Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Contact Thea at [email protected].
I have enjoyed “Thea’s Mailbag” for a while now. Great stuff! I am retiring this month after 45 years in credit management in the exterior building products distribution business.
Credit manager commission or bonus has been kicked around and debated for many years in credit. There is a counterpoint for every point, as credit managers can manipulate results to fit a program by simply doing their job in a certain way to achieve the desired results.
One thing that cannot be debated is the contribution of a strong credit department to the bottom line of a company. When I say strong, I am not referring to the usual credit measurements. I am referring to the contribution the credit department makes to the overall corporate goals of growing sales and profits. A strong credit department makes solid credit decisions on new accounts, services the good accounts in the customer base whenever and wherever it can, manages the accounts that need managing throughout the year and finds a way to sell and collect the marginal accounts in a successful manner. When a credit department is doing all this at the highest level, the credit statistics will also be at the highest levels and the company will grow and prosper.
Even with all of the above stated, credit managers’ bonus compensations are best tied to sales and profit goals. This keeps them working toward company goals, versus some particular credit measurement that might contradict the company’s growth strategy. It fosters a close working relationship between credit and sales as each group pushes the other to [succeed]. Bonuses can be tied to corporate, regional, or branch results, depending on a credit manager’s area of responsibility.
One caveat, however, is that this works best when a credit department is more or less traditional, where the credit manager approves and manages customer accounts. It could also work where there is centralized credit application processing, provided the credit manager is responsible for the account from there forward. If credit responsibilities are divided up into multiple groups, handling one specific aspect of the credit program, it would be more difficult to do short of a general bonus to the credit/financial services employees if the company is satisfied with the overall results.
This is my 2 cents on the subject. Thank you, again, for your many great columns. They are always good and on point and come from the real world of credit management.
Signed, 45 Years of Credit Managing Bliss
45 years! Well, congrats on your fast-approaching retirement. You very well may be the godfather of credit! May I just say, hats off and much admiration to your longevity in a role that can be a soul-sucking experience, if you let it. But you, my dear friend, have the right attitude and approach that many fellow credit managers share. We get up, day in and day out, slap that smile on our faces, find the humor in situations no one else does, go into battle every day against almost everyone and absolutely love it!
So from every credit manager out there, thank you for the very well-written words and a huge and heartfelt congratulations on your many years of dedication. You rock! Enjoy your retirement...fishing and hanging out with your lovely wife! You can still live the credit life through the kids carrying on the legacy. Enjoy, you’ve earned it.
PS: Thank you for your very kind, and appreciated, words.
[Editor's note: Letters are edited for brevity, clarity, and style.]