Incentivizing Effective Collections

This article discusses issues associated with incentivizing effective collections.  Structuring and implementing an effective incentive scheme is an integral part of the account management process.  It is important that an organization implements a collector incentive scheme that will compliment the methodology of working delinquent accounts.  The objective of an incentive scheme should be to motivate collectors in such a way that will improve overall collections effectiveness.  This article discusses three different approaches to structuring an incentive scheme for individual collectors.

The incentive schemes discussed within this article are appropriate for ‘normal’ delinquent collections as opposed to policy group collections.  The term ‘policy groups’ refers to groups of accounts that are in a state other than normal delinquent accounts.  Examples of policy groups include deceased estate accounts, fraudulent accounts, insolvent estate accounts, etc.  The actions taken within policy groups are different to those taken in early stage collections, and in recoveries.  Specialized training is required for each collector within these areas.  Ideally the policies will be documented (or driven by the collection system), to ensure a consistent approach across all collectors. 

As a rule, incentive payments should be higher for the better performing collectors.  Therefore effective evaluation of collector performance is required to drive the incentive scheme.  The collector evaluation should include both qualitative and quantitative performance standards, for example:

• Number of accounts worked per employee
• The results of collections calls made
  
• Quality of telephone calls and account record updates
  
• Volumes and ratios of promise to pays
  
• Volumes and ratios of honoured promise to pays
  
• Roll-rates
  
• Payments collected
  
• Payments collected as a percentage of total amount due
  
• Backlog of accounts to be worked.

It should be noted that any incentive scheme is prone to manipulation by collectors seeking to maximize their rewards.  One of the objectives of any scheme should therefore be to minimize the potential for manipulation.  To do this, the incentive scheme should be driven by results and not simply collector actions.