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Collections Best Practices

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Jeff Bernstein of Strategem Portfolio Services gave an overview of the latest developments in collections. Jeff’s company has a product called Strategy Director (about which I blogged before). Jeff does a lot of work with collections groups and all too often sees a failure to implement analytics even where those analytic models are being developed for collections. There is thus a need for both a technology platform for analytics but also an educational one so that models will be used once they are done.

Collections has been reshaped by a combination of increased expectations and a globally competitive market in the last decade. Collections has been evolving in multiple dimensions:

  • Skills metrics are essential not just portfolio results that collectors may or may not control. Unless people feel that skills and talent get them rewarded, rather than results driven by the portfolio quality, then it is hard to change behavior. Leadership, management and skill building are increasingly important.
  • Cost efficiency was the drive for a lot of outsourcing and offshoring as well as the more recent push for alternative contact channels. Now a more holistic approach to tracking results and costs is more common.
  • A risk based focus is now more or less the basis for collections work. Pooling by degree of risk and segmentation by risk are the norm. New systems allow this to drive very consistent outcomes as rules-driven processes, voice response systems and more are increasingly common. Operational negation – having the business do something that contradicts the analytically developed approach – is on the decline having been epidemic in the past.
  • Quality management is now the norm with best in class organizations using recordings etc to review performance and target improvements.

Progressive organizations are taking a number of steps:

  • Management Systems Approach
    Top to bottom performance visibility with skills-based metrics being widely used and often even visible to everyone. Leadership focus on individual development and quality monitoring is continuous.
  • Offshoring/Outsourcing
    Portfolio risk strategies now drive outsource strategies – which segments of the portfolio show the best cost/benefit for outsourcing? Rather than using outsourcing as an overflow it is now a more integrated component with a particular portfolio focus. Increasingly a part of the company not a separate one and increasingly informed by analytically-derived strategies.
  • Alternative Channels
    Channels are now integrated not bolted-on. Analytics, like impact modeling, again help find the folks who are likely to be handled well by a specific channel. Interactive voice response systems can be included in very sophisticated approaches thanks to their support for rules and scripting as can SMS and web channels. IVR, SMS or web might be exclusive for some customers and one of many for others driven by preferences and analytic measures of effectiveness. Optimizing contacts across these multiple channels, and across offshore or outsourced groups, uses this array of choices to maximize results.
  • Real-time data
    Progressive organizations are using recent and even real-time data to drive better conversations and to avoid repeating failed strategies. Using trigger events to requeue and reprioritize/allocate acconts is critical to improving results.
  • Quick response to evolving risk
    Using internal and external scores and tracking of non-delinquent accounts to find early signs of problems and building analytics that can help find and treat these accounts before they go wrong is very productive. Combined with more real-time data and a more holistic view of potential treatment channels this can be particularly effective.

The end result is true Lifecycle Risk Management in Collections. Using micro-segmentation of early stage accounts and event triggers for rapid response; rules-based processing that use all the available channels; and well designed skills-based performance metrics. Risk-driven, skills-based routing to the right channel, the right approach, dynamically adjusted.

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