Jeff Judy

Jeff's Thoughts - July 12, 2017

Supply and Demand

A recent article by Ed O’Leary caught my eye for a couple of reasons. First, I always pay attention to what Ed has to say, as he not only offers keen insights on our industry, he communicates those insights exceptionally clearly.

Second, the title, How will you fill your next lending job?, points to an issue that often comes up as I travel around the country for training events, conferences, and consulting. Everybody is finding it harder to hire the credit staff they need to take advantage of today’s economy.

As Ed points out, one reason for the shortage of skilled credit employees is yesterday’s economy. With the Great Recession in place, we didn’t hire and grow staff as we had in the past, and that leaves a shortage of candidates who have a few years of experience. After all, that employee that you did not hire in 2007 or 2008 would have almost ten years’ experience in credit at this point.

There are additional factors contributing to the shortage, but the point I want to make is this: we are in a classic supply-and-demand situation. The supply of skilled workers is way below the growing demand for those workers in our industry.

Now, when you analyze businesses to assess their creditworthiness, you probably take a good look at their supply issues, both labor and material. And if you see a shortage of skilled workers in their industry, you know that that is going to imply some rising costs to the business. You want to talk to the borrower about how they are going to cope with the shortage, how they are going to remain competitive when good employees are scarce.

We need to apply some of that same thinking to our own industry. But I am surprised at how many institutions seem to have trouble stepping up to take the action needed to recruit and retain valuable credit staff.

The shortage of credit staff with appropriate skills – and Ed ably points out that those skills go beyond analysis and negotiation to include teamworking with other employees – is going to require a heightened investment.

That could mean higher salaries, but that’s not enough. You may have to spend more time in the recruiting process, checking references more carefully, interviewing more thoroughly. You may have to devote more resources to training, not just grow skills that you can’t buy, but to ensure that new hires and old hands share a common culture, a common way of understanding and executing their roles for your organization. (In addition, training is valued by employees and can be something that helps with both recruitment and retention.)

Still, I regularly have conversations with managers who moan about the labor shortage in our industry, but who do not seem to have worked out any coherent strategy for dealing with it besides wishing conditions were different. If wishes were fishes …

If you extend credit to a business in an industry with severe competition for skilled workers, you want to see evidence that they recognize and are responding to that issue. You want to hear their plans for winning that competition before you hand over the cash.

You should expect no less from your own institution.