Structured continuous improvement in the credit function. (Selected Topic).

In the quest for career advancement, lucrative incentive increases and/or overall job satisfaction, leading edge credit executives arc consistently searching out means by which their organizations' performances may be improved. Structured continuous improvement methodologies serve as the foundation of a number of formalized management programs that include Total Quality Management, Kaizen and Six-Sigma. In the absence of a purposeful means by which productivity and efficiency gains may be surfaced, recognized and realized, improvements may only result from random or haphazard realizations or breakthroughs. By employing the use of a structured approach to continually glean improved performance results, credit professionals may develop a culture where credit team members are continually focused on discovering and exploiting synergy opportunities.

A formalized and structured approach focused on continuous improvement most readily lends itself to organizations that are compelled by some external dynamic to change. An extreme example would be when an organization is being totally redesigned due to a merger or acquisition, with a much less extreme example merely being when a department's credit policy manual is out of date.

For starters, credit team members should be coached and mentored towards the development of strategic mindsets. In essence, they must be encouraged to lift their heads up from their cubicles and to look around and recognize what's going around them. Going beyond the traditional tactical level credit processes of assigning credit limits and collecting on past due invoices, the credit team needs to recognize and be an integral component of the department's roles in the supply chain, revenue cycle and the treasury function.

As team members buy-in to the notion that the fruits of their labors can and will benefit the company, the department and themselves, they may be deployed to various sub-teams charged with analyzing each and every process within the credit organization. Special attention should be directed to applying in-depth root cause analysis in problem or issue solving exercises. Ongoing efforts geared at differentiating between symptoms and causes will accelerate the process and more distinctly make evident potential solutions.

The overall approach should be fairly structured such that no major processes are missed and that each team is applying a standardized and efficient approach to their work. The initial step would be to designate an overall project lead to develop a project plan, identify process level team members, establish a general overall deliverable and assign deadlines. For instance, a team charged with designing and implementing the credit check-order release process would logically include at least one credit manager, a collector, a customer service rep or an order management system subject matter expert and potentially, even a salesperson. The initial scope statement or charter would clearly define the specific areas to be addressed, such as credit limit assignment, customer master maintenance, systematic credit check functionality, access security, etc. The charter would also document the team members, other stakeholders, process specific expected deliverables and a timeline.

The basic methodology to be applied by each sub-team is to quite simply document the present state processes and controls in place. Upon completion, the team would then apply the knowledge gained in the first phase to create a desired state model. The desired state processes or organization should initially be a wish list, representing the most ideal practices imaginable. Closer to reality, industry benchmarked best practices certainly would serve as a more practical goal and, if available, would be more ...