HVAC Giant Gets Cool, Calm and Collected

HVAC Giant Gets Cool, Calm and Collected

HVAC giant Lennox transforms business performance through underlying systems…

Closer Collaboration
With guidance from REL, finance and sales hashed over the challenges of creating standard, simple-to-understand guidelines. For those occasional times when a salesperson and a credit manager can’t see eye to eye on a customer, a new escalation protocol was devised.

That protocol was an essential part of the process redesign, notes Jackson, because “if you create the process so tightly that you never have an exception or you don’t have a way to address that special situation, the process will fail in some way. So we made a point that there was a pressure-release valve. There was a way to get a customer treated in a certain way outside of policy as part of our process.”

Now, there is enough exception capability “where we can continue to do the right thing to support the sales team where it makes sense,” says Jackson. “And even if we have to say no, people understand why and what the obstacles are.”

“A Big Opportunity”
Changing collection processes wasn’t the only part of the re-engineering project; Dacus also tackled what he saw as “a big opportunity” in the area of credit risk. He formed a separate group to handle credit for new customers and manage existing portfolio risk. The group created a new credit limit scoring model, which reduced the average credit-approval turnaround for new customers from two weeks to four hours. Additionally, Dacus and his team came up with creative ways to help customers increase their credit lines, through secured financing or personal guarantees, for example.

Thanks to these efforts, Lennox increased its annualized gross margin contribution from new business “well in excess of $400,000,” says Dacus.

Good Processes Make Good Customers
Underlying the credit and collections transformation, say Lennox executives, is a desire to maintain good relations with its customers. “Everything we do here is about the customer,” says Reitmeier

The Payoff
Today, Lennox has replaced its former decentralized approach to credit and collections with standardized, simplified, and largely automated processes. Every month, customers’ credit-risk grades are automatically updated based on sales behavior and past payment performance. Among other things, that has enabled the company to reduce order holds for low-risk customers, says Dacus.

The quantitative payoff from the reengineering is reflected by significant improvements in a range of metrics, from percentage of receivables past due to days sales outstanding to collection effectiveness (see chart above). But the qualitative results are just as important, if not more so. Dacus says he’s received thank-you notes from customers that Lennox has helped through tight situations. Morale in collections is up. And the cooperation between sales and collections has never been closer.

Excerpts from full HVAC Article which can be read here

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