Are we emerging from a cyclical recession or a structural one? And why should it matter?
There has been some discussion recently in the business press about whether we are emerging from a cyclical recession or a structural one. A cyclical recession implies that the recession was inevitable and that the upswing of the cycle will return to former levels, simply by conducting business as usual, with very minor changes in scale, but no change in approach.
I submit that we have experienced a structural recession – particularly as it relates to the consumer debt collection industry (who originally commissioned this article). Part of the reason for this belief is that the confluence of faulty premises under which incredible amounts of money were loaned against real estate collateral with risk shifted away from the borrower and the broker will simply not occur again for decades, if ever – and certainly not in the volume at which it once occurred.
The other part of the reason is more of a positive – many people simply interact differently today than they did just a few years ago. Social media is not a fad – it is a new paradigm for how people interact with each other. And its use is growing exponentially – “virally” as it is often termed. If you have not seen the statistics presented in a compelling visual, you might want to visit www.youtube.com/watch?v=sIFYPQjYhv8
Why is this important?
I am here to suggest that if debtors interact with other humans differently now than they used to, after setting aside lien payoffs and garnishments (which I would term as “involuntary collections”) – the vast majority of funds collected is derived from interactions with debtors where collectors seek their cooperation in making payment arrangements. And the vast majority of those interactions take place on the telephone.
What if we could change the dynamic of that interaction, while being fully compliant with the laws which govern the interaction? What if we acknowledged the debtors’ individual circumstances in each interaction, and had a genuine conversation about their financial obligation to our respective clients – without initially bringing leverage to bear? Is it possible that for every situation where some money is left on the table, there is a multiple of situations where debtors who otherwise wouldn’t have paid voluntarily are doing so – which in turn would both increase revenue, and decrease the overhead of ongoing involuntary pursuit?
I am embarking, along with some of my colleagues in the telephone customer service world, on a pilot project to test some of these theories. I’d like to hear back from anyone who’d like to discuss this further – I also intend to follow up with more specifics in a future article.
I also take note that I am writing this article on Groundhog Day, from Pennsylvania. With all apologies to Bill Murray – I hope that what we learn from the changing landscape of doing business allows us to wake up each morning and not have to repeat the prior day’s mistakes until we get it right!