As collections agencies try all manner of rewards to keep collectors, the industry looks to new tests to glean the best prospects.
America's love affair with debt has helped grow the collections industry, evidenced in recent years by several agencies issuing stock and going public. An industry once dominated by small, local operations is now seeing a select group of larger agencies working on a national level.
But agencies-large or small, public or private-face the same problem that has always affected the debt industry: very high rates of collector turnover.
Agencies are looking at a variety of ways to address the problem. For some, it means continuous hiring in search of the best. Others take a slower approach, allowing new people some time to find their way in the collections field. And many firms are now using prescreening questionnaires with job applicants. These prescreens are designed to find the right type of a person for a job that most agree takes special qualifications.
The collector's job is not an easy one. She must know federal regulations on client treatment, be firm with debtors without being abrupt or cruel, and have the ability to listen without getting so sympathetic as to let the debtor slip through her fingers.
"There's an initial shock with collections. You are calling people and asking for money," says Craig Sadlak, vice president of DAT Technical Resources Inc., an employment contractor for the collections and credit industry. "You may have to calm down the customer. You have to make sure they understand you are trying to help. And people can be abusive."
The job can be grueling. The average collector will make about 20 phone calls an hour, reach six debtors, and get two promises to respond, according to the Edina, Minn.-based trade organization ACA International. The average annual compensation is $31,812, made up of a base salary of $22,487 and a 12% commission rate, the ACA found in its 2003 Benchmarking/Cost of Operations Survey.
Industry consultant Kaulkin Ginsberg Co. recently surveyed agencies on turnover rates for collectors who left both voluntarily and involuntarily. The firm's 2004 Collection Agency Compensation Study covered both experienced and inexperienced collectors over various time frames.
The survey says that by 90 days after their hiring, 40% of collectors leave voluntarily and 36% leave involuntarily. In other words, about three-quarters of all new hires are gone within three months. Those numbers cover collectors of all experience levels; experienced collectors leave at a somewhat lower rate than the inexperienced.
Over the course of a year, 40% of all collectors leave voluntarily and 28% leave involuntarily. In general, inexperienced collectors leave in their first 90 days, while experienced collectors "either leave right away, or hang on for the first year," the survey report says.
Some 73% of agencies prefer hiring experienced collectors while 27% prefer rookies, according to Kaulkin Ginsberg. But because of overwhelming demand, only 54% of firms are actually able to hire experienced collectors.
The experienced collector can make a huge difference. "If you are on the job a year or more your productivity skyrockets," says a spokesperson for Asset Acceptance Capital Corp., a Warren, Mich.-based debt buyer and collector.
Asset Acceptance, which raised $97.7 million in an initial public offering in February, has made reducing turnover its top goal for 2004, according to the spokesperson.
Bethesda, Md.-based Kaulkin Ginsberg received responses from 193 firms from across the country in December 2003 and January 2004 for its compensation study. About 45% of the responding firms had annual revenues under $2 million while the remaining had revenues above that. Nearly 90% of the firms had less than 500 employees, and 55% had fewer than 50 employees. Fifty-five percent of the firms primarily work on consumer debt such as bank credit cards and private-label cards.
The turnover statistics, however, are not exact because many firms gave only estimates, says Stephanie Eidelman, Kaulkin Ginsberg's general manager and leader of the survey. Other observers note that some firms simply don't count anyone who leaves in less than three months or six months in their turnover statistics, because so many people leave in those early days.
And the pressure is on firms to present a low turnover rate because it makes the agency look more stable, according to an executive who requested anonymity. Admitting a high rate could send clients to competitors, the executive says.
The cost of turnover to an employer is difficult to gauge because of variables between industries and companies, according to human-resources experts. One indicator is the $4,690 average cost-per-hire for financial-services firms in 2001, according to a staffing performance survey from the Employment Management Association.
It's easy to say that increasing compensation will keep many collectors from bolting a firm. But compensation already accounts for 42% of an agency's expenses, according to the ACA's benchmarking survey.
Placement agencies sometimes encourage turnover by enticing the best collectors to jump ship. The competition for talent is especially fierce in Atlanta, Buffalo, N.Y., Chicago and Houston, says Brian Greenberg, Kaulkin Ginsberg managing director. "People will leave for 25 cents per hour (more in) base pay," says Greenberg.
Kaulkin Ginsberg also found that agencies would try just about every bonus system under the sun. In the 157 responses from agencies regarding their bonus programs, the firm found ... 157 different programs. Generally, firms will pay their collectors a certain percentage of revenue after a goal is met (chart). That goal is often a multiple of the collector's salary.
"Some offer fees, some set goals or thresholds, some tie (a bonus) to company income. There are many variables," says Eidelman.
Pay is only one part of attracting and keeping the best people. Two firms, one large, one small, offer two approaches as examples.
Amsher Receivables Management in Birmingham, Ala., is an 18-year-old, family-owned agency with one office and a total of 83 employees, including 54 collectors. Amsher will pull in about $14 million in gross collections this year, estimates Martin Sher, co-owner and co-chief executive of the firm with his brother David. Cellular-telephone companies, medical firms and credit card issuers (both bank and private-label) each account for about one third of Amsher's clients.
Creating an atmosphere of friendly competition in the call center is Sher's goal. "We emphasize four core values. A collector must be honest, respect others, strive for continuous improvement, and have fun," says Sher.
He and his brother attend annual humor conferences to find ways to keep the mood loose. And Amsher holds "family meetings" once a month with the entire staff to talk about everything but business. "A lot of people have broken families in this industry. A sense of home and family works with some," says Sher.
He declines to disclose turnover or salary figures but notes that the firm's bonus program is tied to salary. Once a collector earns 3.66 times his monthly salary, he receives 21% of all collections above that number. So if a collector were paid $1,000 a month, he would earn 21% of all his revenues over $3,666 that month.
All collectors who meet their quotas are given a sign to hang above their cubicles stating "Don't bother me. I'm making money." That stokes the competitive fires of those without a sign, says Sher. By the end of a month, about two-thirds of collectors have earned the placard.
It usually becomes clear within three months if a new hire is going to succeed, says Sher. Tardiness and absences are warning signals. Still, a newbie not meeting his numbers may catch a break if he is eager to learn and continually improving.
"We keep (a collector) as long as (he is) progressing. That's cheaper than starting over," Sher says.
The second example comes from Nationwide Credit Inc., an 11-office international agency that takes a more aggressive approach to new personnel.
"We are always searching," says Anthony V. Marino, president and CEO. "We run continual training. We use all channels all the time, 365 days. Otherwise you are toast."
Once training is done, the collector is put on the phones. "As they graduate, they replace our lowest performers. A new guy has as much chance to do well as a poor performer," says Marino. That "helps us find some jewels" and keeps the veterans looking over their shoulders, he says.
In the early months, turnover tops 100% but that drops to 15% for those that pass the 180-day milestone.
Kennesaw, Ga.-based Nationwide has about 2,600 employees. Clients include American Express Co., Bank of America Corp., Capital One Financial Corp., Citigroup Inc. and Target Corp.
Collectors earn a salary and participate in bonus programs that vary by office and client demand. Marino didn't share specifics on the programs but says clients may emphasize number of payments or number of retained customers, along with dollars collected.
Nationwide has an office in Bangalore, India where turnover rates are on the rise though they don't match the comings and goings at U.S. offices. Fact is, collections "is considered a profession in Asia. In the U.S. it's a job," says Marino.
Meanwhile, some agencies and placement firms serving the collections industry are turning to more sophisticated pre-employment screening methods to find those applicants most likely to succeed. Roswell, Ga.-based Psichometrics International LLC offers three tests that applicants take before scheduling a job interview.
The personality test has 56 statements that require the applicant to choose among five answers ranging from strongly agree to strongly disagree. A cognitive test has 26 questions that assess the applicant's ability to think on her feet. And an honesty/integrity assessment has 80 true/false questions.
Applicants take the tests online and are given 10 minutes for each segment. Psichometrics evaluates the applicant's answers by computer and e-mails a two-page report on the applicant for each test to the agency or a recruiter like Sadlak's DAT Technical Resources.
Psichometrics had been offering the assessments to clients such as Dell Inc. and Sprint Corp. for their call-center positions. Collection agencies started requesting tests specific to collectors about 18 months ago, says William Roy, a partner at Psichometrics.
The tests help to spot applicants who can think strategically, are assertive without being too aggressive, and handle confrontation without getting angry, says Sadlak.
For Maple Grove, Minn.-based DAT, the results are preliminary because it began using the tests only about four months ago, says Sadlak. But one early sign of improvement has been seen in the so-called show-up rate, he says.
That placement-industry term refers to the percentage of job applicants who show up for a job interview at a prospective employer that the placement firm has arranged.
Before using the assessment, the show-up rate was 78%. It jumped to 92% when the test was used, says Sadlak.
Psichometrics will present the test itself or license it to another firm that stamps it with its own brand name. Roy says that demand has been strong with call center-related tests accounting for about 1,000 of the 4,000 to 5,000 Psichometrics' assessments taken each day. Clients pay $10 to $20 per assessment, depending on volume, says Roy.
According to Kaulkin Ginsberg, other firms in the personality assessment field include Hire Success, Employee Selection and Development, Saterfiel & Associates, Profiles International and Result Resources.
The fact that the assessments are conducted and evaluated online also makes them quite convenient, according Sadlak. Still, they can't replace the personal touch.
"The personality test doesn't tell us if the person is reliable or will keep regular hours. For that you have to review their r?sum? and use common sense," says Sadlak.
That and a liberal application of the most effective screening tools are collections executives' only hope for reducing their turnover woes.
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