Thursday, 27 June 2013

6 tips for incentivising the right behaviour

My 13 year old son plays centre forward for a struggling local football team.  They’ve recently finished a tough season during which goals – never mind victories – were a rarity and they finished bottom of their league.

Mid-way through the season my son asked me for a new phone. Because I’m not as skilled as his mother at saying “No,” following several weeks of nagging I made one of those spur of the moment, ill-conceived parental promises. “If you score a hat-trick between now and the end of the season you can have one.”

Given the season they’d been having I thought I was on pretty safe ground.  Besides, what was the worst that could happen – my son would try that little bit harder and help his team scrape a much needed win?

So – did Dad’s little incentive scheme have the desired effect or were there unintended consequences?  In summary, no and yes! Some of the most noticeable changes in behaviour were:
  • My son was never the most generous team player, but now he stopped passing altogether in favour of speculative goal attempts from all pitch positions (running back to help the rest of the team was another casualty of his new found focus).
  • His team mates started to get a bit resentful and some of them stopped passing to him.
  • The resentment even spread to some of the other boy’s parents who were getting grief from their kids about my son’s potential bonus and the lack of theirs.

So what’s all this got to do with effective collections?

Well, in the Advisory team we spend a lot of our time reviewing the effectiveness of creditor’s collections and recoveries operations.  In the same way as my well-meaning incentive scheme didn’t necessarily drive the right behaviour in my son (or help his team), we see numerous examples of incentive schemes and structures within collections operations having unintended consequences.  For example:

One creditor we worked with boasted about their high collection agent retention rate and ease at which they recruited new agents from a competitor down the road. This was linked to the fact that their agent remuneration package was heavily weighted towards a relatively high basic but with limited scope to earn commission for over performance. It transpired that all the best collectors were working for the competitor who offered a lower basic salary but where the OTE was much higher.

In another creditor we saw the best performing agents were those who were automatically writing-off a debtor’s fee and interest on every call (doing this counted towards the agent’s revenue target.  It was meant to be only permitted as a last resort but the absence of appropriate checks and MI meant that the best performing agents were exploiting this loop hole).

Another organisation we worked with offered no commission scheme at all to collection agents on the basis that, “The Union doesn’t like the idea of some agents earning more than others at a certain level.” The resultant collection rates were poor.

On another, call handle time was a key measure without appropriate control, we found that some agents were hanging up on calls at the end of the day to hit their target.

What are our 6 tips for an effective collections incentive scheme?

1. Ensure incentive schemes are aligned to company objectives
In our experience, measuring agents across a series of broad categories of behaviour which drive a balanced incentive scorecard works well and ensures alignment with broader company objectives and the right agent behaviours.  The combination of behaviours we see agents measured on most commonly are effectiveness (e.g. amount collected), efficiency (e.g. volume of work carried out/productivity) and quality (e.g. adherence to process/compliance).

2. Build flexibility in to the scheme
As the business priorities change (or agents get wise to the limitations of the existing schemes!) incentive schemes need to be sufficiently flexible to encourage a modification in agent behaviour where required.  For example, in a certain month the business focus might shift to be more on cash collections at the expense of average handling time and the way agents are incentivised should be modified to reflect this (the balance scorecard helps with this).

3. Ensure schemes are realistic
We’ve seen examples of incentive schemes with ‘entry criteria’ which are either very broad (i.e. more or less everyone qualifies) or overly stringent (very few agents qualify).  Both can be a disincentive.  The trick is calibrating any qualifying criteria over a few months to ensure the schemes are balanced and realistic.

4. Ensure scheme provides a genuine incentive
Top collectors are ambitious and enjoy success.  In our experience good schemes will enable top collectors to earn twice what a poor one earns (but they will collect 3 to 5 times as much).

5. Ensure that the right MI is available
Good management information ensures that performance can be monitored and managed at all levels of the organisation and that agents have full visibility of their performance on a regular basis.

6. Manage poor performers
Consistent poor performance needs addressing through training, coaching or moving them to a more suitable role. Often, those who work in customer services aspire to the incentives and rewards of collectors but find it difficult to make the transition in behaviour required.

And, as a foot-note to this story, you may be interested to hear that my son didn’t get a hat-trick.  He did, however, get a new phone, but only after having helped with some jobs around the house and so, don’t worry, my parental integrity remains (more or less!) intact.

By Charlie Horner, Lead Consultant, TDX Group

Wednesday, 19 June 2013

Keeping up with the competition

Recently I was asked "if I am doing everything that I can think of and still not beating the competition what should I do?" This person had made a lot of improvements to their company and had, for a short period, been doing well. But the competition had reacted and they were once again falling behind. My, rather abrupt, answer was "think harder or give up" which entered us into a broader discussion.

Unfortunately, after having made a series of process improvements, this person was now back to doing business as usual - and this was the problem. Henry Ford once said, “If you always do what you’ve always done, you’ll always get what you’ve always got.” Nowadays the pace of change is so rapid that there are few instances where this remains the case - those who don’t continually innovate and streamline end up falling behind and struggling to survive.

A good example of this is AA Insurance; a decade ago it had a large network of retail premises, offered good quality competitive insurance and continued for a number of years building on this model. However, when Direct Line saw an opportunity to change the way insurance was bought, reduced overheads and therefore premiums, it took great market share and AA Insurance started to struggle.

AA insurance is still here today thanks, in my opinion, to the great visionary work of Mark Wood who came in and made a number of hard, radical decisions which looked to the future instead of reflecting on the past. He was not popular with everyone, good leaders rarely are, but he did turn the insurance arm of AA around.

Going back to the original question I was asked - the person I was helping was well intentioned, very good at delivering change, but was lacking the understanding of what was possible and the ideas to get there. Their real question was how do I go about identifying opportunities for improvement? This is far easier to address. To do this you should look at your own operation with a critical eye and assess if it is it better than last month?

Questions you should be asking are:
  • Am I really making best use of all the resources I have available to me?
  • What are my current constraints and can they be eliminated?
  • If I were to start from scratch what would I do differently?

A regular review of what is happening externally in your market is also key:
  • How is my performance compared to the market? The earlier you can identify any gaps and trends the better you can assess and react to them.
  • What are my competitors doing? What are they investing in, what capabilities are they building? If they are investing they are expecting a return and you are likely to see your comparative performance change in the future if you do not invest too.

Continual improvement is now a part of all business. Building this into the company culture and making time to capture and assess a broad array of information and data at regular intervals is now what distinguishes the great performers. The best performers tend to use the broadest range of data available from a multitude of sources including:
  • Good quality internal MI
  • Regulator reported information
  • Publicly available data sources
  • Industry and sector  shows and conferences
  • Industry press
  • Benchmarking studies
  • Networking with peers

Investing time and resources to gather and review this information to drive change in your business is key.

By Nick Georgiades, Director - Advisory Services, TDX Group.

Wednesday, 12 June 2013

What’s it like working in a fast growing company?

When I was asked to write a blog entry, I thought for a long time about what credit management areas and topics I felt passionate about and then it became apparent, the thing that I can write most about with ease and confidence is working at TDX and what it’s like working in a fast growing company. 

I’ve worked here for nearly 7 years now and throughout that time whenever anyone outside of the company has asked me what I do, I’ve always responded with a similar answer….I work for a young, exciting Financial Services company based in Nottingham. I don’t very often talk about my individual role to people, because for me, working at TDX is more about feeling part of a group, feeling part of something unique and dynamic and ultimately feeling like you can make a difference to the success of the business. 

When I joined back in 2006 as a Junior Business Analyst there were probably around 30 colleagues, there are now in excess of 300. Back then we only had a few clients based in the UK, we now have a client portfolio across a wide range of industry sectors and have a strong market presence in Europe, South America and Australia. The growth in such a short space of time has been incredible and what’s amazing is that the trend is continuing. As we continue to invest in new products, new ideas, new ways of working our opportunity to grow keeps on expanding. I’ve never been bored working at TDX and looking at the upcoming plans it’s fairly safe to say that I won’t be anytime soon. 

Some of the highlights for me so far whilst working at TDX have been: 

Rolling out new technology to  our clients
  • Identifying a genuine business problem and working with the whole IT team, as well as our clients and suppliers, to deliver something innovative which drives a tremendous amount of value within the recoveries process
Migrating with a major telecommunications company onto our recoveries management service
  • Having the opportunity to work with such a large organisation and deliver an important project, as well as helping build the start of a long term partnership
Going live with PLATO
  • Seeing our former system  (which the team I joined in 2006 was responsible for) evolve into the largest debt management and placement platform in the UK, PLATO
Working to roll  PLATO out to market and on-board blue chip clients in the UK, Europe and Australia 
  • Being part of a young, enthusiastic team whose willingness to go the extra mile has helped deliver a host of significant projects and implementations over the years
Some of the people I have worked with at TDX are just plain and simply amazing in terms of how much they are able to get through and their desire to deliver excellence

Having a role you enjoy, but which also challenges you, is a rarity for many people, but I’m happy to be able to say I do have that here. Feeling like you can make a difference to a business is a powerful motivator for many, and perhaps one of the main reasons TDX has bucked the downwards economic trend. Long may it continue. 

By Antony Dear, Head of PLATO, TDX Group

Friday, 7 June 2013

The Future of Payments Part Three: Pointing Towards the Future

Each week I give my 12 year old daughter her school dinner-money and she quips "I’m going to load-up my finger". Her school is one of many now using the technology which means when a student pays for a meal, they place their finger on a scanner that brings up their name, class and the balance of their account.

This makes me wonder whether the same technology will ever be used in the high street, in supermarkets or even online. It’s a concept that has been trialled before, and some trials continue to this day, but largely this technology has slipped away from mainstream attention as the payment industry has focused more recently on mobile, near field communication (NFC) or other contactless payment methods.

Past challenges with biometric systems have been concerns regarding security and privacy. In fact most systems don’t use the actual fingerprint to identify the user, but create a template of the fingerprint - a set of numbers measuring specific features of the print - making it impossible to reconstitute the original fingerprint. Nevertheless concerns do exist about the interoperability of fingerprint systems and the severity of the consequences of the loss of one’s fingerprint template.  

Interestingly there are rumours that Apple, having acquired a company specialising in this technology last year, could be about to incorporate fingerprint sensors into one of its next iPhone releases. The vision and forward-thinking of one or two large organisations or retailers is all it will take for biometric systems to leap back into the mainstream.

When it comes to making payments (of any kind, including those relating to debt), fingerprint systems could eradicate the need for identification and verification steps, or having to remember numerous log-in details, making both physical and even online transactions and payments even easier. It could be the ultimate ‘single sign-on’ and could create some interesting debate around the passing of personal data between organisations, for example in the debt industry, between creditor and debt collection agency.

I believe Plato said "nothing is more certain than change" and this is certainly true in the world of payments. Combined with the growing use of online wallets such as PayPal, all payment-taking organisations, and of course that includes the debt industry, will need to constantly rethink the methods and channels through which they take payments.

And I fully expect in the next few years my daughter will turn to me and say witheringly: "Dad, did you really carry around a wallet stuffed with payment and loyalty cards? You should have used one of these instead!" wagging her ‘powered’ finger at me.

By Carlos Osorio - Director, e-collections and payment services,
TDX Group