Collection “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, I found my preferred way of doing business evolving to provide alternative A/R management tools and training to a variety of business customers.


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


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 negative baggage of that line of work. Our purpose truly 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 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 collection agency approaches in motivating payment.


The approach of CFO Advisors at that time was to serve as a connection and listening post between our client and their customer and not simply another entity demanding payment. 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 almost as much as the dollars outstanding, I have still been thinking that it was time for my industry to change and evolve. “We have the hammer, and they are the nail” just wasn’t working as well as it once did.


A workshop I completed recently on advanced Mediation confirmed that need, and provided a professional and effective path that needs careful consideration. Mediation.


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


Yes and No. Mediation requires engaging a trained professional who understands conflict (and there are few greater conflicts than between someone who owes and someone who is owed) and 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 collectors.


The training confirmed my personal experience that when people are led to an understanding of why and how of a conflict (in this case, the unpaid bill), and were able to 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, of course. The expense of the mediation has to be taken into consideration. (However, both parties may well agree to split the cost. After all, should they not come to terms through such a facilitated meeting both sides will be spending a lot more on attorneys.) There is also the need 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.


However, the extra effort will pay dividends in many ways, not the least being distinguishing yourself as an evolving firm which takes relationships into consideration and practices a more facilitative approach.


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 they can’t help you directly, they can certainly direct you to the right place/person.


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


One of these days, we will pull ourselves out of the Great Recession and we will dust ourselves off and decide where to take our business. I doubt that it will be with companies that hired bill collectors who treated us shabbily. Think of it – Being Nice can actually pay!


                        author

Jerry Ashton

Jerry Ashton is a 30-year-plus entrepreneur in, and veteran of, the field of accounts receivable controls, credit, collections and customer service. Jerry founded and was President of CFO Advisors, Inc., which enjoyed a 15-year-run as a respected and effective go-to firm engaged by companies wanting CFO’s unique approach to receivables… MORE >

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