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An interesting article about the Federal Deposit Insurance Corporation (FDIC) noted that 42% of its staff are within five years of retirement age. Apparently, the average across the federal workforce is a lower 31%. Leadership at the FDIC is concerned with the potential loss of institutional knowledge and experience. The thought occurs to me that all businesses, and particularly the consumer finance industry, may have a similar issue.

Over the years, I have spoken to many clients and trade association members about successorship planning. For the smaller companies, that often involves children or grandchildren. It seems that too many of the smaller consumer finance company owners are finding it difficult to interest their children in working in the consumer finance industry. This seems to be the case notwithstanding that many owners of smaller companies have made a handsome living in the consumer finance industry.

Larger companies have a different issue. They are competing for talented workers with all businesses. Paying a competitive wage with competitive benefits is more difficult for them than for the “mom & pops” in the industry because the promise of a future ownership interest is clearly less certain. And, the attrition rate in the larger companies is a continuing concern.

The FDIC’s answer to its situation has been to reduce its graying work force by offering buyouts to those employees approaching retirement age; and, relying more on generally younger middle management to step up and take on more responsibility. (The FDIC is also closing offices.) While relying more on younger employees may sound good, I am not sure that this works well in consumer finance companies—primarily for two reasons:

• First, it is difficult to fill existing positions for customer service representatives (CSRs) for the reasons that I mentioned above.
• Second, there is a serious institutional knowledge requirement for serving customers that is not easily replicable in hiring new CSRs.

Continuity of the businesses’ workforce is certainly one of the great challenges for the consumer finance industry in future years.  

One approach to addressing the concern about loss of institutional knowledge is to double-down on training and cross-training continuously throughout the year. It remains exceedingly important that CSRs understand their function and those of others for whom they may need to substitute.