The technique of Isolation works wonders to double-up on improved results. When we acquired Paradyne, among many, many issues to deal with were these two; both of which were optimized by the technique of isolation. The first was a portfolio of aged accounts receivable from equipment previously sold on perpetual leases. The second was the resale of a product to Lucent; that product developed and produced by a third party. This week we'll discuss the lease issue; next week the resale product.
The collection procedures for these aged leases was co-mingled within the company's accounts receivable department. While the normal accounts receivables from current product sales and these lease receivables for aged leases technically fell under the same organizational category of accounts receivable; the techniques, considerations, servicing, and attitudes required to optimize both were very different. And results for each category were sub-optimal. So we created a separate subsidiary for the collection of these lease receivables with its own management, objectives, and performance criteria. Results for the standard new product accounts receivables radically improved: results for the aged lease receivables radically improved. Isolation of issues that, while on the surface seeming to be categorically linked, have in fact sufficiently differentiating characteristics, can achieve dramatic results.
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