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Oct 01 2016
Effective Credit Committees
Susan Archibeque, CCE, Nicholas & Company, Inc.

I was a session speaker at the NACM Annual Credit Congress in June, 2016. In the session: The Challenge Of Overridden Credit Decisions, I shared with the audience some of the changes we made at Nicholas and Company that I believe contributed to our success in changing the culture of our company from one of "The blame game" to a collaborative team working together toward common goals and objectives. One of the changes we implemented was forming a credit committee. During the session at Credit Congress, I had an audience participant that boldly stated during the session that "Credit Committees don't work." I was surprised with his response, and it got me thinking. While he strongly believed that they don't work, I had a completely opposite experience. In fact, I would contribute much of our success on the formation and participation of the credit committee. So why such a drastic difference? I gave it some thought and believe the reason some credit committees are very effective and some are not, is due to the following factors:

Authority - It is imperative that all levels of management agree that credit has the final authority to extend or deny credit on all accounts with the exceptions of those that are brought to the Credit Committee. All executive level management should also have the support of the committee and give the committee final authority on the account brought to the committee.
Purpose - It is important that the Credit Committee has a clearly defined purpose, a committee chair is established, and committee members are carefully selected. Members should be thoughtfully appointed and composed of five to eight members. At Nicholas, our committee consists of; Director of Credit, VP of Finance, Director of Sales, VP of Sales, and Legal Counsel. All members should agree and recognize that the final decision made by the committee is a result of a collaborated group effort and all committee members shared in the outcome.
Committee Chair ability to conduct a meeting - It does require a bit of skill in conducting an effective meeting. With Sales Management in the room, it is easy to be distracted, and it is important to keep the meeting moving. Sharpen your skills in conducting an effective meeting or seek the help of a meeting monitor if needed. There are two things to consider: 
1) Content knowledge and experience relevant to the work of the committee.
2) Proven leadership and people skills that will be essential if the committee is to work effectively. You want a good leader of people and processes, someone who feels confident in guiding committee members to accomplish the task promptly.

There are some personal characteristics of an effective committee chair that also need to be considered;

  • Is confident with self and other committee members.
  • Is more interested in the committees' success than his/her feelings of personal importance or opinions.
  • Is prepared to accept the group decision and communicates positively to the credit staff.
  • Ability to work with the people, who can stimulate them rather than brow beat them.
  • The committee chair will be responsible for preparing agendas for the meetings, assigning responsibilities to committee members, and doing some of the follow-up to make sure assigned work is being done by members.

Attitude - I can't help but think that this individual may have had a very bad experience with the Sales Team and/or with upper management and it may have impacted his attitude toward them and their attitude toward him. My advice would be to work on changing perceptions - his perception toward them and their perception toward him. Perception has a powerful impact on our ability to influence and motivate others. By creating a new experience and working on building better relationships, he may gain respect and change the way the group works together.

In summary, I believe a Credit Committee can be effective if given proper authority and support. It is important to define the purpose of the committee and carefully select committee members and a committee chair that has the knowledge and skill to keep the meeting on task. This may be someone other than the credit professional and the attitudes of the committee members must be carefully considered. Attitudes can in fact dictate the outcome.