My father was an NCO in the British Army. When I was growing up, if you were easily intimidated, you didn’t get a lot to eat at the free-for-all that we called meal-times…. So I am not easily intimidated.
Delinquent debtors frequently use intimidation as a negotiation tactic. Often it takes this form; the debtor says: “If you don’t release the order(s) pending, we will take our business elsewhere. When we are asked why, we will be sure to list you and your behavior as the primary reason for the decision to move to a competitor.”
I was invited to take a trip to visit a local customer to discuss the status of their past due account and to review the status of orders on hold. When I arrived, I was escorted into the main conference room in which six or more of the debtor company’s executives waited for me. After the introductions, the debtor company President told me:
· He said he “could not imagine” what I was thinking at the time
· Their account was one that should never be placed on credit hold
· He told me the orders I held needed to be released immediately, and that doing so would benefit his company and my employer
· He expected an immediate affirmative response – meaning the orders on hold would ship no later than the next day
· Once the goods were received, they would open a dialogue with me about a mutually beneficial debt repayment plan
The debtor company President told me that this was my last and best chance to remedy the problem, and make amends for my past errors. He said he was prepared to call my company President, but preferred to work things out with me rather than pointing the blame at me. My response was to request 24 hours to make a decision. The decision was actually already made. I would consider releasing the orders on hold if and when the past due balance was paid in full.
The debtor called my company President within two hours of my meeting. By the time he called, I had already provided my boss and through her, the company President, with an update. As a result, the debtor had no bargaining power, only threats.
Does intimidation work? Yes. It is a popular negotiation strategy. It is especially effective if the credit manager is not certain their decision is fully supported and/or supportable. If you are confident that you understand your company’s tolerance for credit risk, then customers’ attempts to intimidate you to influence your credit decision-making is unlikely to work.
That’s my opinion. What is yours?
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.