A “Best Practice” Long Overdue

…The Option of Mediation

“When the only tool you have is a hammer, everyone looks like a nail.”

If that isn’t true of the collection agency and collection attorney industry, I don’t know what is.

In the 30-plus years in which I have been in the credit and collection field, first starting out in the world of the collection agency and then moving on to totally outsourcing credit operations for Fortune 500 companies, I found my preferred way of doing business evolving as well.

Perhaps my greatest change was to research, implement and provide alternative A/R management tools and training to a variety of business customers.  The motivator:  it is never about the money; it is always about the relationship.

It is not that I didn’t appreciate the value of third-party intervention that a collection agency provides.  It was that I didn’t appreciate the way it was – and in too many cases, still is – done.

I did have an unfair advantage.  My firm positioned itself, both legally and in fact, as a consulting and outsource firm that could serve as a third party – but one without the negative baggage that accompanies that line of work.  CFO Advisors’ purpose was to “get the money and keep the customer.” (For clarity, my work was strictly in the commercial, business-to-business arena and not business-to-consumer.  That’s a whole different animal…)

I discovered that my clients and potential clients, finance and credit executives, really started listening when I made it clear – in both performance and in philosophy – that my firm did NOT use traditional, negative-based approaches to motivate payment.

The approach of CFO Advisors was to serve as a connection and listening post between our client and their customer and not simply as a more friendly ”hammer” demanding payment.  It required effort, and balance.  The extra time and energy it took to research and to negotiate was a challenge, but our style, attitude and superb performance (who doesn’t want to pay the “nice guys?”) earned us long-term clients such as RR Donnelley, Hearst, Gannett, and Johnson & Johnson Health Care Services.

Coming into the present, where I am semi-retired and work selectively for businesses that value the customer relationship as much as the dollars outstanding, I have still been waiting for my industry to change and evolve.  “We have the hammer, and they are the nail” just isn’t working as well as it once did.

It’s time for the industry to re-train itself.  A workshop I completed recently on advanced Mediation confirmed that need for me, and provides a professional and effective path that needs careful consideration.  Consider it a “scalpel” as opposed to a more blunt instrument.

Mediation?  To “collect a past-due bill?”

Yes and No.  Mediation requires engaging a trained professional who understands conflict (and there are few greater areas of conflicts than between someone who owes and someone who is owed) and who is able to get people to participate in a positive dialogue.  It also requires a level of neutrality and respect for both sides of an issue that is not usually found among even first-party collectors, much less third-party.

The training confirmed my personal experience that when people are led to an understanding the “why and how” of a conflict (the unpaid bill, in this case), and were provided an environment in which they could explore alternative solutions, terms were reached that were fair and satisfactory to both parties.

No coercion, no manipulation, no threats – exactly what mediation is all about.

There are drawbacks for the collection firm that would want to adapt this approach, of course.   The expense of the mediation has to be taken into consideration, although both parties may well agree to split the cost.  After all, an agreement reached through a facilitated meeting  costs a lot less than one reached through the courts and attorneys.)  There is also the training it will take to re-frame a collector’s thinking and approach – which means time and money invested.

Geography is also a consideration, as is the amount of dollars owed or perceived value of the relationship which is at stake.

What is more at stake is your firm’s own future.

The extra effort will pay dividends in many ways, not the least being distinguishing your marketing ability to present yourself to clients as an evolving firm which takes relationships into consideration and is not just another “me, too” agency.

Over the last two years, the FTC has recorded the largest number of complaints ever about collection agencies.  Record fines and penalties have been assessed.  Collection agencies have been closed.  An entire – if dubious – cottage industry in “debt counseling” has been created to enable debtors to better resist collection attempts.

It is time for collection professionals to balance out their traditionally adversarial approach

For those wishing to explore the value of the mediation option, there are two outstanding teachers in the field of mediation in the greater NYC area: Elizabeth Clemants of the Association for Conflict Resolution (www.acrnet.org) and Alex Yaroslavsky, the Yaro Group (www.yarogroup.com.)

It was in their Professional Mediation class that I saw the application of ADR (Alternative Dispute Resolution) to certain parts of a collection agency – or any business’s – account portfolio.  If these two can’t help you directly, they can certainly direct you to the right place/person.

For those of you who are interested in having more tools in your toolbox other than hammers, this will be an intriguing new area to explore.

The benefits may not actually show up immediately.  But, one of these days we will pull ourselves out of the Great Recession.  The “debtor” who is being pounded on today will eventually pick themselves up, dust themselves off, and get back in the game.  I doubt that they will be returning to companies that hired bill collectors who treated them shabbily…they will simply become someone else’s prized customer.

That customer you take time to work with today, will be the customer who will work with you tomorrow!  And, when they have bills to pay, yours will be at the top of the stack.