Understanding performance: start influencing outcomes instead of just measuring them

Come month end the same old questions are invariably asked about collections:

• What are the changes in collections compared to last month?
• Performance isn’t in-line with forecast; should we expect this to continue?
• Performance is in line with plan but shouldn’t we be doing better with the introduction of initiative X?

Your standard MI reports should enable you to answer some of these questions:

• Have placements dropped recently?
• Is liquidation declining?
• Has a particular DCA had an issue with remitting payments this month?

But how well do you really understand your portfolio’s performance?

 

Identifying the true trends in your portfolio is much more difficult. To really understand performance you need to stop just measuring your performance outcomes, such as collections, liquidation, penetration, breakage rates, average payments, etc. You need to start measuring the inputs as well.

For example:

Upstream changes – changes made in acquisition and customer management can have a huge impact on the problems/debts being managed in collections and recoveries. For example the introduction of smart metering in the water and utilities sectors is going to have a huge impact on portfolios, as will the reduction in fees for the use of mobile phones abroad in the telecommunications industry. Knowing about these changes and adjusting your processes and strategies accordingly will give you a head start on other creditors.

 

Debt quality – a change in the mix of debt flowing in today will have a limited impact on collections this month, but if it continues will have a large impact in the future. As above knowing about this early will enable you to adapt your strategy to maximise performance.

 

Collections activity – monitoring the activity of your collections team/DCA will enable you to ensure all the accounts are receiving the activity you want at the time you want. If your portfolio is only on the dialler in working hours this could have a huge impact on your performance. By monitoring activity you will spot this long before you would have noticed the collections drop and so will be able to make the change immediately.

 

Strategy effectiveness – knowing if your strategy is performing well is vital; any new strategy needs to be tested so you know the effects. Lots of performance issues can be traced back to a change in strategy such as removing a letter that was not fully understood.

 

So, understanding your performance better isn’t just about answering those tricky questions come month end, it is the key to you achieving great performance. Understanding performance is the first step to being able to implement improvements to your processes and strategy. These improvements are much more likely to work as a result as you know what they are addressing, you are able to monitor their performance and thus make adjustments as required.

 

By Stephen Hallam, Value Analyst, TDX