Kinetic Consulting

How credit managers can do more not only to maximise the effectiveness of their teams but also to ensure their contribution is recognised and valued.

A look on social media will give you many definitions of leadership, with quotes from the great and the good. Even at the time of writing a new book has been published giving a Top Ten of ‘What bad leaders do’ by yet another management expert (there would seem to be a lot of them out there). I do sometimes wonder how many of these experts have actually ‘managed’? As someone said recently ‘There are many people out there who have never done it, but will happily tell you why it will or won’t work.’

The work that I do with the CICM as Head of Accreditation CICMQ and other international credit management consulting assignments brings me into contact with some truly excellent credit managers. They have one thing in common: they understand the value of their people, the need to develop, motivate and recognise good performance, provide an identity for the team and, importantly, provide a ‘common purpose’.

There is one further dynamic that needs to be addressed: how the team fits into the wider organisation and the strategy of the business. Being an excellent leader in isolation (i.e. within the credit management function) is one thing, but it is how you project your team in the wider business that sets an excellent credit manager apart from the average one.

Every once in a while there is a discussion on social media about credit managers with questions like ‘Why is credit considered back office?’, ‘Why aren’t there more credit director board positions?’, ‘Why isn’t credit management valued more?’ and a recent one ‘Why aren’t credit professionals paid more?’ They are all interesting questions that deserve answers. When we started to develop CICMQ, the Chartered Institute of Credit Management’s Quality Accreditation Programme, Philip King, the Chief Executive of the CICM, asked a simple question: ‘What does good look like?’ From this point we started developing the criteria. We came up with five things that we felt all credit management teams should have in place:

– Credit Policy – the rules and guidelines that determine the objectives and action of the credit team

– Compliance – to the policy, process and legal and regulatory framework

– Customer Service – how the credit team manages customers, disputes and complaints

– Personal and Professional Development – how teams are managed and developed

– Performance Measurement – the KPIs and measurement, dashboard and actions to improve

Doing these things well is obviously important, but this is only part of the story. The technical stuff you would expect a good credit management team to do. What sets a team apart is the ‘Common Purpose’ – a Roadmap for improvement and how the team articulates that to the business or ‘Stakeholder Management’. So shortly after CICMQ was launched we added Roadmap and Stakeholder Management as new criteria: what are the plans for the next 6, 9 and 12 months and how is this articulated to the business.

Typically, when organisations start the CICMQ programme the Roadmap is in the credit manager’s head and the extent of Stakeholder Management is a monthly debt review with finance and or sales. As organisations progress through the process the benefits of developing the methods and procedures around these activities become evident. In some cases it is like re-launching the credit team to the business and we have had some great examples of this.

At its most fundamental this is about the credit team communicating what they do and the value that they bring to the business. Despite what you may think, many sales or customer service teams rarely truly understand what the credit management team does. A credit manager’s role should include making the business ‘Credit Aware’ but not all credit managers do this effectively, so from the CICMQ organisations who do this sort of thing very well here are a few tips…

MATCHING THE COMPANY VISION

When developing a continuous improvement plan or Roadmap, link all of the projects and improvement actions to elements of the vision and values of the business. This will ensure that you get minimum push-back and maximum buy-in from senior management. By doing this your team will also be seen as ‘good citizens’ by senior management, and we can guarantee that you will be one of or possibly the only function to have done this.

UNDERSTANDING HOW YOU CONTRIBUTE

Many organisations have scorecards based on company performance. What they miss is that having a weighted company scorecard with a complex formula makes it difficult to understand how individual performance can

contribute to the business performance. The same is true of department measurement. Make sure that there is clear line of sight to functional or business targets.

COMMUNICATION

Performance monitoring, targets, plans, and actions should be widely published, and not just the successes but also the failures and the lessons learnt. Gaining trust from the business is about being transparent and if things go wrong explain why and what you have done to fix it. Never hide stuff as it will at some point come back and bite you.

STAKEHOLDER MANAGEMENT

This isn’t a monthly or quarterly activity, this is ongoing. Don’t expect your stakeholders to come to you. Get out there and meet them by getting on their agendas, find out who is in control of the agenda and become their best friend! If this is something you are starting now you will find that not everyone will be interested. Don’t waste time trying to convert those that don’t want to listen to you, concentrate on those that do. The blockers will always come around when they see the benefits of cross-functional working, especially when you start to publish league tables of debt and disputes.

KEEP IT SIMPLE

Work with the business on a few things and do them well. Don’t try and do everything at once – this is a long game not a sprint, and developing business relationships and building trust takes time so if you have a series of problems or points you want to get across prioritise them and tackle them one at a time. In the first month you could focus on Credit Applications; month two could be payment terms, month three disputes etc. Resolve one issue then move on to the next.

DEMONSTRATE VALUE

As mentioned previously, other functions rarely fully understand what the credit team does beyond ‘debt collection’. Sell what you do to the business, how you do it, why you do it and why it is important.

MEASUREMENT AND ACCOUNTABILITY

‘DSO is a finance problem’ was what one business manager said, so we translated into ‘Terms DSO’, the terms that sales people offer their customers, and ‘Delinquent Days Sales Outstanding’, the element of DSO that is overdue. DSO and cash collection are everyone’s responsibility. Not many outside credit will understand DSO but everyone understands cash. One credit manager said to his Logistics Manager ‘one day DSO = three trucks’; you are looking for the switch that turns the light on.

Leadership is about many things but in credit management it is about developing an awareness of good credit management within your business and demonstrating the value of what you and your team can bring to the sales process and customers, like those CICMQ Organisations whose examples I have used above. Good credit management brings a huge amount of value to organisations perhaps we need to be better sales people so we come out of the shadows.

Sources & Acknowledgements:

CICMQ Accreditation, The ‘CICM best Practice Network’