By Vilis Ozols, MBA, CSP

 This article appeared in the California Collectors Association monthly magazine; Collectors Ink, in the Texas Collectors Association  monthly magazine and in the CRS News quarterly newsletter in 2005.(click here for information about reprinting these articles)

Warren Dedrick, the founder and owner of CR Software, Inc., states that “The only person who really makes money for a collection agency…is the collector!”

But what happens if your agency is constantly losing collectors? What can you do about high employee turnover?

One of the sessions I facilitated at the annual CR Software User’s Conference was an interactive workshop on call center management. As the facilitator, I had anticipated that the audience of collection agency owners and managers would promulgate content on such topics as workflow automation, call load balancing, outbound calling strategies and predictive dialer management. Instead the audience almost immediately started a spirited discussion on employee turnover. Imagine my surprise when every attendee agreed that the secret to collection agency call center management is really managing employees, and more specifically managing employee turnover and attrition.

Our group then voluntarily shared the annual turnover rates of their employees at their collection agencies. Interestingly enough the group admitted turnover rates from as low as 0 percent (no employees leaving their organization over the past year) to as high as 50 percent (half of their employees leaving over the course of the past year). This should prompt a very good question for anyone reading this article: what is your turnover rate?

You might guess at what it is, or you might know down to the decimal; pinpoint what it is. One of my favorite sayings from the world of Total Quality Management is this: “Replace Opinion with Data!” This is a very serious indicator of how your agency is doing. Do you know what your turnover rate is? But let me pose an ancillary question that might be even more telling: What is the cost of employee turnover to your organization?

I always liked Mark Twain’s quote: “There are three kinds of lies: lies, damn lies, and statistics!” But let me share some of the statistics in the area of employee turnover. The US Bureau of Labor Statistics (BLS) states that the voluntary turnover rate across the board this past year in the US was 20.2 percent. Just in case you are wondering how to calculate your numbers, the standard method the Bureau of Labor Statistics uses to compute net monthly turnover rates is the number of separations during the month, divided by the average number of employees on the payroll during that month, times 100. 

In a recent survey concerning employee turnover statistics and retention, the Society for Human Resource Management (SHRM), the world’s largest human resource (HR) management association, provided insight into the reasons employees quit. Interestingly, “better career opportunities” and “more competitive salary and benefit packages” were the top reasons for employee resignations.

Employee Turnover Costs You Money

If you are trying to calculate the cost of employee turnover, employee retention consultant Sam Geist, of KEi, states that the cost of replacing an hourly worker is 0.25 to 0.5 times the person’s salary plus benefits; the cost of a manager or supervisor is 1-1.5 times salary plus benefits; replacing an executive or top manager is 3-5 times annual salary plus benefits. Replacing a top-producing sales executive is often even higher.

This is always a difficult number to come up with, but some of the factors to consider are cost of finding, hiring and training a replacement; cost of lost productivity in the process of the attrition; cost or affect on the rest of the employee base as your organization goes through employee attrition; cost to your organization in terms of customer satisfaction and potential lost clients; and the administrative costs of stopping payroll benefit deductions, benefit enrollments, COBRA notification and overall administration costs.

Employee Turnover Costs You Client Satisfaction

In an interesting study, researchers Estelami and Hurley with the Marketing Science Institute showed that employee turnover predicts customer satisfaction levels very well. Also, employee turnover statistics can serve as the equivalent of customer satisfaction surveys. They also showed that when levels of employee turnover are low, improvements (that is, decreases) in turnover rates yield big improvements in customer satisfaction. When employee turnover is high, the improvements in turnover rates have less impact on customer satisfaction.

What this means to you as a collection agency is that if you are already effective at employee retention, any improvement will yield high results in increasing your client satisfaction ratings! Conversely, if you are bad at employee retention, your customer satisfaction ratings are probably already hurting badly and improvements in customer satisfaction are not as likely to be tied to your turnover rate until you dramatically improve it.

Reasons for Quitting Are Not Surprising

Why are workers leaving their jobs? According to the SHERM study, “A better career opportunity” is the primary reason cited by 78 percent of exit interview respondents. Money is the second most cited reason, as 65 percent of employees leave because they were “dissatisfied with salary and benefits.” “Poor management” was a distant third (at 21 percent), followed by “moving to follow a relocating spouse” (18 percent).

Employee Retention Tools

The collection agency owners at the CR Software conference workshop offered many real-world collections industry solutions to their employee turnover challenges. They stated that fair and competitive salaries and benefits were very important. They also cited many examples of “improving workplace quality” as being important, including employee recognition plans, fun events and contests at work, and comprehensive communication strategies with their employees to make sure that employees felt valued and appreciated. Comprehensive training, both for new collectors and ongoing training for all employees, was also suggested as a powerful retention tool.

One of the most effective employee retention plans suggested was to improve the initial hiring and interviewing process. Experienced collection agency owners and managers found that if they put more time and effort into the hiring process, the organization experienced lower employee turnover rates.

Now we can also compare the collection agency suggestions with the Human Resource study findings. The SHERM study also asked the HR professionals to rank the effectiveness of several retention tools. Traditional benefits apparently work the best: the respondents ranked health care benefits as the most effective retention tool, followed by competitive salaries, competitive salary increases, and competitive vacation and holiday benefits.

Interestingly, some of the newer and trendier benefits did not fare as well. Concierge services (where a hotel-type concierge arranges personal services like dinner reservations and personal shopping) ranked as the least effective retention tool, and telecommuting and special severance protection packages also ranked in the bottom five. Based on the survey findings, the best action for employers trying to boost their retention rates is to analyze salary and benefits packages to determine if they measure up to the competition.

Remember, the only person who really earns money for a collection agency is the collector. If your collectors are constantly leaving you for another job, your agency is losing its most import asset. If you are to listen to the suggestions of some of the smartest collection agency owners and managers in the industry, maybe your best call center management technique should be a concerted effort at employee retention!


Vilis Ozols, MBA, CSP, ( president of the Ozols Business Group in Albany, NY is a motivational business speaker and leadership consultant. He is the author of 3 books, he’s a former pro beach volleyball player and he has spoken to businesses in all 50 U.S. states.