This article was published in the December 2004 issue of Collections & Credit Risk.

Current trends and economic conditions in the collections business environment are bringing new challenges for many organizations. Whether your organization is an agency, a debt buyer, a legal firm, or a credit grantor collection group, factors such as reduced fees, higher costs, lower recovery rates, greater competition, and offshore initiatives are likely forcing you to change business strategy.

Many companies have adopted tactics such as competing with lower prices and commissions, putting off needed investments in operations, infrastructure and personnel, and in some cases following the offshore activity. For most, the consequences of adopting these measures have been negative, creating unstable relationships and jeopardizing business success.

However, collections organizations do have another important option at their fingertips — training. According to recent research, the top 100 performing companies in the United States spend, on average, the equivalent of 4.1% of their payroll on training.¹ With the collections business being highly focused on customer service, organizations need to concentrate on what lies at the center of each and every collections business — their people. While many organizations view their collection software as the core of their overall success, the winning competitor recognizes that the software is only an enabler — and it's the people using the software that will ultimately demonstrate its potential and effectiveness.

By leveraging your existing investment in personnel, you are, in effect, delivering better services, and paving the way for consistent success. Companies that invest in employee training also experience an easier transition as the business undergoes current and future changes.

Power of Productivity

Despite these convincing arguments, clear barriers exist to taking this action for many collections organizations, including tendencies to defer or cancel training of personnel in an effort to save time or costs. However, it has been repeatedly proven that training keeps staff motivated and enables them to stay current with industry trends — very important factors in gaining a competitive edge. Additionally, there are three consistent and valuable benefits derived from training, supported by specific examples. The first benefit lies in the power of productivity. While we know productivity is attained by lowering costs as well as increasing output, it's critical to understand the relationship between a small increase in productivity and big operational improvements. Two companies, Prudential Financial Services and Wachovia Bank, recently proved this correlation between training and productivity. Both companies implemented training programs focused on specific skills in their call centers and then measured the impact on the business. They determined that the number of calls processed daily increased by each employee. Moreover, problems were successfully handled in one day versus the amount of time spent prior to the training. Specifically at Wachovia Bank, the savings per call were only two-tenths of a cent, but over the course of twelve months the savings were amounted to a whopping eight million dollars.

In another study, Wells Fargo found that allowing employees at any level to propose new procedures and processes, that were demonstrated at work, and then included in training, resulted in people following the new procedures, reducing costs significantly while getting more done — or in other words — increasing productivity.²

Quality: The second benefit of training is improved quality. While defining quality varies from organization to organization, we do know that training leads to repeatable and improvable processes, which then can be measured, reducing mistakes and increasing quality. For example, a number of service companies, including call centers, that implemented training reported increased customer satisfaction and retention, fewer compliance violations, improved job satisfaction, and a reduced need for employee supervision. The results were increased output and a decrease in overall costs.

People: Finally, the most significant benefit of training is the effect is has on the people, themselves. Organizations that provide targeted training and tuition stipends demonstrate an improved ability to recruit and retain good people. And the good people they employ are more satisfied with their job, feel empowered, feel a sense of unified culture and teamwork, and have the desire to stay longer. This, in turn, leads to a reduction in turnover rate and according to a recent study conducted by Booz Allen, the retention of one employee for one year is worth, to them, an additional $140,000 in revenue.³

Recognize Your Investment

Maintaining an emphasis on training is very important, but it will also be critical to be certain that training is going to help your company and that the return on investment is recognizable. One of the simplest ways to assess whether or not to initially, or to continue to, invest in training is to conduct a cost-benefits analysis at the onset. As you consider conducting this analysis, there are a number of factors you must understand in order to get an accurate read. Initially, you'll need to look at the number of people you will be training. If you have only a few people for training, it may be more advantageous and efficient to research training options outside the organization.

Another factor is the direct costs — those that are directly incurred as a result of training such as the design and development of training and fees and expenditures.

Along similar lines, but most often forgotten, is indirect costs. These costs may or may not be a part of the training initiative, but occur nonetheless. Indirect costs include salaries and cost of equipment. Another way to think about these costs is that they would normally be incurred regardless of whether the training takes place.

The fourth factor to consider is efficiency. The measure of the amount of learning that is achieved relative to the amount of effort put into the effort of organizing a training session. The more effective a training session can be, the less the direct costs.

The learning that occurs as a result of the training is the fifth factor. It could be a brief test or simulation to evaluate how well the training actually worked.

The final, and most important factor is performance change. Did people use what they learned on the job? If, as a result of training, employee performance improved, the success should be weighed. You can look at indicators such as increased sales, accounts resolved per day, and other real world measures to determine if performance has varied.

Once you've identified these factors, conducting a return on investment or ROI analysis is pretty straightforward.

Identifying the direct and indirect costs is the first part of the equation. From here, you'll need to look at the added benefits of training. These include labor savings, productivity, cost reduction, and revenue generated. Labor savings are found when there is less effort needed to achieve the current levels of output. Productivity translates into accomplishing more in the same amount of time. In some cases, productivity is not a necessary or expected benefit of training. In these cases, cost reduction is usually the benefit. This includes things like a reduction in staff turnover, or a decline in compliance problems. Another benefit is revenue generated, which shows up in things like increased sales and higher fees earned.

In order to conduct the ROI analysis of training, a simple calculation is used. You'll need to add the value of the benefits and divide it by the quantifiable costs. You will then multiply the result by 100 to get a value that should show the expected benefits of the investment. You can also look at ROI in terms of how long it will take before the benefits of training match the costs and pay for itself. This payback analysis is conducted by adding together all of the costs and dividing by the benefits expected to be realized in one month. The answer will tell you the time the time required for the training to pay for itself.

Here are a few questions to answer to also help in your decision on training.

• How much do you want your business to grow in the next quarter or year?
• Have you done a comparison of training investments against the cost of losing staff, customers or business?
• What are the real costs—both direct and indirect—of replacing a well-trained, well-informed staff member?
• If you could picture the perfect employee, what skills, abilities and personal attributes would they have? Does your current training support those characteristics and skills?
• What is your company's vision? Does your training strategy support that vision?

The benefits of training are plentiful and offer a clear path to success. As we endure an environment that is constantly changing, it is important to remember that organizations responding to change most effectively share three commonalities: adaptability, flexibility and productivity. In order to obtain this culture, companies must provide training to empower the employees and present strong product — its people. As you consider how you will weather the next storm, look hard at investing in your human capital. As the saying goes, “people are your most important asset.”

1 Tammy Galvin, Training (Minneapolis, MN: March 1, 2004), 1
2 Galvin, 6
3 Galvin, 3