How to Build a Great Incentive Program for Today’s ARM Industry
Now that incentives are more relative to compliance than production, and as the CFPB defines what they desire to see from an incentive program, how do you meet all these requirements and still build an incentive that motivates the staff to perform? This is a question I am getting weekly from my clients.
I have been teaching the same solutions for a decade as it relates to incentive issues. You must praise the behaviors you desire in the staff and provide penalties for non-compliance so as not to reinforce negative behaviors. This is the same thing that the CFPB is doing. They are requiring and defining new rules and providing penalties for non compliance.
Today, many companies are using perverse incentives or incentives that are creating the problem issues in the firm. Their incentives are actually working in reverse to the company’s current goals. They are using the same incentives from 10 years ago even though they realize the rest of industry has been changing rapidly. Many processes have remained the same in many collection agencies and firms over this period of time as a result of complacency or simply not understanding there may be a better way of doing things.
So what are the key performance indicators (KPI’s) for a great incentive program? Well this is a moving target and will not be the same for any two agencies or law firms. KPI’s should focus on the current deficiencies of the agency or firm and align in such a way to drive operational change and efficiencies as a result. These line items will be a moving target if you are effective at the incentive.
For example if your firm has a problem with attendance and timeliness try this. Create a fine or some type of penalty for the actions of the late and tardy. If you design the program correctly the problem will go away in 90-180 days and the program will no longer be needed. It is likely that another deficiency has been identified by then and a program can be built to alter that undesired behavior.
What I have been teaching for 13 years is to create a scorecard system for the staff…all the staff. The line items on the scorecard will vary but the scorecard is designed to help the company and the staff to understand their deficiencies and build training and incentive programs to overcome those issues.
So what are some of the line items in the scorecard?
- Accounts worked per hour
- Conversion rates
- Contact percentages
- Call escalation
- Dollars per hour
Now not all of the items on the scorecard will be scored at the same level so a weighting percentage must also be created. Maybe attendance is weighted as 30% and compliance is weighted at 50% and remaining 20% is based on production. This equals the 100% of the staff’s scorecard currently, but in three months the attendance may be taken away and accounts worked per hour used in its place as an example. As the company identifies opportunities for improvement throughout this department the scorecard can change to create that desired behavioral change.
Remember, there should be a scorecard for every staff member in the company, not just production staff, but all of the staff, and it must be created and discussed EVERY MONTH. Then you must create and document a plan to help the staff member overcome their individual challenges. All this can be done in the scorecard document.
The most important thing to understand is that you must use this scorecard in a positive manner to motivate the employee and not to beat the employee over the head with. If you focus merely on the scoring and not on the improvement and coaching aspect of the exercise, you will fail to get any buy-in from the employee and the improvements in performance, attitude and motivation will be minimal.
For help with developing and implementing an effective scorecard based incentive program, contact Lighthouse Consulting at email@example.com