I think our natural inclination is to look for grand solutions to our problems. (“If I could increase our average payment size by 25%, our recoveries would skyrocket!”) But silver bullet solutions aren’t always possible. And when they are, they often require significant time, resources and specialized solutions to implement. 

A better approach is to implement a series of small, strategic tweaks. These small changes, when applied consistently across all aspects of the recovery process, can compound to create impressive results. 

There is true power in consistently finding improvements in the margins. I want to help you embrace this power.

Because the term “marginal improvements” is boring enough to put an insomniac economist to sleep, let’s use something more memorable. From here on out, we’ll refer to “marginal improvements” not as a concept, but as a person.

Meet “Marge”, our new best friend. She’s dependable and consistent. And though we might not realize it in the moment, she’s about to become our greatest asset.

In my last article, we discussed the funnel equation, and how it can be used to easily predict the impact that can be realized by improving processes. In case you missed it, let’s look at a basic recovery funnel - and funnel equation - here again for reference:

The relationship between our variables creates a compounding effect. Increasing any one of the metrics by a sizable amount does result in an increase in total recoveries. But the increase pales in comparison to what can be achieved by increasing each metric by just a little bit.

Let’s see this in action:

The top row represents a hypothetical baseline level of performance. Options 1-3 display what would happen if we increased performance in one metric at a time by a significant amount. Option 4 displays what would happen if we created marginal improvements in each metric. 

Look at the results in the Total Recoveries column. Option 4 drives the biggest increase in recoveries. And it’s not even particularly close. 

The best part about this? Creating improvement like this is so darn attainable. 

I can’t snap my fingers and improve our RPC Conversion Rate by 20%. But I can think of a ton of different ideas that could drive improvements on the margins. And I know that the marginal improvements will add up to make a bigger difference nine times out of ten.

One of (maybe the only?) downsides to this approach is that it takes time to yield results. You likely won’t notice the impact from those tweaks on the margins right away. 

Your patience will be tested at some point. When it happens, remind yourself that you aren’t just creating marginal improvements. You’re creating marginal improvements that compound.

In typical Nate fashion, I want to break this down with an example. 

Let’s use round numbers and say that your starting recovery rate is 10%. And you’re going to use small tweaks on the margins to increase your recovery rate by 2% each month. If you do this consistently, you will have increased your recovery rate by over 24% by the end of the year. Let’s take a look:

Pretty magical, right?!

Here’s my challenge to you: Find your 2% each month. 

Try new things. Make small changes that will result in improvements, even if the success is imperceptible at the time. You may not feel it, but the magic of compounding will be working for you.

The benefits of befriending Marge far exceed what we’ve discussed so far. Let’s look at some of the other reasons why Marge should be your new BFF:

Culture of Continuous Improvement

Once Marge joins your team, you’ll find that every idea has value, not just the ideas that are the result of “Eureka!” moments. This creates a tremendous opportunity to gather ideas from your team, which in turn help promote a culture of continual growth. 

Combating the Law of Diminishing Returns

The more resources you invest into improving a process, the more the incremental gains from the improvements will decrease. 

For example, it doesn’t matter how many resources you invest, you will never get your RPC Conversion Rate to 100%. Not even close. 

Instead of burning yourself out chasing an unattainable goal, you can instead focus on getting your RPC Conversion Rate to a number you’re comfortable with. Once you reach that number, pick some other low-hanging operational fruit. By the time you’ve made all of those improvements, you likely will have another idea of how to improve your RPC Conversion Rate. And the entire time, Marge has been working tirelessly on your behalf. 

Reducing Risk

Putting Marge to work is a great strategy for mitigating risk. How? 

By focusing on slowly improving everything, you aren’t putting all of your eggs in one basket. If one change doesn’t result in the change you expected, it’s no problem because the others are still contributing to overall improvement. 

Marge-driven initiatives also typically require minimal resources and opportunity cost than larger projects. 

Big Picture Perspective

We’ve focused on viewing these concepts through the lens of improving our recoveries. But this is far too narrow of scope. 

Focus on putting Marge to work in every aspect of your company/department. Challenge yourself (and your team!) to find that 2% and to stack those small wins. It may take some time for the results to manifest but have faith that they will.

Don’t forget to look to your local university when looking for talent.

My agency partners with the University of Wisconsin to participate in the federal work study program. The work study program is a benefit program in which eligible student workers’ wages are subsidized up to 75%.

We started this process about a year ago and the results have been incredible. Sure, the cost savings have been great, but there have been other benefits as well.

Work study students are bright and motivated. They’re quick to train and bring a fresh perspective that has helped us refine processes (they’re definitely helping find marginal improvements!).

Another unexpected benefit: Our job posts on the work study platform have yielded 5x more interested - and qualified applicants - than our posts for the same positions on traditional platforms.

ICYMI: Highlights from last week’s edition. Click here to view the entire post.

Are we on the same wavelength? Check out EngageARM.com for free resources, networking, and in-depth tutorials to help you build a highly-effective recovery department.

I’d like to close this with a quick ask. If you enjoyed this, please share with a colleague. Even better, take advantage of the referral program (linked below). If you disliked it, let me know why. All feedback is good feedback, after all.

Cheers,

Nate

EngageARM.com