Posted: 10 Jun. 2021 10 min. read

Is there too much empathy in collections?

Historically, empathy and debt collection were not terms commonly used in the same sentence. With recent events such as the bushfires, COVID-19 and increased customer and regulatory expectations following the Hayne Royal Commission, a shift in the mission of the collections function is underway.

Collections is now seen as a way to assist customers who are experiencing financial hardship. As a result, there is an increased expectation on agents to show empathy towards their customers. However, is it possible that too much empathy is preventing fair and consistent customer outcomes?

The importance of empathy

Many organisations are choosing to extend the mission of collections beyond the recovery of bad debts to providing solutions and assistance to customers in need. This requires agents to have soft skills, as well as access to a toolbox of financial and non-financial solutions. Empathy is the ability to sense other people's emotions, and to imagine what someone else might be thinking or feeling. Agents should use empathy to understand each customer’s situation and what action to take next.

The problem with empathetic collections

While the introduction of empathy within collections is a revolutionary step, it can have limitations. For organisations that are moving from collecting to assisting, balancing these two objectives with empathy can be difficult. When over-empathising with a customer turns into sympathy, it makes it difficult for a collector to separate themselves from their customer’s issues and they will struggle to have productive conversations and collect effectively. It’s important to remember that assisting is not delaying the inevitable by asking the customer to meet renewed payment arrangements when you know they will not be able to, in a misguided attempt to save them from their financial issues. Assisting is knowing when to make the tough call to sell secured assets and write off shortfalls and educate the customer on the impacts. This will support the customer’s transition to a better financial wellbeing in the medium to longer term.

Aligning empathy to strategy and solutions

Organisations that want to assist customers through all types of financial issues must ensure they have agents, solutions and processes that are equipped to do so. Empathy itself does not prepare the collector for the unique and often complex and emotional customer situations that can exist. It must be balanced with agents who have critical thinking and problem-solving skills and flexibility in their approach to dealing with customers. Agents who can adapt their thinking and knowledge of collections to assist each customer will be able to bring empathy that is appropriate to that customer’s situation.

Having the right agents must also be complemented by the right solutions. It is not enough to have a few financial solutions that can’t be adapted to each customer’s circumstance. A range of financial and non-financial solutions that have been approved by leadership and are supported by policy will give the agent the confidence to find solutions that are fair to both the customer and organisation. Of course, key stakeholders such as learning & development, compliance and quality assurance must also allow agents to show empathy to the customer and align to how these solutions are deployed to avoid process breakdowns.

Outcomes must be consistent as well as individually fair. Appropriate systems, processes, and control frameworks must be in place to ensure the solutions lead to consistent outcomes over time. Monitoring will ensure that solutions are systematically driving fair and consistent customer outcomes, aligned to the agreed mission for collections.

For a collections function to really embrace empathy, it must be driven and demonstrated from the top down. Leaders must align their team goals with their evolving mission of assisting customers rather than focusing solely on operational metrics. Once the right goals are set, they can be embedded into processes, controls, and monitoring, empowering agents with the right skills and tools to truly assist and collect upon customers.

More about our authors

Kris Glaveski

Kris Glaveski

Principal, Financial Risk

Kris is a Principal in Deloitte’s Financial Risk practice within Risk Advisory, with extensive experience spanning Credit Risk Management, Business Improvement, Data and Analytics, and Financial Services Operations – with a particular focus on Credit and Collections. With 15 years of in-industry experience, he has led strategic priorities and organisational change within the Financial Services sector, demonstrating an ability to solve complex business problems deliver significant business value through the effective use of data, analytics, people, process and technology. Kris is also an experienced Lean Six Sigma practitioner, having spent two years as a Black Belt leading strategic business transformation, process improvement, optimisation, and digitisation programs across Operations, Credit, Legal, HR and IT functions.

Tony O’Donnell

Tony O’Donnell

Lead Partner, Consulting

Tony has over 20 years’ experience specialising in enabling and delivering large, complex operational, technology and strategic change within organisations. He has successfully led large-scale transformation programs in multinational companies across a number of sectors including financial services and utilities, in Australia and globally. Tony leads the Strategic Cost Transformation in Australia as part of the broader Deloitte global capability. Tony is recognised as a strong leader of people, and is very passionate about bringing innovation to the projects he, and his team deliver based on operational and business excellence principles.

Annabel Steven

Annabel Steven

Analyst, Risk Advisory

Annabel is an Analyst in the Financial Risk and Regulatory team within Risk Advisory at Deloitte. She has worked across the financial industry with a focus on credit risk and collections. Her experience is in assisting large financial institutions to improve business operations through data driven strategy design, and process automation. Annabel holds a Bachelor of Commerce degree, majoring in Business Analytics.