by Charlie Perer, Head of Originations, SG Credit Partners
Taking inspiration from the film Remember the Titans, Charlie Perer explains how business development officers, underwriters, credit professionals and every other member of a lending team must work together with respect and trust to be truly effective amidst current economic challenges.
Remember the Titans is a 2000 biographical sports film starring Denzel Washington that is principally about the integration of a Virginia high school in 1971, but it contains many subplots. The movie centers around the human drama of a local high school football team as it finally racially integrates. Fundamentally, though, it’s a football movie about a team that has to learn to trust and respect each other despite difficult inter-team dynamics.
There are many parallels to sports and business, especially the concept of teamwork. Lending, at it’s best, is a true team sport with offensive (business development officers), defensive (underwriters and credit managers) and special teams (work-out professionals) contributors. Today’s lending market is all about dealing with change and if you are on the front lines of new business, it may feel like the goal posts are constantly moving. While defense wins championships, teams still need to score to win.
Right now, if you ask any BDO who their biggest competition is, they won’t hesitate to say their firm’s internal credit committee. This applies pervasively to all BDOs at the majority of lending shops, both of the bank and non-bank variety. It’s a hard task in today’s market to have the confidence to tell prospects that you can close on terms presented, but that’s the job of a BDO unless firms want to sit out. In certain instances it simply may be better to pause lending then send mixed messages to the market, or worse, leave a potential client at the altar. BDOs can easily be put between a rock and a hard place. Either management wants to grow but very selectively, so the bar is higher, or management doesn’t want to grow and bonus expectations should be lowered. It, of course, goes without saying that there is the flip side of this, which is that capital preservation is paramount and sometimes teams just have to tread water to stay in the same place.
Winning too much can actually be a problem, however, because it can be a sign of either taking on too much risk or doing things no other lender would consider. “Why us?” is the question that any BDO submitting a deal to their respective credit committee needs to answer. Not only does the BDO have to answer this question for the credit committee, but they also need to be able to get the portfolio management team comfortable that they are not lending into a liquidation. Trust is the foundation of a team, yet it is more difficult to trust in a changing environment when an aggressive credit policy in a growth economy has to be changed. This creates friction up-and-down a lending shop when BDOs, underwriters and credit committees are all are trying to calibrate. There was a parallel scene in Remember the Titans when the team got a new coaching staff and playbook. The concept is no different in lending, as any changes to an operating manual such as a shift in credit policy acts no different than changing a playbook for a football team.
When you apply this concept of change to the lending world, you end up with multi-dimensional lending game going on amongst sales and credit within both banks and non-banks. Each group is dealing with a fluid market and changing offensive and defensive positions that are being driven by variables out of their control. The teams that have strong continuity, trust and great defense (i.e., portfolio management) are the ones who can win and keep new clients. Risk in today’s market is fluid and changes monthly, so folks on the front line should expect to deal with the goal posts changing. However, what’s not to be expected is mixed messages and very slow feedback loops back to the front lines once market updates have been communicated to senior management. Lending groups with the most continuity, shortest feedback loop and most trust and are going to prosper in what is a once-in-a-decade difficult lending environment like we face today.
While trust is important, respect for each constituency is too. There is a difference between trust and respect. Clearly, you need to always trust people on your team, but what the best groups do is have respect for one another’s jobs. Without that respect or appreciation it’s very difficult to work together. For example, a chief credit officer or an underwriter that has no appreciation for how hard it is to be a BDO to compete and actually win a deal is a problem. Also, in general, if credit officers don’t take into account that a BDO’s reputation, integrity and relationships are always on the line, it usually ends badly. Conversely, a BDO must understand that credit officers have their literal careers on the line every time they approve credits and manage accordingly. If a BDO can’t respect the initial feedback and set adequate expectations with the prospect addressing that initial feedback, opting to instead just push forward to try to get a deal signed up, then that too will end badly. Mutual respect, while sounding cliché, is vital to build teams, whether you’re in the sports or business arena.
Teamwork and having a core playbook transcend sports and military analogies. The core themes of Remember the Titans showing how disparate people can learn to work as a team operating under one playbook. This is no different than any organization in business. Sales, underwriting, portfolio management and administration all need to know how to successfully operate one playbook.
Some of the emotion Remember the Titans captured was what comes with instilling a new executive and a new playbook and getting a team at odds to work together. The end of the film takes place at the funeral of one of the stars of the team 10 years after the team won the state championship. The final scene shows the Titans together as a team.
For the first time in a long time, we are all going to be stretched as teams. Lending is a long journey and the groups that have real alignment between both sides of the house are going to prosper. People say it can’t work, sales and credit coming together, but today we “remember the titans” who have made and continue to make it work every day. Strong side, left side!