CEO Moment

Will the real decision-maker please stand up? The "perched-pen" syndrome is not all that uncommon. This is someone who appears to be the decision-maker but in reality is just a clerk or lower level supervisor. As a general rule, those who work in the financial accounting functions are not the most important players in the decision-making process and are usually a far cry from being the actual decision- maker. In sales as in accounts receivable collection, you need the person who has "The Power to Say Yes"

David Ward, CEO

Coming Next Month

We will address how outsourcing accounts receivables can help if you are involved in a post acquisition/merger situation.

Welcome to the brand new Delta Recovery Systems monthly newsletter. We're looking forward to providing credit managers and their staffs with timely tips on credit and collection practices. Each month we'll take a concise look at a few issues pertaining to the credit and collections industry. We welcome any comments, suggestions and/or questions you may have concerning our newsletter and industry issues in general.

We all know it today as the 80/20 rule. In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's Principle. While it may be misnamed, Pareto's Principle or Pareto's Law as it is sometimes called, can be a very effective tool to help you manage effectively.

Where It Came From

After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of expertise. Quality Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s recognized a universal principle he called the "vital few and trivial many" and reduced it to writing. In an early work, a lack of precision on Juran's part made it appear that he was applying Pareto's observations about economics to a broader body of work. The name Pareto's Principle stuck, probably because it sounded better than Juran's Principle. As a result, Dr. Juran's observation of the "vital few and trivial many", the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto's Principle or the 80/20 Rule. You can read his own description of the events in the Juran Institute article titled Juran's Non-Pareto Principle.

What It Means

The 80/20 Rule means that in anything a few (20 percent) are vital and many (80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work he identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world even accounts receivable. You may find that 80 percent of your sales come from 20 percent of your customers, and that 80 percent of your bad debt comes from 20 percent of your customers. Also 80 percent of your sales may come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways.

How It Can Help You

The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 percent that matters. Of the things you do during your day, only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if something isn't going to get done, make sure it's not part of that 20 percent. 80 percent of your time should be spent doing what is really important. For instance, helping your good employees become better is a better use of your time than helping the great employees become terrific. Apply the Pareto Principle to all you do, but use it wisely. Learn more...

1) We hold a certificate of compliance from the Commercial Law League of America. We're one of only 192 agencies out of the over 10,000 in the United States that has this distinction, a blue ribbon in the commercial collections industry.

2) All our collectors are certified by the International Association of Commercial Collectors, so they maintain the highest ethical standards of fair debt collection.

3) Our collectors operate in a customer service oriented fashion, not an aggressive approach. As a result, we're able to maintain your professional and public image while meeting your collection needs.

4) Our President and CEO, David Ward, is the President-elect of the International Association of Commercial Collectors, the largest organization of commercial collection specialists in the world. This means that you can count on us to be at the forefront of trends and changes in the collection industry.

5) We represent the North American region for Global Credit Solutions, which gives us access to a global network of collection specialists covering all 5 continents. This is particularly advantageous for our clients that have debtors on foreign soil.