There’s a motto I have these days that says, “it’s all about performance until it’s about compliance and it’s all about compliance until it’s about performance.” It seems all organizations are playing the ultimate balancing act between providing its clients with optimal performance while remaining completely compliant with all federal and state regulations, along with internal company policy and procedures. Like it or not, from now on performance and compliance are completely intertwined, therefore it is important to balance them in your overall operational strategy which includes how your organization compensates collectors.
Traditional debt collection bonus programs are shifted heavily, if not completely toward performance. The more money a collector collects, the more bonus money they earn. There is growing concern in and outside of our industry that these types of programs could incentivize the collector to “do whatever it takes” to get a debt collected, which could lead to potential compliance violations that cause harm to the consumer while opening up your organization to liability. One way to calm this concern is to create a bonus program that incorporates the organization’s compliance objectives with the collector’s performance expectations. By doing this the organization will establish with collectors that remaining compliant is equally as important, if not more so than meeting performance expectations.
1. Compliance Objectives
The first step in the performance incentives equation is to identify, establish, and communicate exactly what are the organization’s compliance objectives. In order to incorporate them into a bonus program, each compliance objective should be able to be measured. I recommend that these compliance objectives remain as objective as possible; did the collector comply or did they not, leaving little to no subjectivity. Examples of compliance objectives for collectors could be:
a. Identify the consumer properly
b. State the mini-Miranda
c. Comply with all debt collection regulations
d. Document the conversation
e. Comply with Employee Code of Conduct
Compliance objectives should also not be limited to just rules and regulations that govern the debt collection industry, it should also encompass the organization’s policies and procedures. Maybe an organization has an Employee Code of Conduct that has been developed that contains measures more stringent than federal, state, or local regulations in order to prevent any risk. If so, and they are measurable, the organization should find a way to incorporate them. Another example would be a call progression. Most collectors are trained to ask for the balance and work down from there based on their training. If they fail to do so they are posing liability to your organization’s performance and therefore out of compliance with company policy.
2. Performance Expectations
With clear compliance objectives in place, performance expectations are next to identify, establish and communicate. They should be as objective as possible; either the collector met the expectations or they did not. Examples of performance expectations could be:
a. Gross collections over targeted goal
b. Fee expectations over targeted goal
c. Liquidation goal met
d. Post dates for future month’s goal met
Performance expectations will vary from one organization to the next; what is not suggested to vary is the expectation(s) once they are set. Consistent and transparent expectations are essential for collectors in order to foster an environment conducive to their success.
3. Structuring a Bonus Program
Developing a structured scorecard to be used in the evaluation process is the final focus. While there are many ways to structure a scorecard, one example could be to randomly audit a select number of conversations a collector has with a consumer in a defined time period and list those accounts individually in separate columns on the scorecard. Then structure the scorecard to where each compliance objective and performance expectation is isolated in its own space and evaluated for each one of the accounts. A simple yet effective way to do this would be to use predetermined objective answers to the objective or expectation such as Yes/No/Not Applicable. Then using it like a checklist for evaluating the accounts; either the collector did what was required, they didn’t, or maybe something wasn’t applicable.
Once the scorecard is completed, a score should formulate based on how much weight each plays in the overall plan. There are several options here. One could be that each objective or expectation is assigned its own unique weighted value based on importance to the organization. Another way could be to assign a separate weighted value for the compliance and performance sections. When formulating the scorecard you might want to have someone with a little background in basic analytics or statistics to assist in the final scoring. In the end, the goal would be to create a scorecard structure that would produce a final, single scored percentage.
Once that final scored percentage is calculated, the next step in the process is to determine how to apply that to the bonus program. Below is an example of how this can be accomplished:
Let’s say a collector has a performance expectation of $6,000 for a specified month and under the previous, performance-only based bonus plan the collector would get 25% of all dollars over that expectation. In the previous month the collector collects $10,000 and therefore is entitled to 25% of the $4,000 over their expectation which would be a bonus of $1,000. You could go back to the final scored percentage on the scorecard and only award that final scored percentage of the performance earned bonus. Therefore, if a collector scored 80% on the scorecard, the collector would receive a final bonus amount of $800. Their noncompliance with compliance objectives lost them $200 in this example.
In conclusion, regulators and clients are concerned that performance only based bonus programs could entice the collector to do things that could cause harm to the consumer in order to increase their bonus potential. Starting to incorporate compliance objectives with performance expectations will not only get you ahead of the curve, it will also help establish a culture of compliance and communicate to your organization that compliance is just as, if not more important than performance.
Nick Jarman is the owner of RightAway Consulting & Coaching. Jarman served the ladt three years on the Board of Directors for ACA International and is the past President of the Missouri Collectors Association.