Do Collector Bonuses Send the Wrong Message, Impact Compliance?

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Brett Sivits

Brett Sivits

I had a boss whose near constant mantra was “Change is good…right?”  By adding the “right” I assumed she was asking whomever she was talking to embrace her own willingness to roll with the punches.   Knowing her positive attitude about the future I still assume that was mostly true but now I think that at least on occasion the last part of the phrase was a desperate request for affirmation that change was indeed good.

The constant flow of change has made for one constant in our industry.  For every change that we as an industry address, we add an additional layer of complexity for our collectors.  This complexity is already seen as a barrier to their success but what you may not realize is that this complexity may also require us to fundamentally change how we motivate and compensate them.

One almost universal constant in the industry is that collectors receive a bonus or commission.  I have been part of literally hundreds of discussions extolling the virtues of this model or that, and have authored many schemes myself.  However, today I propose a new approach.  I would suggest the possibility that collectors no longer receive a bonus at all.  Instead, I would simply ask that we consider compensating our collectors with a more generous flat wage and strive to hire and retain the best of the best.

The Science

In research dating back 40 years it has been demonstrated over and over again that individuals who are faced with a complex task not only do not perform better when there is a monetary reward, they actually perform worse.  The keyword in the sentence above is complex.  Individuals performing simple tasks are still motivated by financial rewards.  The science behind this is simple.  The monetary reward focuses the mind on the relatively small portion of the task for which it’s being rewarded and the mind deemphasizes the other parts of the task.

The research not only finds that monetary rewards erode performance but that the negative effect on performance is magnified as the reward increases.  In other words, the more you pay in bonus the more performance can be negatively affected.

Click here for more information about the science.


Is a collector’s job more complex than it was 10 years ago?  Will a collector’s job be more complex going forward?  The questions are almost rhetorical at this point but for the sake of argument I will review just a couple of the items that are adding layers upon layers of complexity.

In 1977 the first federal law explicitly governing the collection industry was passed.  In the 36 years since the FDCPA became law, a whole host of other laws have been passed – not to mention the volumes of case law that now govern almost every action taken by a debt collector.  In 2011 the CFPB was created and an entirely new type of oversight radically changed the landscape that we operate in.  A recent announcement by the CFPB foreshadows even more changes coming in 2015

Compliance is not the only force that is shepherding us into a brave new world.  The speed of change is accelerated by the ever-increasing sophistication of consumers.  Never mind the fact that the economy is in constant flux and we as consumers seem to be fundamentally different than we were before 2008.

Technology is another one of those forces on the march.  Would your clients allow you to replace all the computers in your office with index cards? What if someone broke into your office and stole your dialer and left you a pile of rotary phones (assuming your dialer isn’t already in the cloud).  Is it still even possible to run your business without huge amounts of outside data being dumped into your system every day?  Would you still be in business if you were forced to complete every bankruptcy form with a typewriter?  The answer to those questions demonstrates our absolute reliance on technology and its ability to make our operations scalable and as a result, profitable. 

I propose that the simple position of “Collector” is not simple anymore.  I have listened to and scored thousands of collection calls from across the country from multiple industries, and I can say confidently that the best collectors are doing much more than they have ever done in the past.

As a result of that complexity, many in the industry have simply increased the complexity of the bonus schedule.  Now instead of just measuring dollars collected we measure additional performance indicators and compliance related data elements.  Just as obvious of a reaction to someone outside of the industry may be to eliminate the bonus scale all together.

I have the pleasure of working with both private and public entities and one key difference is most government entities who collect money don’t pay bonuses.  A careful review of the data between private and public entities is that every meaningful indicator of performance is the same in both groups.  The bell curve of performance that we are familiar with is almost identical when you pay a bonus and when you do not.  At least in these examples, overall performance is not impacted by taking away a bonus and replacing it with other intrinsic motivators.

True Motivation

In the absence of financial motivation, we will need to motivate differently.  For years, we have understood that intrinsic motivation, a desire to improve from within yourself, is more powerful then extrinsic.  Rewarding a collector intrinsically will require that we value collectors beyond their ability to recover funds.    The list below is just a few of the things that can motivate your staff.

  • Growth Potential
  • Being part of a team
  • Self-Improvement
  • Doing Good
  • Making  a Contribution
  • Autonomy 

If all of this seems Pollyanna then I would propose that you do not think much of your staff.  Clearly, some would “wash out” but most would stay and thrive and those left will represent the type of staff you have always wanted.

The difference maker is that this kind of motivation is long-term and self-satisfying.   Pure financial motivation is simply not satisfying in the long term.   A raise today is tomorrow’s expectation.  A huge bonus today is next year’s standard.  You are in a race with their expectations.

The Future

Pew Research and others have indicated that Millennials are willing to stay in jobs longer than recent generations and that their financial motivator isn’t just a high salary but to a large extent it’s also income stability.  As of right now, Millennials are the largest segment of the American workforce and as their influence grows we need to be willing to adapt to meet their expectations.

The benefit to a staff that receives intrinsic motivation from doing their job is obvious.  They perform better, they stay longer, they are motivated to improve the process and ultimately make the company better.  Rolling this out should not be seen as a cost savings measure.  Bonuses and Commission dollars should be reinvested in your staff by increasing their direct compensation.  Measures to ensure performance will need to be strengthened and underperforming collectors will need to receive additional training and coaching.

Don’t take my word or even the researchers’ word for it.  As an industry, we have been paying bonuses and commissions for decades and many in the collections industry will be uncomfortable with my conclusions but I would propose that you test them out.  Try it with one team of collectors or with one location etc.  Ensure that the inputs are the same and that the training, coaching, and your measuring strategies are all in place.

A higher average salary will draw a higher caliber employee who will be more equipped because of education or experience to successfully accomplish the goals we give them.  Increased training, coaching, and follow through will provide our staff with the tools to accomplish this ever increasingly difficult task with increased success.  If this industry is going to successfully evolve in this environment, we need to begin to rethink some of our “best practices” and compensation can be the first step to a whole new breed of collector.

Continuing the Discussion

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  • avatar ron-west says:

    As some brilliant actor once said, “Show me the money”. This article is a crock o’ s…
    It’s another excuse to underpay achievers. The hourly will never compensate for the commission of the good collectors. I worked in the industry for 22 yrs and always felt great “internal” motivation in anticipation of cashing a great commission check. They would give me placks in acknowledgement of being the top monthly collector. I told them to keep it and give me the ten bucks. I now own my own agency and don’t want to hire someone that money doesn’t motivate.

  • avatar ron-west says:

    I’m baaaaack. When Macy’s or Wal-Mart starts taking that feeling of satisfaction as currency let me know!

  • avatar JASON CASH says:

    The problem with commission is the archaic attitude of most agency / law firm owners that if a collector consistanlty makes a lot of bonus money the owners revamp the bonus structure in favor of the the owners at the expense of the collectors. I worked collection commission for 25 years straight and left for just this reason. I never looked back and never regretted in. I’m not on straight pay scale and have never regretted my decision.

  • avatar Joe Potter says:

    We would all serve our industry, companies and employees well by eliminating incentive based collection compensation- replace it with performance standards to ensure work effort and corporate level incentives based on achievement of the organizations financial, quality and growth goals. Ensure EVERYONE in the organization has “skin in the sucess or failure” and in the rewards. It’s the future – watch.. and while you can argue that this means richer executives and poor workers, a well developed BALANCED plan achieve just the opposite. AND .. think of the TIME we would ALL get back in our days if we did not have to talk about account crediting or embed account crediting into our workflows and procedures?

  • avatar David Greenberg says:

    Brett — Thanks so much for posting this blog piece. I’ve been in the commercial collection industry for over 40 years and for much of that time (and at great odds with my peers and bosses) have shared your conclusions. In fact, in my particular historical niche market, which was in the international sector, I believe your conclusions about the professional level needed becomes even more pronounced.

    In the international realm, the collectors I hired and trained needed to learn the elements of international treaties, the contrasts between our English Common Law and Civil Law, Teutonic Law, Napoleonic and on and on it went. There’s never a day where a truly professional international debt collector comes to work and leaves without learning something new by the end of the day.

    However, common to all truly professional collectors is the gift of creative problem solving. It’s not merely the dull approach of volume phone-pounding. The creation of a collection strategy to fit a given complex case becomes the hallmark of the professional, along with all of the traits one would expect within the framework of a professional environment.

    Certainly, there are different levels of a collection environment. The “small claim” collector’s job, probably bears no resemblance to the complexity of collecting an account based upon container loads of goods shipped here from abroad. I recognize that and appreciate that difference. There are some collectors who simply aren’t built for growth or that complexity or desire for innate problem solving – they do better on the assembly line of the auto-dialer.

    So is it perhaps a sound approach to have different compensation schemes for different types of collectors? I don’t have a conclusive answer to that question, but proffer it probably is something to consider.

    Ron West indicated his primary motivation was chasing the big-buck commission. I can honestly say that in my 40+ years I “valued” my commission check but it wasn’t my primary motivation. Rather, when I knew I did well for a client, best protected that client’s interest by developing and executing a sound collection strategy in a complex case, while performing on a higher ethical plane and standard – THAT’s what gave me the job satisfaction needed. At the end of the day, I routinely turned in solid numbers throughout my career.

    Ron, believe me – I’m not diminishing what you’ve accomplished at all and applaud your success. I think the commission concept has its place but so does the straight salary for a professional level employee. The trick is to dole out your work assignments to the employees with the correct skill sets and based upon your business model for the types of cases you handle. I don’t think there is any one “perfect” approach.

    I knew a lawyer who once quipped to me, “Dave, you pay peanuts, you get monkeys.” Here, I think we all agree with that concept, but the question is what type of peanut are you paying?

    For me, I think the greater success comes with finding the type of employees who drive to a high professional standard and derive the satisfaction of living the metrics involved so they can place the concept of “client first” at the front of the line — all else follows in due course.

  • avatar Bill Lindala says:

    Brett, I am going to disagree with you on this concept. Although I do agree that every item that you listed under “true motivation” needs to be there, I also feel that a collector needs to have the ability to earn money. In addition, you mentioned training, coaching, and measuring strategies; those need to be there too, just not in place of the ability to earn money.

    I’ve been around this industry for a few days and every position that I have held has given me the opportunity to earn money on top of a base or salary. I happen to be driven by that opportunity and I’m not sure if I would have stayed in this industry if the pay structure was different. This is what I have always looked for; The ability to grow personally, professionally and financially and if any one of those factors are not there or somehow go away, I’m probably not going to be content.

    The other side of the coin, is that if a company started from scratch and hired everyone fresh off the street, from different industries perhaps and offered them the structure that you are referring to. In that case, they wouldn’t know anything different, so it could be successful.

    However, if you take an established company, with an established staff, I’m not confident that it would work.

    Regardless of my take on this, it’s a good article because it’s making us think and have a conversation. Nice job.

  • avatar BHA LLC says:

    I have found that YTD is important. if it comes in salary bonuses or both…really not much difference.

    all that noise about no bonuses meaning more professional or able to handle multiple tasks…one has nothing to do with the other…commissioned employees do the same job…ive paid low wages and big bonuses and high wages and low to no bonuses and either way its the same people who shine.

  • avatar Mike Powell says:

    It’s a great thought point. Simply put, straight commission derived solely on $$ collected is out. The bonus structure of the future for a professional compliant shop will be a balance between actual money collected and how it was collected. The CFPB is clear that they see a conflict of interest in protecting the consumer if the only motivation for the collector to resolve the account is more money. I believe that a bonus over and above the base is still necessary. The type of work and in a lot of cases the abuse that agents (even professional) endure from some debtors will always need more incentive that just an “atta boy/girl” pat on the back.

  • avatar Ken Wojtach says:

    I politely disagree. You must first offer a fair hourly rate for a collector to have a base income. Profit margins and fee rates are decreasing continually and paying a high base risks having a unprofitable client because the collector labor costs and the risk that did they perform on the portfolio.

    If all collectors have a higher set base hourly rate rather than a lower hourly rate with shared commission the company risks having higher labor costs not correlating to production and fees. This overtime can have a dire effect on company profits. It is easier to have no commissions paid out if production is low compared to trying to reduce hourly rates because of business trends

    If collector wages are set at a fixed higher hourly it becomes very easy to be complacent and get set on an acceptable level of performance. .

    If a collector gets a fair hourly wage but has potential to earn additional bonus or commissions directly related to performance levels they will put extra effort in attempting to achieve higher results. That is what we are all trying to accomplish clients, collectors and agency management more productive results.

    I have for over 30 years in management taken pride in knowing that if the company is doing well the collectors will get to share part of the profits through commissions. I also use a tier commission structure. This way collectors keeping pushing until the last day of month to increase shared commission % rather than planning ahead by sandbagging.

    Most all of us work because we need to provide an income for our needs. If an employee has a chance to increase their income it is human nature to try a little harder rather than no incentive to outperform co-workers if all are paid the same.

    Employees working in an environment were all are paid a set rate no matter effort or results will gradually lower their efforts to meet the completion. Somewhat like what happens in sports when a superior team plays a less talented team. Many times the more talented team’s production will play down to the level of the less talented team. No reward or competition breads content and mediocre efforts and results.
    We are in the money business and we should want money motivated employees. If a employee’s wage are set to high they can become happy and not internally motivated as an employee with the potential to cash in additionally to their hourly pay if they excel above others in production.

    Compliance should not be an issue if being paid commissions or bonus or set hourly rate. If a collector is properly trained and monitored they will know that it is unacceptable to attempt to push the line just to make a higher commissions.

    The job of management is to police employees so to be able to assure clients that there is no tolerance for compliance violations

    If you want the best employees and to stay with you pay them their fair share in commissions and you will have a lifelong employee. I have almost 0% turnover by keeping employees happy by paying them their share. I do not want an employee happy with their hourly rate and just meeting their monthly goal. I want the hungry money motivated employee who knows they are a cut above and know if they produce they will be rewarded.

  • avatar CLP Midwest says:

    I will say that being in the trenches cussed out and strongly mistreated on a regular basis is dirty work and should be incented as so. Also as young new hires begin collecting alot of them just need a job and are not motivated by “Good job!”. I honestly wouldnt still be in collections if I didnt feel I was being rewarded and compensated well for going the extra mile and having thick skin. If there is no seperation from top performers to under performers there is no competition in the game.

  • avatar Bill Boykin says:

    JASON CASH says: The problem with commission is the archaic attitude of most agency / law firm owners that if a collector consistanlty makes a lot of bonus money the owners revamp the bonus structure in favor of the the owners at the expense of the collectors.
    I am and have been a top performer earning big bonuses, but know all too well what Jason Cash was writing about management/ownership changing the structure. I have left jobs in the past for not increasing base pay and would be very comfortable having a steady good pay, rather than work at the whims of management/ownership that may tire of paying large bonuses.
    It is indeed more and more complex every year and that will not change. I learn new things on a daily basis and keep up with all the industry news and legal cases. I AM motivated by my bonus, but that is because in this industry it’s been nearly impossible to get paid the same amount without it. I believe in the other motivations given in this article and am motivated by them, but would much prefer having a stable income at the same level I made annually made through bonuses than a chance at more through bonuses.
    As long as growth within the firm, promotion opportunities, and a comfortable workplace are there, this would be the ideal situation for collectors in my opinion.

  • avatar Bill Boykin says:

    I think the argument against no bonus is the assumption that all collectors would be paid the same wage. This is intrinsically not the case, nor what I think the author is intending, but rather than they be increased accordingly with the increased complexity of the position. As a top performer, willing to forego bonus, I would do so, but only in the knowledge that I’d be paid as a top performer and not as someone that just started or underperforms…

  • avatar Wacker says:


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