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Developing An Effective Credit Team (Part I)

By Mr. Mike Morley

Outside the department, most people do not really understand what it is we actually do. Credit is one area where, if things are going well, then nobody pays attention to you.

It is important to educate senior management about the role of the credit department in order to elicit their support.

I cannot stress the importance of this enough. Senior management needs to understand that we do more than just harass people for money. It is important that they understand that the steps you take today may not show measurable positive results for many months.

Develop and maintain good relationships with other department managers, particularly the sales manager.

We all have the same common goal, for the company to make money so that we can make money. Unfortunately some people in sales view the credit department and the credit manager in particular as an obstacle to sales that they must somehow circumvent. It will take time but you need to make the sales department view you as an ally, a problem solver, someone that they can turn to for help in closing a sale. The credit department is the liaison between accounting and sales. Not only do we keep track of the company's assets, but if properly utilized we can be the company's best sales tool. Our job is to make it easy for customers to buy our product while still protecting the assets of the company.

Make consistent decisions based on facts, not emotion.

At first, salespeople, customers, senior management, and even your own staff will be testing you. They will constantly be trying to get you to back down on various credit policies you have set or decisions you have made. You must have enough confidence in your own judgment to stand firm. People will try to go over your head to get your decisions overruled. This is the main reason why it is very important to enlist the support and confidence of senior management before these problems develop. It is crucial that your superiors do not overrule your decisions at this stage because if they do it sets a precedent that is very hard to overcome. Eventually, if you are consistent and your decisions are firm, this testing phase will pass.

Once you have management and sales support, you are in a position to demonstrate what it is that separates the credit department from the rest of the bean counters. It is our ability to come up with creative solutions that will allow people to buy your product.

The way we handle our accounts receivable departments has changed dramatically over the past few years. What used to require a staff of 10 to 15 to handle manually can now be handled more effectively by a staff of 2 or 3 utilizing the latest technological innovations. However, the selection, training and motivation of these smaller departments becomes that much more critical. Here are some ideas to help you run a small, tightly knit credit team capable of handling large volume/large dollar accounts.

Hire and keep people who are a good fit for your department.

Hire or keep only those individuals who are a good fit, whose personalities complement each other. With smaller departments handling larger workloads it is important that each member be flexible and view themselves as part of the team.

If you have just taken over this position you will probably be inheriting some employees who for one reason of another just do not fit. Or, maybe you have been in the position for some time and know there is a problem but you have been hesitant to do anything about it. This is a sensitive area. Do not move too rapidly to get rid of them. Give yourself a little time to really understand the situation, to honestly evaluate the strengths and weaknesses of each employee. Since the company has already made a significant investment in each employee, it is often better to work on understanding the employee, determining what motivates them and helping them to fit in rather than getting rid of them.

However, if you are in the process of downsizing and it is inevitable that some people have to go then be sure to consult with the Human Resources department to ensure that you follow the proper procedures in either having them transferred to another department or letting them go. The last thing you need when you are focusing on turning things around is to be faced with a wrongful dismissal suit. It is important to move quickly in these cases since the uncertainty about who is going to go is very bad for the morale of the entire department.

Be as open and honest as you can be in a downsizing situation.

Do not try to pretend that nothing is going on because employees can sense when something is happening, and your credibility will suffer if you attempt to deceive them.

Contrary to what most people believe, money has little motivating value. Maslow's hierarchy of needs suggests that once you have your basic physical needs met, such as food, clothing, and shelter, these things lose their ability to motivate and we begin to strive for a sense of belonging and esteem. In other words, working at a job jut to collect a paycheck soon loses value. We need more than just money from our jobs.

Make sure that your staff members understand that they are very important to the success of the department and therefore the success of the company.

Reward them. The rewards need not be elaborate. Praise and recognition go a long way. People need to feel important, unique, and that they are making a significant contribution to the the company. Tell them so.

The same management style does not work for everyone.

Take some time to listen to each employee. Try to determine what internal forces motivate them, in other words, where they are on Maslow's scale. For example, some people are motivated by security, others by a need for esteem, and others want a sense of achievement. If you can determine what each individual needs then you have found the key to keeping them happy and productive.

Recognize the special emotional and psychological needs of the collectors.

It takes a special kind of person to be able to spend the day phoning delinquent accounts and not lose their temper. It is a unique skill to be able to get delinquent accounts to pay up while still retaining the good will of the customer. Give the collectors opportunities to blow off steam. I have been reading about some high-tech firms who have set up backetball hoops in the corridors so that employees can periodically shoot a few baskets to relive stress. This has been particularly effective in the research and development departments where management is starting to recognize that being chained to a desk does no ensure productivity. I think it would work just as well in the credit department.

Job rotation is a motivator because it periodically puts employees in a learning situation, and anything that stimulates growth is a motivator. The kind of intelligent, creative, ambitious people you need in the department will quickly become frustrated if they are not provided with new challenges.

Anyone who is not in a constant state of growth is dying. Therefore, it is important to continually upgrade the skills of the department staff. Take advantage of any company sponsored training programs. Encourage staff to enroll in the Credit Institute of Canada's accreditation program.

Switch jobs around periodically so that others are able to take over if necessary. There are a number of reasons why this is particularly important in the new smaller credit departments. First, if everyone is capable of doing each other's jobs then things will not grind to a halt if someone is off sick or quits. This prevents you from being held to ransom by an employee looking for an unreasonable raise. Secondly, if you explain it properly, it can improve employee morale because the staff will realize that their jobs are more secure because they are each able to contribute more to the company. Third, it helps to prevent burnout because it gives staff more variety in their work.

Develop possible successors in the department so that you will be free to move on to greater challenges. As I said earlier, anyone who is not in a constant state of growth is dying. That is just as true for you as it is for your employees. Keep improving your own qualifications and look for opportunities to make additional contributions within the company. If there is nowhere for you to advance in you present company it is time to start looking elsewhere.

Some people are under the mistaken impression that they are securing their own position by trying to make themselves irreplaceable. They try to make some aspects of their job appear very mysterious to outsiders, something that only they can do. It does not work. Let's face it, in this economic climate there is no such thing as job security. The only security you can have is to continually upgrade your skills so that you can make increasingly valuable contributions to your company and society. If you can make money for an employer then you will always have a job somewhere.

If you are proud of the work you have done for a company then you would not want to see it fall apart if you leave or are promoted. Encourage the development of your staff so that the department can keep on going without you.. Besides, just as you probably would not stay in a company where there was no chance for advancement, your best staff will not stay if they do not see any advancement opportunities for themselves.

In closing, things are changing at a faster rate than ever before and this is creating more and more opportunities for people who are willing to adapt. We are in a career with a bright future. Companies will always want to sell products and get pain, so there will always be a demand for a good credit manager.

To be continued.....

Created on 24-Dec, 2001 by HKCCMA.

Last Edited on 09-Apr, 2011 by HKCCMA.