Jeff Judy

Jeff's Thoughts - March 7, 2018

Corporate Memory II: Preventing Amnesia

In the previous issue of Jeff's Thoughts, I wrote about "corporate memory," the idea that your institution's unique way of doing things depends on not just the official guidelines to credit behavior, but on the shared understanding of how guidelines and strategies should play out at the front lines. While I identified the policy and procedures manuals as the heart of the culture, I compared the habits, tendencies, and beliefs of the credit staff to a protective, reinforcing layer that wraps around the manuals, much as packing peanuts surround and protect a valuable item for shipping.

Together, the manuals at the center and the practices that interpret and reinforce them make up your corporate memory. Together they ensure that the preferred practices that reflect your values and execute your best strategies are applied consistently time and again, regardless of which employees are involved in an individual credit transaction.

But if what credit staff are telling me, as I criss cross the country in training and consulting events, is true, many institutions are fighting against creeping amnesia.

The problem is that that reinforcing, protective layer of corporate memory -- the habits and "real" practices that credit staff display -- is rarely recorded anywhere. These all-important elements live inside the heads of the credit staff. And when there is too much turnover, it peels away this protective layer of the culture.

In simple terms, your institution forgets the best way to handle credit. On the credit side, this can have painful consequences. On the business side, replacing that lost memory is time-consuming and expensive.

And turnover is a growing problem. For one thing, we have a broad swath of baby boomers in senior positions within our credit operations. They are retiring, taking a lot of knowledge with them. For a double whammy, people who planned to retire a few years ago but held on until the stock market recovered are now pulling the trigger.

For another, we are close to full employment. This labor shortage makes it easy for your staff to jump to another institution, or even to another industry ... again, taking valuable corporate memory out of your culture.

What can you do to combat this corporate amnesia?

First, make the culture an explicit topic of discussion at all levels of the organization. Do not assume that employees understand the importance of "how we do things around here", of how your institution's specific approach needs to play out in all aspects of the credit business.

Second, pay more attention, and more regular attention, to your written policy and procedures. Schedule periodic reviews of the complete manuals, rather than just revising sections here and there as issues arise. If your manuals don't reflect current actual practices, they will come to be seen as less and less relevant to daily work at front-line desks. Don't put this one off.

Third, find ways to capture some of that knowledge that is in the heads of credit staff at all levels. Naturally, if someone comes up with a better way of handling a certain type of credit, revise the manuals to reflect that.

But there are many issues in individual transactions that are addressed, but that aren't generic enough to, say, change policy. For these, write brief case studies and use them in staff meetings and training events. That spreads the experience across more staff, and provides another buffer against loss of corporate memory.

Staff turnover is a real pain. We all know the costs in time, money, and energy of replacing staff. But there are additional costs if you don't take steps to preserve your corporate memory in the face of a very different labor market than the one we lived in just a couple of years ago.