When I meet with collection teams, I always ask collectors, “How do you know you are doing well every month?” Their answers give me a good sense of how much leadership values performance and recognizes the team.
If the response is something like, “Well, I am still here,” or “I got a bonus last month,” it indicates limited discussion regarding individual performance. However, if the answer is, “Let me show you my performance reporting or scorecard,” it shows that there is a level of performance management in place.
I believe a great collection team consistently delivers strong performance every month. Creating a collector scorecard is one way to start developing a strong team.
Scorecard Alignment
One critical component of a collector scorecard is its alignment with the organization’s objectives. Typically, collection organizations aim to reduce contractual write-offs, increase fee revenue, meet all compliance and procedural requirements, and deliver a good customer experience. Leadership usually incorporates these goals into their yearly objectives, and collectors’ expectations should be no different. Collectors are typically evaluated monthly based on their performance, and designing a scorecard with metrics aligned to leadership’s objectives increases the odds of success. For this blog, I am focusing on reducing roll rates and contractual write off.
I recently worked with an organization that had limited collection reporting and evaluated the collection team based on inbound abandon rate and outbound calls. Collectors were assessed by the number of calls they handled each day, while leadership was evaluated on monthly roll rates, contractual write-offs, and inbound abandon rate. The collection leadership listened to calls and had verbal conversations regarding what they heard on the call. There was no formal monthly evaluation process, leading to significant variation in the number of calls handled and the customer interaction by each collector.
A deeper look into the collection system revealed that much of the available reporting was not being utilized. Working with the team, we identified several metrics that could be used for a scorecard, including accounts worked, right-party contacts, promise-to-pays, kept promises, dollars collected, customers rolled back/cured, and postdated payments. The leadership team had never requested this type of information from their system service provider.
With all the reporting options available, the team had to decide which production indicators best aligned with reducing roll rates and contractual write off.
How to Determine Aligned Metrics?
I like to use the “Cake Theory” when identifying good collection metrics. Imagine you are choosing a bakery to make your wedding cake. What would be a significant requirement for the bakery? For me, the taste of the cake would be a critical factor. If my expectation is a tasty cake, then my expectation for the bakery is that they deliver a tasty cake. Since this was a one-time event (married 32 years now), I was not worried about a healthy cake. I set up tasting sessions with each bakery to taste the cakes.
Now, if I went to a bakery and they had a table set up with a bowl of water, sugar, flour, strawberries, baking powder, eggs, salt, and vanilla, and they asked me to taste each ingredient to determine if they make a tasty cake, I would be caught off guard. My expectation was that they deliver a tasty cake. The only thing that mattered was the taste of the cake, not each individual ingredient.
This concept applies to collection metrics too. A collector should be evaluated and recognized for impacting roll rates and contractual write-offs. Collectors call customers and work with them individually to resolve their past-due accounts. A collector’s goal is to inspire a customer to make a payment or find another solution to bring an account current or less delinquent. If a collector is successful in doing so, they positively impact roll rates and contractual write-offs. The more each collector achieves this result, along with the other collectors on the team, the greater the impact on the organization.
In the organization I recently worked with, there were many collection metrics available. You have both ingredients and the final product (the tasty cake). Metrics like accounts worked, right-party contacts, and promise-to-pays are ingredients. A bakery uses a combination of ingredients to make their cake, just like a collector uses their skills to positively impact customers. Some collectors spend more time working with a customer and have great negotiation skills, resulting in fewer accounts worked per hour but potentially better outcomes. Another collector may work through accounts quickly to help as many customers as possible. Both approaches can be successful. Ultimately, the measure of success (the taste of the cake) could be the number of customers rolled back/cured each month. If we believe moving a customer to a more current status positively impacts roll rates and contractual write-offs, then so should a collector.
The other metrics (ingredients) are critical to success too. Coaching collectors to deliver strong results requires using these ingredients to diagnose strengths and opportunities. For example, for a collector with strong negotiation skills, coaching them to work a few more accounts per hour could significantly impact customer rollbacks/cures in a month. Similarly, teaching a fast-working collector how to listen and offer payment solutions may increase their ability to help more customers instead of quickly moving on to the next one. Coaching collectors with good reporting and a monthly scorecard drives performance and improves recognition for each collector’s contributions every month.
Collector Scorecard Requirements
For example, the organization above valued roll rates, contractual write-offs, and inbound abandon rates. After review, they also determined that customer satisfaction and adherence to procedures were critical. I challenged the team to identify the critical areas they want each collector to focus on to be successful. I also explained a few things to consider when building a collector scorecard:
- Use measures that are aligned with leadership’s objectives and not just the individual components (cake theory).
- Show collectors how their contributions align directly with the organization’s goals.
- Avoid using too many scored items, as this can dilute where the collector focuses effort each month.
- Provide daily reporting that shows collectors how they are progressing against their monthly objectives.
- The scorecard should provide a score or result based on overall performance for the month.
- Ongoing feedback from leadership with each collector monthly helps collectors deliver strong results.
- Reviewing scorecard results at the end of the month reinforces the importance of these expectations and objectives.
- Align all reward programs with the elements that lead to a strong scorecard or actual scorecard results.
- Challenge collectors to develop action plans to improve areas that could lead to better overall results.
Considering all these points when developing a collector scorecard will help ensure you are moving in the right direction.
Conclusion
Building an effective collector scorecard is crucial for fostering a high-performing collections team. By aligning metrics with the organization’s objectives, such as reducing roll rates and contractual write-offs, and focusing on the critical areas that drive success, you can ensure that collectors are working towards the same goals as leadership.
Utilizing the “Cake Theory” helps illustrate the importance of evaluating overall performance rather than individual components. A collector’s success should be measured by their impact on key performance indicators like roll rates and contractual write-offs, rather than just the number of calls made, or individual tasks completed.
Incorporating daily reporting, ongoing feedback, and monthly evaluations into the scorecard process ensures that collectors stay on track and receive the guidance they need to improve. By aligning reward programs with scorecard results, you can motivate collectors to achieve their best performance consistently.
Ultimately, a well-designed collector scorecard not only drives individual performance but also enhances the overall effectiveness of the collections team, leading to better outcomes for the organization. By considering these principles and continually refining your approach, you will be well on your way to developing a strong, successful collections team.
Author: Ken Evancic
Ken.Evancic@ResourceManagement.com
As a consultant for Resource Management Services, Ken provides consulting, training and mentoring in all phases of collection and recovery, in addition to auditing third party vendors.
Ken Evancic is a Vice President at Resource Management Services, Inc. Ken Evancic is a collections veteran with over 25 years experience. He has managed all phases of collection, including all levels of delinquency, automated dialer units, early out agency management, recovery, and skip tracing. In addition to collections operations management, he has lead initiatives in the areas of performance management, collections strategy development, collector and manager training, collector desktop design, collections reporting systems, and risk and compliance.
As a consultant for Resource Management Services, Inc., Ken has specialized in developing and completing third party compliance and performance audits for collections agencies and collection attorney firms for many top credit grantors and debt buyers. He has leveraged his 25 years of experience to develop multiple collector and collection management training classes designed to maximize collector performance. In addition to collection training, Ken helped develop and facilitates the RMS Third Party Vendor Auditing training.
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