“I am relieved to have something worked out on my account,” writes one consumer. “I truly appreciate [your] help in resolving my debt,” says another. Page after page of feedback reflects the appreciation and relief people experienced in interacting with Encore’s collectors. They were scared, confused, and needed help. When a collector phoned, many consumers began to see the person as their ally in navigating the system.
It wasn’t just that these account managers had strong customer service skills. Something else guided their behavior. Interviews with them show that Encore’s focus on having an intention for their consumers spoke to employees. “It gives me a sense of pride and honor knowing that I am able to improve someone’s financial situation,” states a young collector in Encore’s India call center. Another talks about reminding himself that “each consumer has his or her own personal story or journey that got them into this financial situation. It is my job to listen, ask questions, and then offer solutions. When I hear their gratitude, it puts a spring in my step and more energy in my voice.”
Every job, no matter the profession, serves a deep purpose—but we may need to look for it beyond the blinders of our egosystem. If a debt collection company can feel genuinely inspired by a noble goal, it is accessible to all of us.
The Power of Commitment in the Face of Failure
BRANDON
One critically important item needed to be finalized before our earnings release in February 2011. After the affidavit ruling back in 2009, at least ten plaintiffs’ attorneys from separate jurisdictions across the country filed lawsuits to have our judgments overturned or vacated. It would have been a nightmare to deal with all of them individually, so we had the cases consolidated into a national class action in the state of Ohio. After eighteen months of negotiation, we had reached an agreement that resolved all matters.
During these negotiations, we established that although we had made a critical misstep in the wording of our paperwork, the consumers in question did in fact owe the money. Nonetheless, to avoid a lengthy and costly legal battle, we agreed to pay over $5 million to settle the matter. We believed this was more than fair, given the lack of economic impact to any of the consumers involved. All parties agreed, and the federal judge gave his preliminary approval to the settlement several days later.
Everything was lined up for the announcement of our financial results for 2010. Collections had increased 25 percent, while our cost-to-collect declined by 10 percent and our cash flow and earnings grew by 30 percent. In addition, we had raised another $75 million in capital to acquire new portfolios. Our shareholders were pleased, and Encore’s stock ended February around $27 per share—almost ten times higher than the low point in April 2009!
It’s fun to be the CEO of a public company when the stock is going up. Existing shareholders congratulate you on your results; prospective shareholders take your calls and are keenly interested in your story; the employees love coming to work. We had been on an amazing run since mid-2009, and I saw nothing but clear skies ahead.
Almost on cue, lightning struck. Within days of the class action settlement, outright anger was expressed in many newspapers, including the Wall Street Journal, about the perceived unfairness of the terms. Pleas were made to state officials to stand up for their constituents. We were in the spotlight, and it was white hot.
After making some calls, we determined that much of the outrage was fueled by misinformation. Behind closed doors, we were being accused of everything from filing fake lawsuits against people who didn’t owe any money to blatantly disregarding the laws in individual states. Every day, it seemed another state or group came out against the settlement.
The allegations hurt. I felt judged as unethical, and it struck a deep nerve. Didn’t it matter that a federal judge and a team of plaintiffs’ attorneys had spent two years reviewing extensive amounts of information before agreeing to the settlement? Who were these people to question our integrity without ever meeting with me or with anyone on my team? I felt out of control and desperately wanted to set the record straight.
Initially, we managed the public relations backlash pretty well. Several newspaper articles fanned the flames, but they were largely based on hearsay and rhetoric. We kept restating the facts, which were well founded and seemed indisputable. I tried to reassure the employees and our shareholders that it was a tempest in a teapot. Once the various state officials fully understood the due diligence that went into the settlement, they would move on to something else. The judge signed the formal agreement on March 9, which helped bolster our position. We continued working with the states, and our shareholders seemed satisfied with our answers.
The negative reaction to the settlement prompted us to delay our announcement of the Consumer Bill of Rights. We didn’t want it to be seen as deflecting attention from the lawsuit, but we didn’t want to lose momentum on it either. On March 21, when we finally presented it publicly, our employees were enthusiastic and proud to be leading the modernization of the collection industry.
The excitement lasted exactly one week. On March 28, the attorney general of Minnesota sued us for a variety of offenses, including systematically collecting from the wrong people. They hadn’t spoken with us beforehand, and I couldn’t figure out what information they were using upon which to base their claims. Everything seemed to be coming from third parties. We contacted the attorney general’s office, hoping that things could be resolved quickly.
In the meantime, I continued to believe that Encore could get a fair hearing in the media. Encouraged by our relationship with the consumer groups, I thought if I had honest and vulnerable conversations with journalists, maybe I could break through the mutual distrust we had with the press. I explained the facts as we saw them to one journalist covering our industry, sharing in our phone conversation how we were just people trying to fulfill our duty in a productive way. I answered her questions transparently and hung up feeling that we had built an understanding. When the article came out, however, it was as if we’d never spoken. The press about Encore and the lawsuit remained one-sided and, at times, very personal.
The saddest part for me was the assertion that we had opportunistically issued the Consumer Bill of Rights. No matter what we did, the world was always going to see us as the bad guys. I was starting to feel numb and cynical again.
Then in July, the state of Texas sued us for items related to the affidavit issue. It just wouldn’t end. The press jumped all over it. Other states threatened to start an investigation into our collection practices. The court of public opinion was hanging us.
When I went into our executive staff meeting the following week, I found that my whole team, like me, was frustrated and discouraged. Instead of talking about financial results, ongoing initiatives, or portfolio opportunities, we quizzed Greg Call, now our general counsel, desperate for some kind of resolution. We were theorizing about what would happen if this dragged on much longer when Manu cut us off.
“Why are we spending so much time talking about this?” he asked over the videoconference from India.
“I’m getting questions from the banks about the status of these lawsuits,” Amy told him. “If we don’t fix this, they’ll stop selling accounts to us.”
“And our shareholders don’t know what to believe,” added Paul. “Our stock is getting killed.”
“I understand,” Manu countered, “but I also know that we consistently make ethical decisions about how we collect. We spent thousands of man-hours implementing processes to live up to our Consumer Bill of Rights. My collectors here are excited to help people get back on track. We need to have faith in Greg and his team to manage these lawsuits. We can’t control what the media says about us,” he exclaimed, “but we can trust ourselves and focus on our work!”
Manu was right. I felt my energy shifting back to what mattered. Seeing people around the table soak in his words, I felt embarrassed that I wasn’t the one to put us back on track. But that was why I built this su
pportive team, and let go of being the smartest person in the room. It didn’t matter who brought the clarity, it mattered that we found it.
In the coming weeks, we stopped defending ourselves; instead, we thought about how to get the facts transparently on the table. No one wanted to believe we had made structural changes to our processes or that we were not intentionally trying to harm consumers. Just as stock analysts had validated our success in India, we needed somebody from outside Encore to authenticate what we were doing. The Texas attorney general’s office became that entity.
We were openly challenged and audited by them between July and December 2011. During that time, our stock price once again dropped by a material amount, from $30 per share to $20. I can’t claim that I was never demoralized by the ups and downs, but our team did an amazing job of sticking together and supporting each other. In the end, no consequential issues were uncovered, and our investors, analysts, and key bank clients began to accept our facts as true. The storm clouds were clearing.
Many other states were still unconvinced. Realizing that openness was our best path, we discussed asking those groups to form a coalition to audit us. It seemed crazy. If we let them poke around, who knew what they might find? Conceivably, there were issues I didn’t know about or inadvertent inefficiencies that looked bad.
But the team and I ultimately decided we were confident in our operations. And if they found something, it would help us improve.
We put out the invitation, and the states in question agreed to identify representatives to examine our operations and processes. It would take time, but we’d work together to make it all-encompassing and completely transparent. At last, we had a path to closure.
Throughout dealing with all these legal issues, we never finalized the articulation of our noble goal. The absence of a definitive version didn’t diminish how important our consumer-centric approach had become for us, however.
SHAYNE
A debt collection company like Encore Capital—with the Wall Street pressure for quarterly results and the uncomfortable task of collecting money from reluctant consumers—is an extreme example of a chronic experience in the modern world. Leaders and employees in all sectors— public, private, nonprofit—are often too stressed to feel inspired. Even organizations with an inspiring mission can get caught up in the grind. What makes it so difficult to live a life infused by our noble goal?
Feeling a daily connection to a larger calling occurs when our brain is predominantly preoccupied by our sense of purpose. Many of us in the Western world, however, focus on our personal success as the yardstick of our value. The drive to achieve and the fear of failure dominate our thinking. Year after year, we work long hours, pushing ourselves to ever-higher heights—the next promotion, recognition, or financial threshold—only to discover that the high of accomplishment disappears in minutes or days. Slight underperformance triggers our egosystem’s fear of not being good enough. This quasi-permanent stress squashes the inspiration of our noble goal.
This is the “performance anxiety paradigm” in which our yearning for success and our fear of failure become our primary obsession. Although many leaders credit their fear of failure for driving them to succeed, inherently it is an at the mercy mindset. We are driven, believing (falsely) that we will feel “good enough” when we’ve reached whatever success milestone we are chasing after. But we won’t. Have you noticed how quickly the feeling of inadequacy returns? No amount of external success will satiate our egosystem’s potent mixture of anxiety and delusions of grandeur. Our path as leaders is to let go of this hopeless hope and be guided instead by what we want to create and contribute with others.
Having this performance anxiety paradigm as our dominant frame of reference isn’t “bad,” but it does have consequences. For starters, performance anxiety infuses us with a sense of scarcity in time, achievement, money, and reputation. We can never do enough, the result being that we often de-prioritize other aspects of our life, such as family, physical and mental well-being, and involvement in our community. Similarly, it can undermine the quality and integrity of our professional endeavors. Our zero-sum mindset about success, profitability, and performance can push us to make “me first” or even ethically gray decisions. If criticisms later arise, we’re often defensive because we sense we’ve compromised ourselves.
Root-cause analyses of British Petroleum’s Deepwater Horizon explosion on the Gulf Coast in 2010 revealed that cost-cutting and overly aggressive schedules fostered a culture of poor safety. It was easy to demonize BP and the workforce that allowed this disaster to happen, but frankly, most organizations in every industry function similarly. As a society, we have created a context where financial results and the performance anxiety paradigm, not purpose or contribution to society, reign supreme. Think this tendency is “out there”? Just notice how you feel the next time a colleague or a competitor is advancing faster than you are. Chances are you will feel a twinge—a pinch—and feel compelled to race ahead. It’s a collective obsession that has consequences for all of us.
Although Encore Capital never finalized their company’s noble goal, their story illustrates the power of searching for it. Leadership sincerely cared about their consumers and employees, and that created a context of purpose in the organization. Empathy influenced employee decisions and behaviors when no one was watching. Later, when Encore was under fire, they had nothing to hide in how they operated. It didn’t mean they were perfect, but Brandon and the team felt secure enough to say to their detractors, Come take a look and tell us what you find.
Their noble goal helped rouse this courage because failing, being judged, and feeling hurt seemed less threatening. If there were flaws in their system, they wanted to learn about them because it accelerated their ability to fulfill their mission. Our noble goal helps us better see others’ needs and be more willing to learn when our ego feels incompetent. It is a central ingredient in any learning organization.
This freedom causes us to show up more often with our full talents and strengths. Our mental faculties focus on what really matters and how to do it to the utmost of our abilities. We create positive ripple effects, because we’re more willing to see others succeed and even out-shine us. We grow, we collaborate, and we give discretionary effort. A meaningful noble goal inspires significantly higher performance long term for individuals and organizations.
Uncomfortably, the freedom and creativity of being at the source comes when we let go of the results that feel most imperative to achieve. Letting go of the result does not mean letting go of our commitment to our goals, but rather accepting that we might not achieve the outcomes our ego so craves.
We saw this in Manu’s intervention in Brandon’s executive staff meeting. It would be easy to think now that Encore could afford to be at the source because they had achieved their business results. But far more often, it seemed they would never get there. Their stock was down. The media was castigating them. “There were many times I felt we were failing,” Brandon recalled.
That is the anxious chatter of our ego. We always have the choice, in the context of our noble goal, to say “so what?” We might fail. We might be judged, or hurt, or not get that promotion we’re so desiring. But what do we want? How do we want to grow? What context do we want to create?
In the words of Claire Nuer, “When we say ‘so what?’ to our deepest fears and reach for the stars, the magic of being human unfolds.”
BRANDON
To truly become a different type of collection company—a model for the industry to emulate—we needed more than just the Consumer Bill of Rights. The executive team and I spent many hours searching for initiatives that could bring benefits to our current and future customers.
My favorite idea involved forgiving $1 billion in debt. Now that would be a good headline! How could releasing 500,000 people from at least one of their debt obligations be spun negatively? Our analytics were accurate enough to assure that doing this would not impact En
core’s bottom line, and it would move hundreds of thousands of people closer to financial solvency.
Everybody loved the idea—until we focused on an unintended consequence for our consumers. The federal tax code has a provision that requires any forgiven debt of more than a few hundred dollars to be reported to the Internal Revenue Service as income. Given that the average balance was around $2,000 for the identified accounts, we could actually harm our consumers’ tax status by canceling their obligation. As crazy as it sounded, our customers were better off if we did nothing and maintained the obligations as “outstanding.”
The idea I became most excited about involved bringing together a group of prominent researchers, nonprofit organizations, and our own internal team of behavioral scientists to study how our consumers make financial decisions.
Even though our consumers accounted for 10 to 20 percent of the U.S. population, there were virtually no systematic efforts to understand them. There were many anecdotes but only limited data. Doing research of any kind required access to a large database of consumers, and we happened to have one of the largest databases of financially distressed consumers in the country. Understanding our consumers better would allow for better communication, a higher level of engagement, and likely better financial returns with fewer complaints. More broadly, this knowledge would enable us to bring data to the growing number of discussions about what to do for overstretched consumers. It would be good for us, good for the consumer, and good for the system. The Consumer Financial Protection Bureau had announced its intention to hold field meetings to discuss what was “wrong” with collections. This initiative could allow us to move beyond the anecdotes we expected would dominate the discussions.
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