A friend of mine, let’s call him Tom, called to ask for my advice. His company had a customer with a $1 million credit limit. That customer had experienced some financial setbacks over the last year. As credit manager, Tom believed that the customer still warranted the $1 million open account. His manager disagreed. She instructed him to reduce the credit line to $250,000. Tom asked why. The only answer he got was that his boss considered the credit risk to be unacceptable. Tom notified the sales department. The V.P. of Sales and the salesperson were surprised, but nevertheless notified the customer.
Tom called me because the customer’s C.F.O. had just requested a call to discuss issues and options. As far as Tom knew, there were no options or alternatives he could offer, and no suggestions or proposals he could accept. He asked me how I would handle this situation. I told Tom that the most important thing he could do was to own the credit decision even if he disagreed with it. I told him that the worst thing he could do would be to suggest that there was any internal disagreement about whether the customer was creditworthy. I warned Tom that if he hinted in any way that he was concerned about the decision, the sales department or the customer would immediately seize on this information. Worse, if Tom told either the customer or the sales department that he disagreed with the decision, he would be throwing his boss under a bus.
I think the best way to handle this is to accept complete responsibility for the credit decision. To do otherwise makes you appear indecisive. If you say you disagree with the credit decision, you appear disloyal. If you feel strongly about a credit decision, ask for an opportunity to discuss it with your manager before the decision is finalized. Frame the discussion as an opportunity for you to learn more about the way your manager evaluates credit risks, rather than a meeting in which you try to persuade your boss that their decision was wrong because doing that makes you appear insubordinate.
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.