|
Skill Sets for the Near
Future
E. John Broderick
Is it truly possible that increased
work, an unending learning process, the high probability of forced job
change and a divisive split in the basic nature of your career field
could be good news? An objective view of the current trends affecting
the credit field seems to indicate that this is the case - for those who
are prepared. If you pay minimal attention to the general economic news
you know the current job market is termed an "Employee’s
Market", meaning a high demand for skilled workers. It seems as if
everyone is in demand. With the advent of the Internet, skilled
professionals are even auctioning their skills to high bidders. The
phrase "Free Agent" has been borrowed from the sports world
and now describes the professional who is willing to offer their
services on a project or temporary basis. The demands of the marketplace
have caused employers to amend their hiring practices to include hiring
bonuses and compensation incentives to a degree never before experienced
by American Industry. Practically every aspect of corporate life is
being affected by a drive to take advantage of opportunities presented
in such positive economic times.
Amidst all the positives there are
other striking trends. As industry consolidation continues, there is a
good possibility your present position will be jeopardized. As companies
search for more cost effective ways of conducting business you could be
caught in the ongoing see saw battles of centralization vs.
decentralization. It is a fact that, if your company is instituting some
type of enterprise software, such as SAP, your position will be affected
and will be different in ways you may not have anticipated, if it exists
at all. The influencing factors of Technology, Globalization and
E-commerce all have clear impact on your future. In the middle of the
most favorable economic climate experienced in our lifetime, competitive
challenges arise so rapidly that in many cases the human factor becomes
secondary to the perceived needs of the organization.
The irony is that at the very time
demand for skilled professionals is at a peak there is a continuing
trend of employees being regarded as commodities to be bought and
discarded as business conditions ebb and flow. At the very same time you
are enjoying the advantages of an "Employee Driven " job
market, there is continued evidence that the corporate work force is
simply a tool of the marketplace. As companies are forced to upgrade
technology and strategy to remain competitive they must change the work
force to keep pace with these changes. As a consequence, job security
today can best be defined as, "How marketable are your
skills?" Have you kept your skills current? Are you constantly
benchmarking your credentials against those of your peers who are
actually your competitors? To further add to any sense of discomfort,
you, as a credit professional may feel, your field is transitioning. Are
your skills up to the challenge of becoming a "Customer Financial
Service Professional" or a "Customer Support Finance
Manager?" Entire segments of the credit field have been redefined
which means the skills and management philosophy, necessary to perform
in the past, must differ in the future.
The major areas of change have taken
place first on a philosophical level. As Credit is "seen"
differently, the processes behind the function will be performed
differently. The primary philosophical change has been the transition
from the traditional Credit role to the newer arena of Customer
Financial Services. A clear separation between the functions of Credit
Risk and Collection is becoming apparent.
In addressing the Credit Risk portion
of the Customer Financial Service role, a Fortune 200 client of
Smyth’s included the following in their mission statement for a
Corporate Manager of Credit Risk:
"Companies must develop strategic
responses to be more competitive within an ever changing business
environment. It must be recognized that creative and long-term processes
must be applied to the issues of Customer Evaluation and Financing. The
scope of these evaluations encompass, not only the traditional
discipline of Credit Risk Evaluation, but extend further into the realm
of, ‘Getting to know your customer and your marketplace’. In essence
– ‘Know who you are doing business with.’ As important as gaining
this knowledge is the proper dissemination of it by recognizing the
Customer Financial Services Department as the key supporter of the
overall sales effort."
Management of the Credit Risk function
is being entrusted to those individuals who have schooled themselves
beyond the short-term perspective, which has been the traditional role
of the Credit Manager. Many will argue that the "good" Credit
Manager has always functioned from this point of view. The difference is
that in tomorrow’s world it will be mandated that Credit be a
long-term investment advisor to Finance while at the same time be the
key supporter to the Sales effort. Skills in the areas of Economic and
Market Research will be expected in addition to the traditional Credit
approach. In the job descriptions Smyth has seen over the past two
years, there has been a significant increase in the number of companies
requiring the Credit Risk Manager to assume responsibility for
determining the profit of individual transactions. The question being
asked is, "How can you determine risk if you don’t know how much
profit is at stake?" This type of analysis, which has been the
traditional realm of a Corporate Financial Analyst, is being
transitioned to the Credit Risk Professional.
Identification of future business
partners, as a mandated responsibility is another requirement Smyth is
seeing with increased frequency. It is felt that the Credit Risk
Professional should possess the skill necessary to recognize those
customers who will be tomorrow’s winners. Early investment in these
firms will mean long-term profit opportunity. Credit, viewed as
opportunity, is a long way from credit viewed as a 30-day transactional
activity.
Within many organizations, the Credit
Risk Manager has become synonymous with "Deal-Doer." Recently,
a Credit Director we know saw a newspaper article about barges being
purchased and used as jails. He started the process within his company
to become the financing source for the purchase resulting in a net
profit of over seven million dollars. It is this type of aggressive and
creative thinking, which trademarks the true Credit Risk Manager.
Multi-tasking is now a minimum
expectation. Value added has become a corporate cliché. Today it is
cross discipline practitioners who will accomplish more by utilizing the
best tools offered by a variety of specializations. Individuals who are
not equipped to perform in a cross discipline environment will be seen
as restricted contributors incapable of further growth. As the push
continues for flatter, more customer responsive organizations, the
adaptable Credit Risk Manager must incorporate "risk as
opportunity" in day-to-day thinking. It is only by combining
knowledge of Economics, Technology, Marketing and Finance that a Credit
Risk Professional will be able to meet the full range of expected
challenges.
It is fortunate that industry is
providing creative solutions to manage what can be viewed as an
insurmountable mountain of knowledge. Technology in the form of the
Internet provides information faster and with more depth than ever
before. Trade information previously available only in time consuming
meetings can now be shared with ease through Internet Systems such as
the Carix System of the NYCFMA. Outsourcing of many research functions
to specialized Credit Reporting Services provides in depth analysis and
trade information. The arrival of Credit Scoring Systems and
Predictability Models to the world of Commercial Credit will provide the
tools necessary to manage large portfolios with fewer people. Knowing
how to access, analyze and effectively disseminate information in a time
effective manner will have more importance than ever before. It may be
the case that your responsibilities will include management of a broad
range of external consultative services providing solutions to those
issues upon which you decide to focus.
The move to a Customer Financial
Service or Customer Care methodology from the traditional credit
function must be regarded as the most immediate agent of change. The
fact is that Customer Financial Service as a methodology is far from
being defined, although there are a number of assumptions, which can be
made. The separation of Receivables, inclusive of Collections, and
Credit Risk as distinct specialties is the most visible aspect. The
Credit Risk Function is becoming a sub-specialty with a heavy emphasis
upon finance. As a result of this "split" between Credit and
Receivables, Credit Departments will be smaller, but staffed with more
highly skilled and educated individuals. The career path for the Credit
Risk Professional is being enhanced. You now know more and are cross
discipline trained. As your intra-corporate exposure increases,
opportunities for advancement outside of Credit should follow. Smyth has
seen increasing numbers of credit-trained individuals being promoted to
areas such as Strategic Planning, Project and Trade Finance, and
Marketing. What is especially pleasing is the fact that the traditional
areas of growth such as Treasury or Cash Management are still available,
while enhanced opportunities are proffered.
There is a career negative attached to
the Credit Risk function. It stems from the fact that as you become more
involved with the strategic end of the business, you become less
involved with the processes necessary to run the overall Receivable and
Customer Service functions. It is very possible the Credit Risk function
will not report into Customer Financial Services at all, but rather be
attached directly to Corporate Finance or Marketing. A Credit Risk
Department tends to be small with a group of well-educated people
dedicated towards the financial evaluation of strategic partners and
opportunities. The day-to-day Credit issues are being increasingly
handled by sophisticated Scoring Programs. This is one area where the
impact of technology is having a significant effect upon the Credit
Function. As a Manager of a relatively small department principally
involved with strategic as opposed to process issues, the chances of
career development along the operations side of the organization start
to diminish.
Within the framework of Customer
Financial Services, an important career decision needs to be made. If
your aptitudes are best utilized as a practical problem solver and you
enjoy the challenge of large scope process management, then it is best
to move towards the Customer Care side of the organization. If you
consider yourself to be Finance Professional and enjoy the aspects of
analysis and "deal doing" within the Credit Risk structure,
then you must be careful to follow this path. A great deal of career
unhappiness can be avoided by doing some intensive self-analysis and
following the path, which complements your strengths. The good news is
that Credit’s evolution towards Customer Financial Service offers the
career flexibility to pursue differing paths.
Another reasonable assumption
concerning Customer Financial Service is that the Order to Cash Business
Processes will fall within the responsibility of this function. This may
be inclusive of Collection, Accounts Receivable, Order Entry, Billing,
Customer Service, Deductions, Chargebacks, possibly Credit Risk and even
some areas of Logistics. Smyth has seen Director level positions
reporting to the VP of Supply Chain Management. The concept of cross
discipline training is as clearly evidenced here as with Credit Risk. On
the Order to Cash side of the business, the emphasis is on, "How do
we get things done?" Training in Process Management is the
fundamental discipline necessary to absorb the multitude of functions,
which may fall under what can be called the "Customer Care"
side of the organization. Though the emphasis here is clearly on the
practical, the Customer Care Executive must exhibit the type of
strategic thinking that anticipates growth and the advantages of new
technologies.
It should be noted that there are
organizations where the concept of Customer Financial Services has been
adopted as a method of maximizing the benefits of a progressive credit
function without a direct line reporting relationship between credit and
the process oriented functions which are included in many models. Smyth
has seen this in decentralized environments where the Corporate Director
of Customer Financial Services is regarded as a shared asset to be
utilized by the divisional Presidents or other senior Executives to
maximize revenue. In these organizations it has replaced the Corporate
Credit Manager. The primary difference is the corporate mandate to
"Get to know your customer and your marketplace" in a more
opportunistic way.
The Credit Research Foundation, in its
Customer Financial Services presentation, mentions a number of practical
items, which have impact on how Financial Service Executives perform
their jobs. The CRF depiction of the " Burger King Syndrome"
is particularly important. Customers now tell suppliers:
- How they want it.
- What they will pay.
It is now the job of the Customer Care
Executive to deliver the product and collect the monies owed according
to the rules set by the customer because a strategic decision has been
made that it is in the best interest of the organization to accept these
terms. In non-Customer Care organizations there is a series of
transactions between independently responsible departments which
facilitates the "what, when and how’s" of the customer
process. Customer Financial Services is an attempt to pull all of this
together into a seamless flow, which will enhance the entire customer
process. It is here, in the process driven areas, that the concept of
"Teaming" is introduced to the world of Credit.
"Teaming" has principally
been used within large corporate environments where the sheer size of
the organization interferes with the communication process between
independent, restricted goal departments. Originally taken from assembly
line process management "Teaming " provides cross training in
a number of related processes in an effort to maximize efficiencies. A
"team" which has a full understanding of all the component
functions attached to a particular process performs more effectively
than a similar sized number of interdependent workers who are
knowledgeable in only one aspect of the process. When one examines the
major process issues, which requires interdependencies between credit,
customer service, collections, accounts receivable and logistics, the
benefit of the "team" approach becomes apparent.
The major career question from the
standpoint of the traditional Credit Professional is, "Who will be
chosen to lead this initiative?" At this point, this is an
unanswered question. Smyth’s clients have filled this position with
Managers from Marketing, Finance, Customer Service, Credit and
Logistics. The fact is that candidates from any of these involved
disciplines may be the choice to lead this group. It is now incumbent
upon Credit Professionals to prepare themselves in such a manner that
they become the logical choice. Credit Professionals are in a position,
which should give the clear advantage to become the Director or VP of
Customer Financial Services. By the nature of traditional Credit you
already function in a multi-layered environment. What is astounding is
the number of credit people who resist this type of change instead of
embracing the type of opportunity that is presented. These are people
who put the interests of their department first and resist the call to
the view the organization as a whole.
From a functional standpoint, just as
with credit risk, there will be a significant need to augment internal
processes with technological advances and outside expertise. In a
Customer Care scenario the focus is upon the labor-intensive tasks of
customer deduction and chargebacks. The combination of an employee
oriented labor market coupled with increasing demands from customers to
do things their way, can stress a department’s overall capability to
perform. Increasingly, management is recognizing the value of
outsourcing the labor intensive tasks to organizations who specialize in
performing these functions. Many organizations have decided to solve
these issues by the periodic usage of interim project personnel. As with
the credit risk function you will be called upon to establish
relationships with outside vendors where it is cost effective to
"rent" as opposed to employ specialists. Creating a
technological approach is particularly important as Customer Financial
Services absorbs the traditional customer service process and integrates
it with the collection function.
Simple facts make sense here. Change
within the context of Customer Financial Service represents opportunity
for those who take advantage of it. If you have more responsibility, you
will earn more. If you are multi-disciplined, you have greater job
security. If you function with the cutting edge of management tools,
your skills are greeted with welcome on the job market. Positions of
this type will be accorded more prestige and importance within corporate
environments. The only real obstacle to continued career growth would be
resistance to change.
Any broad-brush analysis of industry
trends is comprised of components, which make up the whole. At Smyth we
are uniquely positioned to see these components because our work is a
simple reflection of our client’s needs. We see that the vocabulary of
the field is changing.
Position titles such as, "Retail
Trade Promotions Manager", "Field Customer Support
Manager", "VP of Credit and Securitization" and
"Director of Asset Control and Recovery" are replacing the
traditional Credit related Manager and Director titles. The positions
are different, but many times it is the approach to the position that is
different, not the skill sets necessary to perform.
In the past few years the number of
positions that include "Global" or "Worldwide" in
the title structure have increased dramatically. This is true even in
those circumstances where the international aspect is only a component
of the position as opposed to the focus. What is clear is that Credit
Professionals are expected to know International Trade even if the
company’s primary focus is domestic. It is recognized that we are in a
Global Economy and if a company is not doing business internationally
now, you can now fully expect that such an expansion is part of a
strategic plan. Typical skill sets include Country and Political Risk
Analysis, Letter of Credit and International Security Instruments; a
knowledge of Bank Procedures and Emerging Markets Risk. Even in
situations where a true International specialization is not called for,
there is the expectation that a candidate will be familiar with the
fundamentals and know where to go to get the proper answers. In larger
companies it is often the case that a specialist in International Credit
is hired.
From a career standpoint,
International Credit offers an interesting choice. International people
usually are paid better than their Domestic counterparts, however, since
they are regarded as "Specialists" who are focused within a
particular discipline, they are rarely afforded the same overall career
options that accrue on the domestic front. Continued globalization may
change this. Nonetheless, it is a necessary step towards total Credit
competency to develop a strong working knowledge of the International
field.
The fact that the Credit Field is
demanding new skills has not diminished the need for most of what was
needed in the past. There are fundamentals to the Credit Field, which
are so attached to the function that less than significant knowledge is
unacceptable. You simply need to know more in order to bring the added
value which is the staple in today’s business climate. These skill
sets fall into two areas of equal value. The "Hard Skill" set
is knowledge based and includes the specifics of the field. This would
include specifics such as Bankruptcy and Lien Laws, Financial Analysis,
International Trade and other knowledge specific areas. The generic
management skills include leadership, communications, presentation,
decision-making and others of what is often termed the "Soft
Skills."
In the Credit Research Foundation’s
Skills and Training Survey of CFO’s "Perceived Training needs for
Credit Executives – in the Next Five Years", there is a definite
sense that the hard skill sets are a higher priority. In the top five
ranking only one soft skill, "Leadership" was emphasized. The
top five also included Computers, Technology, Global Risk Management and
Systems/MIS. When the question is asked somewhat differently, "What
training needs are necessary for success over the next five years?"
the trend reverses itself with the soft skills of Writing, Assertiveness
and Leadership being ranked in the top five skills. Here the hard skill
sets included Computers and New Technologies. In this ranking, Global
Risk Management fell to seventeenth on the list. The differences between
these two categories point to the fact that Senior Management expects
you to be knowledgeable about areas such as Global Risk, even though
they rank it as number seventeen on what they believe will make you
successful. The results of the survey point clearly to the cross
discipline expertise emphasized earlier.
There are a number of other reasonable
assumptions, which should be made concerning the variety of skills
necessary for the future. One clear indicator for the future is the
direction those corporations which are industry leaders take. Management
trends tend to start with the major companies and then move to smaller
organizations. Possessing a knowledge base of leading management tools
and philosophies allows you to be the innovator as opposed to a
"reactor" when new ideas are called for. Knowing these trends
will ensure that you understand the importance of change when it is
proposed. One of the primary reasons good managers lose their positions
is reluctance to change. It is a sad fact that Smyth has observed
numbers of good people who exhibit this trait and never seem to learn
the primary lesson that change is necessary and will happen with or
without them.
Other notable trends include:
- Credit, traditionally viewed as a
middle management function, will increasingly be viewed in a senior
management context. Reporting relationships will change as the
various positions within traditional credit and customer financial
services are redefined.
- Companies which transition to an
enterprise type system will be more likely to embrace customer
financial services.
- As a career the Credit field offers
more overall potential than ever before.
- A higher degree of formal education
will be expected of credit professionals
- The credit professional must take
advantage of professional education and training programs, such as
the CCE.
- Technology is a never ending
learning process
- The credit professional must be as
adept at disseminating information as gathering it. Information in a
vacuum is useless.
- There will be an increasing need to
rely upon outside consulting and outsource services as a method of
keeping departments current and cutting edge.
- As departments are reduced in size
there will be a need to supplement staff with trained interim
professionals
- There will be more opportunity for
qualified credit professionals within the consulting community.
- Competition, on both a corporate
and personal level will continue to increase.
- As credit shifts to the long-term
view, individuals with corporate finance or banking background will
fill the credit role in many companies.
It was stated earlier that job
security, the very close cousin to personal economic security, is best
defined as "How marketable are your skills?" This question is
equally valid within your company as on the outside. This is best
exemplified by the fact that "Who will lead the transition to the
new corporate role of Customer Financial Services" is as yet
unanswered. Many credit professionals are poised to undertake this new
role, the challenge is to be certain that the inherent value of well
developed credit skills are recognized. A past failing of the credit
profession has been the lack of self -promotion within management
circles. There is an immediate need to reverse this failing and no
better way to do it than by demonstrating credit’s capability to bring
bottom line value to your company. Today’s economic climate and a new
way of thinking allow you to do that.
|
