EXCLUSIVE: NCO & APAC Merge Under EGS; CEO Talks to insideARM.com

“The clouds started forming at five o’clock pm
The funnel clouds touched down
five miles north of Russellville
Sirens were blowing, clouds spat rain
and as the things came threw, it sounded like a train…”

Tornadoes
Drive-By Truckers

Yesterday at 4pm Eastern I was scheduled to talk with Ron Rittenmeyer, CEO of Expert Global Solutions, Inc. (EGS), the newly-formed holding company that will oversee the operations of NCO Group, Inc. (NCO) and APAC Customer Services, Inc. (APAC). Just hours after the whirlwind announcement that NCO had finalized its merger with APAC and entered into a fresh credit facility of about $1 billion that also incorporates a $120 million revolving credit facility, I received a request to move up the start time for the call. I agreed, but this didn’t seem to bode well for an in-depth discussion about the deal and the future of the combined entities. What I didn’t know at the time was that something else entirely was in the wind.

“I appreciate you moving it up slightly,” Rittenmeyer said. “The problem is we’re under some severe warnings of tornadoes. I keep watching the map here and it keeps getting closer. If you hear a train in the background it’s a bad sign.”

So began my conversation with the head of one of the largest privately-held business process outsourcing (BPO) companies in the world. As Mr. Rittenmeyer kept one eye on the radar and I kept one eye on the clock while a dozen tornadoes barreled through the Dallas-Fort Worth area yesterday afternoon hurling trailers from Schneider National trucking into the air, destroying as many as 650 homes, and injuring 17 people (fortunately no fatalities have been reported), we managed to work our way through a series of topics beyond the deal that brought to life a massive, fully scaled global BPO provider in the customer relationship management (CRM) and accounts receivable management (ARM) arenas. The two organizations will continue as distinct brands in their respective market segments, with estimated combined annual revenue of $2 billion.

So give me some insight into the merger.

“I think this is a pretty historic moment for the company. I think it’s the first step in what really we consider to be the transformation of this company into a substantial ARM-based business which we plan to grow with as much energy as we can. But at the same time, pulling out the CRM piece, combining with APAC and creating a separate CRM brand so that we can have can have two distinct brands—one obviously in the recovery area and the other in the customer relationship area with a shared services organization [EGS] on top of it. As I put in my note to all our 40,000 employees, our focus is going to be placed around the consistency of what we do. But more importantly, when I think about the ARM brand, the goal is quality, compliance—because I think those are both pretty darn important—as well as the customer experience from our clients’ perspective. Those will be the three platforms we’re going to build on.”

Let’s begin with what you mean by “quality.”

“From a quality standpoint, it’s not only what we do but how we do it. As I’ve tried to tell people, it’s equally important that we are seen as somebody who can execute the job, but more importantly the way we do it is to treat people with the right dignity, respect, and class that you would expect yourself to be treated with. We’re there to help people resolve a problem, and that’s how I think of our job.”

And “compliance?”

“From a compliance standpoint, as you well know, there are a lot of rules in this industry. And you know what? I think that’s good because it does separate right and wrong. And I think our job is to be the gold standard of those rules and not to shy from them, but to actually help frame the story around them. And to really have a zero tolerance about compliance; we internally need to have that zero tolerance, and that’s something that the team and I are pushing very, very strongly.”

 That leaves “customer experience.”

“It really is the customer experience. I mean, this does not have to be viewed as a negative industry. It should be seen as an industry that focuses on resolution of issues. Because they’re real issues and they have to be resolved. And there’s a right way and a wrong way to do that—which brings us back to the “how.” It all ties together.”

What other aspects of the transaction are key?

“We want to continue to grow, and grow effectively. This merger helps lay out the platform clearly. From a financial standpoint it really changes the company. The two investment services—Moody’s and Standard and Poor’s—raised us up two notches to a B2 and a B, respectively. And that’s pretty significant. That’s not usually done, but I think they were impressed enough by the team and the story—and equally impressed by our numbers.”

The ARM industry is the target of a lot of complaints. Can you put that into perspective based on your stated approach to quality, compliance, and customer experience?

“We see complaints, obviously, and we take them to heart. But you know it’s also an industry that people do complain about when they get a phone call. And there are always the spectacular examples. I don’t know if you ever get rid of the spectacular examples, but you have to have some rules of the road. If you have a zero tolerance [about non-compliance], the word will spread and people will get the point. But it starts with how you train your people. Actually, it starts with how you select your people. Then the second thing is how you train them. And then how do you go back and re-train them when there’s an issue. But if you look the other way, then you have tacitly approved bad behavior. And, you know, I refuse to look the other way. And while I’ll never solve this over night, we’ve all got to get better at what we do. That has to be something we believe in, and it’s got to start with the tone at the top.”

Because EGS-NCO-APAC is so big, how do you view your role in helping to foster an industry-wide culture of compliance among smaller players?

“I don’t want to be arrogant and say, hey, we’re going to be the guys that tell everybody else how to do it. That’s never my intent. There are a lot of people out there with a lot of good ideas. I think, though, that we have certain responsibility, almost a social responsibility, a moral responsibility if you will, an ethical responsibility to ensure that given our size, we set standards that try to help mold what this industry ought to be doing. And we need to be seen as above reproach in that area. So I think it’s our responsibility to continue to provide the kind of training, the kind of reinforcement, and the kind of follow-up with the people in our organization so that we do everything within our power to make what I said earlier: the quality, the compliance, and the experience—most of all—not a negative thing.”

Would you talk about relationship between creditor, service provider and consumer?

“Let’s face it: if you’re trying to call somebody up to collect money from them, they’re not all going to say, ‘Thank God you called me.” It is a matter of fact. But what we need to be able to explain to them is that we’re not just calling to dun them on their bill. We’re calling them to talk about the problem. And, with them, hopefully to figure out a solution that works effectively for them and for our customers. We’re a vehicle to do that, and therefore it’s important that we do that with respect and dignity—because most people respond to that. Will we be perfect 100% of the time? Probably not. But if we consistently apply the right techniques to our organization; if we consistently have zero tolerance for bad behavior, then we can help set the standard for the industry. I really believe that.”

The creation of the Consumer Financial Protection Bureau (CFPB) is likely to alter the ARM landscape. How do you see the industry being transformed?

“I think there’s good and bad news in every business. The world is changing. One thing that I’ve learned over the years as a leader of different businesses is that a lot depends on how you do the work. Not only what you do—not just having an expectation to perform—but how you perform. Why are these laws being written? And why is [ARM] becoming an area of interest for government regulators and various other groups? I think it’s because people realize that there are individuals out there who are having [financial] problems. But it also runs the gamut from the people who just won’t pay to the people who simply cannot pay right now, and they’re in trouble.  You want people who go out and provide the services we as an industry provide to understand that. And to have a level of granularity in how we approach a problem: that one size doesn’t fit all consumers. The days of pounding on people or banging on doors—metaphorically speaking—I mean, those days are gone. And they should be gone. The thing now is, how do you do this work in the current context and still be effective at it. And there are ways to do that.”

So how you train employees to “do the work” can be an effective response to increased ARM industry oversight?

“Most people—I believe fundamentally most people realize they have a problem. And they want to get it settled within reason. And our job is to figure out how to create that bridge. To build that bridge and help take consumers across it in a positive—not a back door or manipulative—way. But in an honest, up-front, here’s the problem, what are we going to go do about it methodology. And then work with them. It’s very important that we have a process that works like that, and that we train our people to think like that. That doesn’t mean they’re not going to push a little. It doesn’t mean they’re going to stop asking to get paid. It doesn’t mean we’re not going to do the background work on the debt to make sure we know what we’re in to. And it doesn’t mean we’re not going to challenge people. But it does mean that the way we do that will be a non-threatening, more direct, fact-based, and with-some-sensitivity approach.”

Last question: several times you’ve invoked the concept of zero tolerance in terms of compliance. What does that really mean to you?

“Simply put, any behavior that falls below what we think ought to be the norm. We have tapes on every call. And we listen to them. Once we identify a problem, a third-party group within the organization but outside of the operational group where the problem arose listens to those tapes and scores them accordingly. And if we think we have a problem with a specific agent, and we think that problem is—let’s assume that agent has been with us for 10 years and obviously they know better. That’s person is gone. I’m not even going to debate it. Because I cannot afford to continue to re-train somebody who knows better. Because that’s a behavior you’ll never fix. And when word spreads that we will not tolerate that kind of behavior, it immediately begins to change how people across the organization do their jobs.

At that point, the tornadoes were still coming. “Hey, Dorothy,” I said to Mr. Rittenmeyer. “Grab your little dog Toto and get somewhere safe.”

Michael Klozotsky is the Chief Content Officer at insideARM.com. Our thoughts go out to the people and businesses affected by yesterday’s storms in north Texas.