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Have you ever had all the components for a perfect day, project or anything and extertal factor arose that made it not only imperfect but horrible? This happens all the time when I am consulting with collection agencies and law firms. They feel they have all the components needed to have a perfect process but they ignore the external factors. Often the external factors are the ones driving your business not your internal processes. For example currently the client base is driving the policies and procedures of most collection agencies and law firms.
It reminds me of a wonderful day in Sebastian Florida with my dog, girlfriend, her dog and a small 16 foot rental boat. It had all the makings of a wonderful afternoon, a slow boat ride down Sebastian Inlet watching manatees, dolphins, birds and much other wildlife. Much like many of your collection processes they seem to work just fine as long as there is no external interaction. As the day progressed the weather changed and the enjoyment level drops significantly. As we rushed towards cover while the storm was approaching and winds were increasing it was no longer a smooth ride. my dog Oakley began to bounce off the deck of the boat with each wave and became more and more distraught each time he was launched into the air.
The changes in our industry are very similar to this when you’re also getting tossed into the air in your own boat and are unable to touch the deck and make changes in your course due to your clients requirements. There is a feeling of helplessness when you’re launched into the air and your feet are not touching the ground this is the feeling that Oakley had and did not like, while we were taking this glorious boat ride. Most of us feel the same way about the ride the industry is currently taking us on.
The trick to surviving is one of two things either waiting for the external factors to blow over or to stabilize your boat to handle the heavy waves. In our industry currently you’re going to have to be larger to survive the waves the industry is taking on in 2013 and beyond. If you are like the 16 foot boat on the inlet when the big waves come, you’ll begin to feel like Oakley, not in control.
When we returned back to the dock Oakley was very quick to exit the boat get out on the dock and kiss the ground. He had no further interest in taking boat rides in a 16 foot boat. Yet a few days later he was perfectly happy in a 40 foot yacht. Take his lead and make sure that your boat is big enough to handle the ways provided by your clients and the regulatory factors that are currently attacking our industry.
If you need help building a better boat give Lighthouse Consulting a call at 904-687-1687
After more than 30 years in the collection business it’s easy to see the simplicity of this industry. Yet within its simplicity are many intricate parts there are five basic factors that define a collectors performance let me explain them to you.
- Number of calls- the first and foremost that you have to teach a new collector is there are a certain number of calls required to meet the daily matrix. If you can teach a new collector to make 150 to 200 calls per day you will be on the way to having a successful collector.
- Number of contacts- if a collector is making the proper number of calls per day the next thing you want to check on his to see how many contacts is he making. not just contact with responsible parties but also contact to third parties are people that may be able to provide further information on the location or a better number to reach the customer.
- Number of Talk offs- once your collector is making a certain number of contacts per day we need to know how many of those are actually resulting in a talk off with a responsible consumer. The higher the number of Talk offs the higher the overall collection expectation should be.
- Number of promises- what’s your collector is talking to responsible parties we need to see how many of these talk off’s result in promises to pay. Collector who has a high number of tacos and a low number of promises obviously shows an opportunity for training.
- Dollars collected- many agency owners spend their time worrying about this first yet it is the least important of the five. If you have properly trained your collector to make the proper number of calls resulting in the proper number of contacts resulting in the proper number of talk off’s which resulted in the proper number of promises the dollars collected will come.
The biggest problem people have with this process is they want to do it backwards they first want to know how much money was collected then they go backwards to figure out how many promises that person had they seldom go pass that to check on the talk off the context of the number of calls but it all begins with the proper number of calls being made per day.
What you have spent many many hours training your collector to meet these five requirements in a clinical fashion then you can begin to teach them how to become better. Once your collector has mastered the process of making enough calls, contacts, talk offsl resulting in a promises you can begin to teach him the artistic portion of debt collection. Only when your collector has mastered the five factors above can you begin to teach him the art of collection.
A collector who does not understand the five factors above can never be an artful collector they will never be that number one employee. Spend the time to teach your staff the process of collection before you teach them the art of collection.
An interview with Dr. Gary Wood by Phillip W. Duff
As I began an Interview with Dr. Gary Wood in Jan. 2013, I asked, “When did you first enter the collection business? What year?” Gary replied, “97”. I continued, “What brought you into the business?” To which Gary responded, “I lost the job I had. Walt Collins was a friend of mine and he had just started Collins Financial so I told him that I needed something to do, and he said “well you can come over and sit here but, I can’t pay you”‘ and since I didn’t have anywhere else to sit , I went and sat there and I eventually wound up going to work for the company and I was there for about 12 years.”
My next question was, “How did you meet Walt, how did you become friends prior to working together?” “At the Barton Creek Country Club”, he replied.
“So playing golf?” “Well, yeah playing golf, and we were both members out there, and we just met and liked each other and so that was how that happened”.
“You’re known as Dr. Gary Wood. Tell me about your education” I said. ” I have a PhD in money and banking and finance or economics. I’m not sure what it is. It’s from the University of Texas in Austin, and before that I had a Masters degree from the University of Florida in economics, and I graduated undergraduate from Baylor with a Economics degree”. “That means you spent a lot of time in higher education”, I noted”. “Yes, I spent a lot of time in higher education. I worked in higher education. I taught at UT San Antonio for three years and then I got a job at Baylor and I was there for eight or nine years. The last three years I was the director of government affairs for the University and didn’t have any classroom responsibilities, but before that I was a professor”. I followed with ” So, you’ve been in the industry quite a long time at this point, maybe not quite as long as some of the other people. To what do you attribute your longevity?, I asked? ” Walt’s not firing me”, he laughed. ” No, we sold the company and I’m trying to think what year my new contract ran out, I guess it might’ve been 2006, but I had gotten involved with DBA. Walt was the second president of DBA and I have been participating with him in it since the very first meetings. Then I got elected to the board and served on the board for, I guess eight years, and two years as president. This resulted in my getting a lot of good friends at the DBA, and so that’s how I managed to stay active in the industry.”
I then stated, “You’ve been fairly influential in the growth of the Debt Buyers Association because of exactly what you’re talking about. Talk a little bit about the Debt Buyers and when you first came in and what it looked like then and what it looks like now. Also, what way do you think it’s going.” Gary answered, “Well when I first came in there was no Debt Buyers Association and we finally got the thing cranked up. There were maybe eight or nine people. I was not involved at that level at that time, but it was Walt and Mitch BONILLA and probably Dennis Hammond who were involved. Dennis and Judy Hammond, I guess, were really the driving force behind the creation of the Debt Buyers Association. They identified the need, formed the Association, had the experience with the companies that they already had going for how to get things organized and so they worked with a few of the people that ran the business. And I guess Bud Reitzel was involved back then to a degree. This is the 17th public conference (2013), I’ve been to every one of them, and when we started there were about 20 or 30 companies that were involved in the business and debt buying, it was brand new and there were no standards, definition or how to operate or exactly what was going on. I was telling you that one of the big issues was “what do you mean when you say paper is fresh, or old primary or secondary?” There was no universal agreement on issues like that and so that’s one of the things that DBA did in the early years while trying to exist to bring some standardization with regard to contract terms, and just how things should work, and so that went on for five or six years.
And so that has now turned into an Association with over 600 member companies, and with an annual conference, that I think arguably is the one you have to go to if you only go to one in this whole industry. It’s worked out great and I have really enjoyed it and I like the people here. I enjoy being involved with federal government relations because I spent a couple of years working in the Senate and I really enjoyed that so it’s been very good for me”.
I continued my questions, ” What were the original reasons for creating the Association? Was it made for a revenue stream or was it just made to create defined standards?” “Well, Phillip”, he replied, “I guess it was when we looked around at what other professions were doing, (like accountants, lawyers etc.) They all have associations that provide a couple of things for them. One is the synergy of being around other people in the same business. You can go to any of these little tables sitting around here and find two people sitting down talking about “what’s going on in the business, can I buy paper from you, can I sell PAPER to you? Eventually things work out, so there was a perceived need for the same sort of thing to happen with regards to the debt buying industry, and there was a need to distinguish the debt buying industry from the collection industry and I guess that was a temptation to say “why did we all just join the ACA?”. Most people belong to both but these days; interest and motivations are different from debt buyers. It’s a different business with some overlap but you have different issues that you have to deal with.
And so it was that sort of thing and there was eventually a need for standardization. If you didn’t have an organization in which to work on the standardization, it was very hard to get guys together who were just scattered around the country. I think that is what led to the creation of DBA”. I noted,” It’s always been a fractionalized business, so you’re right it’s difficult to get people together to agree on anything and plus the industry’s always been kind of, “I’ve got my own secret sauce and I don’t want to tell you what’s going on”, Even though there is no secret sauce, everybody always thinks they have one but there is not one!” Gary added, “You’re right. That was one of the things that has impeded, that used to impede, the growth of the Association and I think the industry itself HAD this secret sauce notion “I’m not gonna let you look at what I do with this paper” “And that seems to have changed some especially as the availability or supply of debt to purchase seems to be dwindling currently. It seems that it’s bringing a lot of people less fractionalized together and trying to become more consolidated. IT Is moving in one direction. At least that seems that way to me. do you see that as well?” “Yes”, Gary responded. ” I think that’s right. The availability, the almost limitless amount of paper has been available; it’s not there anymore. I think the industry as it grew attracted a lot of people who had limited geographical interest in paper, they were interested in a couple of states or one state, Steve buys Tennessee, Glenn buys Indiana. And there was good business to be had in doing that, but you were limited in the places you could go to find paper like that. Companies like Collins, knew some of the states for which you could charge more than you paid for the whole portfolio and some of the states like Texas you couldn’t give away. Just because of the collection laws in the state, there was this market out there for that kind of paper, for state paper. It would seem like the regulatory environment is getting to be such that the pressure that’s been put on the banks and other issuers is causing them to have less interest in selling on a state basis. And certainly less interest in selling to a company like Collins used to be, and allowing us then to divide their portfolio up because of all the regulatory requirements with regards to documentation and safety of data. So, as the players in the industry looked out and see that kind of situation with regard to what’s going on, and what’s likely to happen, they began to look for ways to consolidate their efforts and I don’t know if it’s going to be consolidation or just annihilation. But I think there will be fewer and fewer companies in the debt buying business over the next decade or so. I have no idea to what extent that will happen, but I think it will happen. And that will continue to reduce debt companies”.
I then asked, “When you are talking about the changes in the regional buyers, (there is much less paper for them), in fact there may be may be no paper for the Steve’s of the world. How do you see that’s going to impact the DBA since that’s a large majority of the membership of the Association for those type of buyers?”. Gary answered, ” That’s one of the issues that the board has been talking about for a few years. Of course nobody knows exactly how it is going to influence it but the best judgment is there will be fewer member companies. I don’t think it is possible to behave in such a way as a trade Association to mitigate that. I think it’s in response to what’s happening in the market place and there’s nothing much we can do about it. Some of the big member companies of DBA have openly admitted they would like to see less of the smaller companies, and in large part they have a good argument. I suspect an inordinate percentage of the disputes and claims against collection operations are coming because of behaviors of some of the smaller companies. I think the larger companies have the capabilities to do better training and they have a much broader base from which to learn. They will stay in business and be around but I think that they would just as soon see 10 companies in the industry”.
Changing the subject, I questioned, “How do you see differences between technology from when you began and now? And how is that technology is not only different but how it’s being used differently? To which Gary replied,” Of course the technology is different, it’s vastly improved with the ability to communicate with the debtors. As someone mentioned at breakfast, it used to be you get your cards out and called the debtor and sometimes you would call them collect (charging the call to the consumer). Then came the dialers and the capabilities that exist with regards to that followed by word processing. The whole range of ways to communicate with your clientele has been transformed by the new technology, and it is good. I think it’s just about all-good and I can’t think about anything too bad to say about that. As far as other uses of technology, Phillip, I never was much involved in that end of business so as I said the dialers sit back there and depending on the regulation that you’re subject they can make calls to the debtors but I’m not really too aware as to how the technology works”.
I noted, ” The business has completely changed from when you and I and a lot of other people got into it till now. What do you miss about the old days and maybe less technology and maybe less regulation and all these things but what is it that you miss most?” Laughing, Gary responded, “I miss being 10 years younger”. It was more of an adventure I guess, then, because you knew you had this ability to make money if you did things right, but there were lots of things that we didn’t even know were issues that turned out to be issues. I just think that I miss the operating in an uncertain environment. Of course there are uncertainties that are involved today with what the kids are having to deal with”. “The uncertainties are a little bit clearer”, I added. Gary said ,”Yeah they are, they know that they are out there and they have so much. Well they have us: DBA. They have NARCA, they have ACA; all of us are working towards trying to improve the qualities of the service we deliver I miss a few of the people from back then”. ” Relationships?”, I asked. Gary replied,” Yeah, but I truly enjoy getting to come to this conference once a year and renew friendships from a long time ago”.
I added, “: There’s no doubt that the biggest thing about DBA has always been the networking, and that’s what everybody has always said. It’s not really as much about the sessions, even though in the last few years the sessions have gotten much better than they were in initial years, much better attended, much more even to pay attention to, because I think initially it was just networking. They didn’t really come for a whole lot. What advice that you got many years ago that has stayed with you forever, would you like to pass on to someone else?” Gary said “Operate with integrity. We always believed THAT at Collins, and I was always glad to agree with it, that it is possible to do this business and take advantage of people you are working with whether it be the debtor, someone you’re reselling to, or some you’re buying from. If you want to you can behave in a way that disadvantages people you’re working with but the philosophy that we always operated with was “if we treat you fairly then you’ll keep doing business with us”. If something happens to one of the trades that we make, it turns out that it wasn’t as we thought it was, it wasn’t as we depicted, the paper wasn’t the kind of paper that you thought you are buying, it’s almost impossible to unwrap the deal that caused this concern but we always use the analogy we’ll make the tire round on the next trade, and so the next time somebody comes to buy some paper from us we would give them a break on the price because of the disadvantage that they incurred from the earlier trade. I think it’s impossible to have a system in which the disadvantage never occurs, but you always gotta be willing to make it right. We were looking for long-term relationships NOT one-off sales, so I think that that is the core belief that I come away with”. To this I added, “Well I know for a fact that that was Collins philosophy and I know many deals that that happened and I know from some of those deals, that a lot of times it wasn’t necessarily you giving them a bad deal, a lot of times it was them not being a knowledgeable enough buyer. Yet I know, still, the next time they came around they were given some better type of deal or a better deal. I have personally seen that more than once”. To which Gary stated “ Well I’m glad, because that was the goal, well the goal was to make money and stay in business, the secondary goal I guess, or the one that you felt was helping you to get to where you wanted to get to, was having a good reputation”. I responded,” And I think that’s what brought people back for the third, the fourth, the fifth, the six or the 20th buy, and everybody else if they didn’t see it directly, we all saw Collins Financial in some chain of title whether they bought directly from Collins or somewhere else”. Gary added,” We bought a lot of paper over those few years”.
I broke in,” I think I know what you are going to answer to this and probably similar to the last question. What would you say you need to succeed in today’s marketplace?” Gary said, “Patient capital. Certainly the right philosophy, the right business philosophy, if you’re going to succeed. But I think one of the things that you can see most readily is you watch people come and go in the business and that is, you can’t predict how long it’s going to take to recover on a portfolio. Well you can predict but you won’t be right. And so I think that the thing that from time to time caused us trouble and has caused other people trouble, is that they get financed by the bank X or big finance companies X. They just want the cash to flow to start right away and be predictable and be the way that you agreed on, and it doesn’t always happen that way. So, if people that are providing you with the capital, understand that there will be glitches, but over the long-haul it’s going to work out, then that to me is critical to be successful in this business.”
I next asked Gary, “what advice would you give to someone entering the industry today?” He lost no time in replying, “Don’t!”
I replied “That’s exactly what almost everyone said”. Gary continued, “it’s a tough time in this industry, and it would be, I think, especially tough to enter it because it is operating on reputation and relationships and of course you see somebody like Walt who’s entering it right now, but he knows what he’s doing”. “He has the reputation”, I told him. Gary said, “he knows what he’s doing. If you are going to enter this business as a rookie, I would advise against it. I think certainly until we get the regulatory uncertainties straightened out and you find out if it’s going to be something you want to do. A lot of people just don’t want to fool with it. I’d tell those to find something else to do.” ” I would tend to agree with you”, I responded.
My next question was “What advice would you give to the industry as a whole?” He answered,”wow, I don’t know! Support the DBA. Well, I guess one bit of advice would be do the best you can to participate in and understand the governmental affairs side of the business, whether it is the FEDERAL, State or local level. As an example, in Austin, Texas they have a regulation on how much payday loan companies can charge . It doesn’t apply to the rest of the State. There’s a large degree of uncertainty about whether they can even do that, that it should be a State regulation that handles that or if Federal preempts the State. So I would say that because so much of the ability to succeed is going to be a function of what happens to you from the regulatory end of the business, if you are going to be in this industry, if you are going to be a debt buyer, if you are going to be in the DBA, you’ve got to pay close attention to that. The DBA membership has been very good at supporting the efforts that we make lobbying. It’s expensive, costs a lot of money because you have to hire a lot of people that have day-to-day connections, like Bob Belair and John Blount. They’re on the hill every day, they talk to people every day and are helping to develop an image of this industry, this trade association. That’s where you need to have patient capital because you still get a lot of complaints coming to the Federal Trade Commission, (now the Consumer Financial Protection Bureau), to see about people misbehaving in the collection business and it still goes on.
I guess the other advice I would give is to have patient capital, be ready to support the lobbying efforts of the Trade Association and get to know your State and local representatives and your congresspersons plus have an understanding of the fact that this business can be done with ethics and integrity, however if you don’t do it that way, you’re going to be in a world of hurt”.
At that point I stated, “I definitely agree with you, particularly about getting more involved in the Industry. A lot of people are doing their job but they are not as involved in the industry as they should be. I understand that to some extent because a lot of the agencies are small or medium and there is only so much bandwidth and so much money to spend. I think that, again, that is because we’re such a fractionalized business. I think that’s part of what has pushed that back, but I firmly agree with you that it is expensive and is a problem for a lot of the guys.” “It’s damned expensive”, Gary added
I continued, ” I have been on the DBA legislative fundraising committee and in talking to some of the guys, they say they have been asked for three or for grand and that’s a lot of money to them. They don’t see the value going down to their own backyard. They don’t realize their backyard is also the Federal’s backyard. What legislation have you succeeded in getting passed”. ” None”. Gary replied. “What have we prevented?” I asked. “Some”, he replied.
“What are we doing to set the stage for the future?” was my final question. To which Gary responded, ” a lot, because the more often we have our fly-ins to Washington where DBA members come in and we take them around to different government agencies or congressional offices, somebody at the congressional level now knows that we exist, that there’s a good side to the collection end of the business, and so it’s a lifetime’s work.”
I remarked, ” I think the fly-ins are a great idea because it humanizes the industry instead of it just being a perception of bricks and mortar, or an idea when there’s people involved. Then it looks much different and I think it does help the regulations some, to what extent, who knows? But it has been a good program”.
” I think so, too.” Gary agreed
I had the pleasure of interviewing John Frey in January 2013 and began by asking him if his entry into American Express in 1968 was his first introduction into the collection business and why he chose that as opposed to some other department.
John replied, “I got out of the army in 1968, (which I had joined in 1965), and my father said “john, you are my son, I love you very much and you can live here as long as you have a job. I went looking for a job and ended up at American Express and they put me to work in the credit department. It wasn’t collections. It was what today you would call early-stage collection which included pre-billing, because with the open line of credit and no-credit limit, we were monitoring spending and looking for risk. That was really what was my entry into credit cards”.
“How did you end up working collection agencies from that entry”, I asked. John said, “I did a lot of things at American Express.
After a year, less than a year, I guess, I was supervising a unit and working with them on some of the technology development?
They were having a very significant problem in the recovery area and at the time asked me to go over and see if I could help them fix it. That was in 1975. I had no experience with recovery, but that’s where I started”. At that time I asked John how long he remained at American Express and he told me it was 22 years. “That doesn’t happen anymore these days”, I noted. “No, unfortunately, most corporations wonder why their employees are not more loyal and fail to recognize that it’s because they don’t have any loyalty to their people”.
“When we talked earlier, you had some clear ideas on hiring and longevity of personnel. Explain those a little, please”, I said.
John replied, “I think the important thing is to get the right people on the job and I have found that Pre-employment testing , if done correctly, (there are some out there that don’t work very well), and you get the right candidate for the job, one who is going to take responsibility for their actions, one who is willing to understand the rules and work through the rules, you are going to get a much better employee and will result in much less turnover. Then the next thing is to provide good training that gets them trained exactly as you expect them to perform their duties. I don’t train people on things like FDCPA. I train them on my policies and procedures here and if someone questions them about FDCPA or bankruptcy law, or whatever, their answer needs to be that we abide by the policies and procedures here which are all constructed to be compliant with the various regulations. If someone wants to talk about an FDCPA or a bankruptcy violation, I send them to a law firm and they can ask attorneys their questions. Collectors don’t need to be dealing with that. To sum it up, you won’t to hire them, train them and follow up on the training. Once a collector is certified from training, the training manager’s responsibility is to deliver the employee to the supervisor ready to work. That means the employee can come into work in the morning, say good morning to the supervisor, log on and go to work. The employee is assigned to a certified coach. A coach is a successful collector that has gone through some coursework and achieved certain levels of excellence in performance, and that person has been trained in the ability to assist that new guy along the way and get him settled in. Coaches, of course, get a $1000 a year more in their paycheck plus a coach whistle and a yellow coach hat and they also get some activities. It’s that crew, that as they are successful as coaches, we test for managerial skill sets and start moving them into supervisor training programs. This becomes our pool of future managers.
“So you are continually developing and trying to push people to higher levels?”. I asked. “Absolutely, absolutely”, John replied.
“You need to continue to provide for that person to have an avenue for growth so they don’t get stale in that position. Now you do find some people that get to be a damned good collector and that’s all they want to be, thank you very much. And that’s okay, that’s okay. That’s a good citizen and you don’t want to lose that guy.
“Everybody can’t be President”, I noted. “No”, John responded. “And there are some people that don’t want to be. But for the guys that want to see a future, if you provide the recognition, the opportunity and the development course, you will not only keep those people, if not in collections, at least in the company. I usually end up becoming a recruiting source for the finance guy, the risk guy and the customer service guy”.
I then asked John to tell me more about how he tied quality or compliance to the bonus of a particular collector and the importance he placed on that.
“I think the compliance is critical” he said. “And I think every collector needs to be performing, not what they think is going to get the account resolved or methods they think are going to work, but rather the collection strategy that we have established and signed off and in fact want to monitor and measure. See, you can’t know if the strategy is successful if everybody else is doing something else. So, what you need to do is to be constantly monitoring. I believe that the supervisor needs to monitor each of his people. He needs to certify that each of his people on the phone are handling accounts the way they are supposed to be doing and in addition, I have a third party team that goes in and monitors the same people and we have meetings to ensure that we are monitoring for the same items so you have an alignment of what you are monitoring for and that’s a very difficult thing to achieve. Forget the piece of paper that’s got 20 boxes on it to check off, it never works. You really need to understand if that was a good collection call. Did we do what we needed to do? And then you need to have a methodology of providing feedback to the collector. We record the scores online. They are moved into a scoring mechanism that looks at other things, as well as the score. We are looking at productivity, achievement, dollars collected, accounts cured, number of right party contacts, conversions and the number of contacts you converted to a promise. Okay, but if you have failed compliance, you do not go into the incentive pool. I believe that incentives are important. You need to have around half of your people qualify for incentives at the end of the month. I think that the top 10% should qualify for some really significant incentive money and then I think you need to scale it back and the middle group needs to get some recognition but not at the level the real achievers are getting. This gives everybody an opportunity to scale up their performance”. “And to achieve something”, I stated. “And to achieve something and some real money”, John said. ” I don’t feel like it’s unachievable”, I said. “I’ve been in some offices where they felt the bonuses were unachievable, so they didn’t”…….. John continued, “the way I set bonuses is to array actual performance, look at the top performers and then go in and do diligence on what those top performers are actually doing to make sure they are not working the system, and then use that information to set the standard for performance in each of those incentive categories. Now, if you commit a blatant violation knowingly, even if you have otherwise good scores, you may be knocked out of the incentive pool for the month”.
“To what do you attribute your longevity in the industry?”, I asked. “Tenacity”, John replied “you know you can’t quit, you can’t let those bastards win. You probably shouldn’t print that!”. I responded,”I think that’s the perfect answer. I think it’s very true. I think most of the people I know that have been considered consistent in one industry and have been successful, think that same way”.
John said, “I think you have to have a good work ethic, you have to have objectives, you’ve got to believe in yourself that you are doing the right thing and you’ve got to convince others that you are doing the right thing. Most of my jobs after leaving American Express were being hired to improve a process that was not working the way people like it to work, and I think I have been successful in every case doing it”.
I continued,”back when you worked in American Express, and back when I was a collector working some of that type business, that was the preferred client and was the client everyone wanted. So why do you attribute that to that and what did that bring to American Express? Did they feel like everyone was courting them and that they were the best looking bride on the block?” John answered,” American Express at the time was a very profitable portfolio to work. It was a very high unit yield paper and American Express was okay with that. Their philosophy at the time was that they were not going to invest bricks and mortar in collection work because it’s not their business, that’s not the industry , and they were happy to have the accounts placed with reputable firms that would do a good job, that would treat their customers right, and they didn’t mind it being profitable. It was good paper, it was usually placed early, it wasn’t real old paper at placement time. Again that goes back to not wanting to invest in bricks and mortar for collections. So the reason they were so desirable was because they were so profitable. They were also quite demanding. We would audit every branch every quarter. We had very high standards, the work we expected to be done on our accounts. When I first got to the recovery world in 1975, it wasn’t unusual to see collection agencies having 1000 accounts per collector in their file.
They never returned an account, it could be there for years. When I left they were averaging about 125 accounts per collector and that really got to the point where you were getting a number of accounts per collector that was manageable to get really good, high quality work down on the file”. I added “when I was working at American Express, we would have 80 to 100 accounts and we were pretty much working every one every day to some extent whether it was skip tracing or calling nearbys”.
John recalled, “doing something, but doing the right work, and today one of the things I based my strategies in managing collection agencies on is ensuring that I have a good partnership relationship with the agency and that the paper is profitable for them. Nobody works for free and if you put a portfolio out and underpay it, the agency is going to take the portfolio and work it at a level that causes them not to lose too much money and that’s not what you want. What you want is, you want to be the reward queue, you want to be the queue that the collector at the branch wants to work your paper because he can make some money on it and it’s a good paper for him, and to some extent I even funded programs for the branch collectors. I think you’ve got to recognize that, I think you’ve got to understand that part of your team and you’ve got to know who they are. You’ve got to know if someone changes them if they move them. I mean how many times have you not made your recovery number this month because the top collector in the unit was promoted to supervisor and wasn’t replaced,or was replaced with a new guy, or quit, or whatever happened, so you really need, your collection agency managers really need, to be very closely in communication with the branches to understand the inventory, to understand who’s working the paper. If somebody is not performing well, you need to question that so you need to know at the collection agency level who are your best performers, just as you need to know in-house, who your best performer is if it’s not good”.
I added’ ” as a former auditor, I agree with that 100%, because I did know exactly, and I would even go “John, so good on that one collection last month, here’s $20.00. Nobody else could find this guy, how did you find him?, or whatever”. John responded, “just call the guy up and thank him or I don’t know how many times we’ve provided lunches for the collection floor, or a TV or whatever, something, a little incentive, you know, here is a couple hundred bucks, do something special for the collectors”
“You were involved in computerization?”, I asked. “Yes”, John replied. I continued” do you have any interesting or funny stories in that regards to that because we all know that it was difficult , but there were also a lot of just strange and funny things that happened along the way as well?” Laughing loudly John said, “the funniest one I can tell you is any old story, and it was going back to American Express, probably in the early 1970’s, when one of the Vice Presidents, ( I think I was a supervisor or an entry level manager at the time)’ brought In a staff of temps to refile 80 column cards because they didn’t realize that the 80 column card sorter could actually do that”. “That’s interesting. How did that turn out, who went and told him?”, I queried. John said “I did, yeah, I brought a box of cards up to the 80 column thing and put it in the sorter. But I knew how to work it. You must understand your technology and how to work it. You can’t be held hostage by someone that doesn’t understand, so to be a leader, if you are going to introduce technology into your organization, you have to understand it yourself and provide the leadership as to how it’s going to be installed and how it’s going to be best used and you better know what you are talking about”.
I continued,”as we talked earlier, we’ve both seen dialers, and people using them incorrectly”. John responded,”they just know how they’ll go out and invest in this technology and think without spending a lot of time learning about it, at the highest level. I really think that theguys of my level (I was Executive Vice President) if I didn’t know how to work a dialer, I’d go sit in at the assistant administration class. Why? I need to know what the capabilities of this technology are so I can provide leadership to these people that are going to actually implement the technology in the collection strategies”.
What would you say was the best advice somebody gave you many, many years ago that still rings true and that you still think about over the years”, I asked. John replied “so many. I’ve been blessed. I’ve had so many really credible mentors over the course of time. Probably some Key advice is from a guy named Pete Maddie at American Express who encouraged me to understand technology and not let it drive me, but to have to be able to understand to drive the technology and Pete was an old time factoring guy. He was Vice President of American Express and was an early adaptor of things like computerized collection and encouraged development of things like predictive dialers and gave me the opportunity to really understand them. So Peter, I think, was a great guy. I also think along the way we run into a lot of people. I think Bill Barton with whom I worked at American Express was one of the brightest guys I have ever known in my life. Bill was an MIT graduate and he would give you an impossible task and then roll up his sleeves along side you to help you get it done. Don’t be giving tasks that are going to take all night and weekend and walk away. So you’ll give an impossible task, help them get it done and they’ll learn from that. And then there was Fred Murkoff for really just understanding your portfolio, understanding all there is to know about it”.
Next I questioned,”what advice would you give somebody entering the industry today?” John responded” when you ask somebody about entering the industry today, I tend to think of the entry-level collector, or the entry-level customer service representative or the entry-level credit guy, not necessarily the guy with a graduate degree in statistics who’s also a very important guy in our industry, so I think the advice to the entry-level collector is that this business is not for everyone. You need to decide early on if it’s for you. You’re going to have to pay your dues and learn the industry and improve yourself. Get your education, keep developing, see how you are doing competitively with your peers to be better and you’ll advance. You have an opportunity to be a leader in this Industry. To the person coming in at the graduate degree level, very much the same advice. This is a good Industry to work in and you can be very successful. But you also need to understand the industry, not just the statistical assumptions. Statistical assumptions may often lead you down the wrong road, so you also need that, you need to be well grounded in reality, in making assumptions based on data. That data is really what’s going to drive your decisions and drive your business and drive your success”.
“Without a doubt”, I stated. “I agree with that. I really think that if you really want an agency now, what you do, is you need good data, good scoring, and then good skills-based routing and then you’ve got the right people and the right results”. John agreed, saying “absolutely. And the skill-based routing really gets us back to our understanding of technology. When you set up a collection system, or typically on an ACD is where we talk about skill-based routing in your collection system”. “Absolutely, in his queue or not”, I replied. John continued “we were very successful at Compass when the mortgage crisis first came in, firstoccurred, in training a core of collectors and how to screen those calls for mitigation or mitigation opportunities or default, opportunities to avoid a default, and those accounts would get routed, didn’t matter where that collector was sitting, didn’t matter what bucket he was in. If a call came in and it was that kind of issue, it went to the collector that was skilled in that issue, so skill-based routing , both in your inbound calling system and in your collection system are very critical. You certainly don’t want to have your 30 day collector, your new guy that just came in, and he’s brand new, working an account that was 90 days last month and was cured, is now coming back into collection. So that account that is new into collection as he was current now he’s moving into collection but the month prior was 60 or 90 days past due, that needs to go to a very different collector set and those are the things that we, as leaders, have to understand and direct those activities that occur in our systems”. I agreed and added “as a leader, it’s your responsibility to help them to get better, and that’s a part of how you do that, is by giving him something, they have a skill to handle”. “Absolutely”, John replied. Continuing, I said “they have to have a skill to handle. If, and like you mentioned a minute ago, they don’t then sit down with them, roll up your sleeves and help reach the skills to handle”. John added,”you have to look at your system very much as if you were asking a specific account and handing it to the collector and saying I want you to work this account. Think about who you are giving it to and what file you are giving to him, what skill levels he needs. And if you can’t do that in your system, your system ain’t working”.
I agreed and then asked,”anything else you want to say that you want the world to hear-cause you don’t look like the kind of guy who’s not going to say what he thinks?” Laughing heartily, John replied,” very few people, if any, ever question what’s on my mind, cause I usually told them”. “I’m exactly the same way” I said, “and most of the people I’m interviewing probably are. We are probably all pretty outspoken”. John added, “one of my bosses at one time, who I think I had a good relationship with, did tell me that I was, to him’ a bully. I would bully my boss”. “I’ve done that. I’ve done that many times”, I stated. John reiterated, “Absolutely, you’ve got to bully your boss”. I went on to say”that’s one thing I didn’t know how to do when I was at GC but I learned after that because I probably would have stayed longer if I could have, and I had some really good ideas, and they ended up doing some years later that it was just too corporate and I could not figure how to get through the corporate bull shit”.
John continued, “there also comes a time when you’re a learner. You’re always a learner, you never stop being a learner but there is a time as you come in as an entry-level guy into the industry, in your learning the industry, in developing your skills and then there’s a point in time you become a teacher, and that role changes somewhat gradually. It doesn’t happen, you don’t come to work one Monday morning and I’m the teacher. It probably happens over a period of a few years that you sart becoming, sharing more knowledge, and championing more strategies and technologies, than you do as a learner, but you still are always learning”.
I acknowledged, “I like that thought because it makes good sense and it’s something I can use in my own consulting. The biggest thing with my consulting is, as you probablyFigured out from this whole thing, it’s not finding a solution, it’s wetting to buy into the solution and the. Getting everybody to actually just buy into doing it and then to buy into doing it right, like you were talking about. You can have a great strategy, but if this guy’s doing this and another’s doing that, nobody’s actually doing the strategy. How do you know if the strategy is working or isn’t”? “Right”, John added. “I can’t tell you how many reputable consulting firms have come in and given very good advice. And a higher-level guy, you know, maybe the chief finance officer says, ” well, how much is this gonna cost? No, we’re not going to do it”. That doesn’t help you. You really have to understand what tools they have at hand, what they’re willing to do, as far as the expense, and it’s not all expense, sometimes it’s taking your understanding of your existing technology,how doesn’t work, am I optimizing it, do I have a collection strategy in place, or is everybody just doing whatever the hell they want?” Smiling, I said “which is what usually happens. It is often not anymore than the cost, other than the cost of consulting because most of the time it’s redeployment of resources you already have or redeployment of technology that is not being used right”. “That’s true, that’s true”,
John said. “I find that very often”, I mused. John continued” unless you get into place, where I’ve been, that the technology they are using is old technology and will not support the growth the company would like to,achieve”. “Or the growth fits even hardly growing sometimes”, I added. John said ” right, and especially when you look at things like Benchmark, I think Benchmark is great stuff, but it’s nice to know how your peers are doing, and I actually know that because I told to them, but you have to understand is the guy in the same technology realm that you are, is the guy as sophisticated in scoring. How many accounts do you have the collector is a meaningless number if you don’t know automation is available to somebody”. “And what his accounts really are what the quality of them are” I followed.
Finally John said “what is your loss rate to a competitor if you don’t know what their risk strategy is. I mean, loss rate is more a reflection of risk in your account origination than it is of collections and it’s also geographic. If you’ve got a portfolio in Louisiana and we start putting California,, Texas and Florida into your loss mix and you’re heavily biased there, the guy in Chevy Chase when I was there in the mid-Atlantic when you’re in DC, Maryland, Pennsylvania, Delaware, he’s going to outperform you every day without even trying. He can be an idiot and turn better numbers than you because of his employment rates, so if you are in Chevy Chase (a very conservative lender, mid-Atlantic states, beautiful portfolio), then you come into Compass, or First Card, with heavy presences in California, Texas, it’s just the rates are different. GC used to have a scoring system that I think had a baseline of 100% and if you are in the forecast and you are a California or Texas guy, you maybe needed to achieve 80% and if you were a New York guy, you need to achieve 125% of this”. I said. ”
As I reflect back on my conversation with John the point that comes to mind is his commitment to training and development. This is something I’ve been teaching for the last decade and very few people truly here, the importance of developing your staff.
If we can all learn one thing from John and his many years of experience it is to train and develop everyone; we need to become a better citizen for the ARM industry. Thank you John!
You spent years and years trying to teach that collector to produce more dollars. Now all your client wants is more compliance. The KPI’s or key performance indicators that the client’s are looking for has changed dramatically over the last five years. The only KPI that matters anymore is compliance. But you still know you have to collect money to make money as it is a contingency-based industry. So how do you teach your employees to still produce collections but focus on compliance?
Here are three suggestions of how you can turn your top producers into your top compliance super staff.
- This is the most important one but the one most people have forgotten. Reward only the behavior you want to happen! We have been paying our collectors based upon liquidation rates, gross collections, number of payment arrangements, expediency of payments, and rewarding many other behaviors for many years. Now we need to begin to reward them for compliant and compassionate actions that result in collections.
- Start over! Don’t take your current collectors and turn them into compliance machines hire new staff and create new as training standards that teach them from day one to be compliant and compassionate collectors.
- Get buy-in from the staff. Teacher staff to use social media to their advantage. Have them join collector groups on insideARM.com, Credit and Collection News, and LinkedIn. As they begin the understand the industry from a higher level they will understand why compliance is so important. As they read articles on these websites and have the opportunity to respond and ask questions they will begin to understand the industry and have buy-in to the changes.
So often my clients are to blame for the situation they are in. They complain their collectors are not able to get the job done, whatever the job may be yet they spend no efforts to train or develop or reward the behaviors they are looking for. They continue to reward behaviors that are outside the realm of the job and continue to complain about the results.
You must make efforts to change your behavior as a manager or owner in order to change the behavior of your staff. If you need assistance creating a new culture within your organization Lighthouse Consulting has solutions.
Lighthouse Consulting’s website design team has been doing a lot of research on the recently released Penguin 2.0 update from Google and here is the High Level.
It’s all about relevancy and tamping down the SEO spammers. Bottom line, quantity of backlinks matters less than the relevancy of the backlink. Meaning, you must focus on backlinks form relevant sites relating to software, collections, financial services, and backlinks form Press releases. Google refers to it as Earned Backlinks.
So, here is the recommendation for our clients:
1) Blog articles – You need to blog two times per week about a subject matter specific to your collection business. This is critical. two blog posts a week over the course of the year is 100 HIGH PR backlinks from other crucial websites. The Lighthouse staff can help you write your articles are we can write and post them for you.
2) Press Release distribution – You need to distribute 12 press releases per year at least. This Lighthouse service formats the release for the web, incorporates backlinking and keywords and stays live on the web longer, ensuring the release gets better visibility over time.
3) Videos-You must continue to add videos, and we need to incorporate those videos into the blog posts, so make them relevant and informative to the subject matter of the blog post, showing software screenshot/demos something relevant to your business Content, Content, Content. Our Lighthouse staff can also produce your videos and post them
4) Social Media – Googel+, YouTube, Linked IN, FaceBook, Twitter, etc… You already do a good job here, but you’re going to need to manage many industry groups and post every blog on these sites this is something we can help you with as well.
5) Natural language Meta Data – if you don’t know what this means that you need our Lighthouse staff to help you with it. Meta Descriptions and Image ALT Tags is critical. Watch for keyword stuffing, but use the keywords naturally in the body copy of the page.
These are just a few recommendations, but should keep you busy for a while. Please let me know if you need some help with any of this.
Thanks for the opportunity,
Lighthouse Consulting Web Development team
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