Thursday, September 29, 2011

The Unturned Stone: The Untapped Profits Hiding in the Poor Quality of Modern Call Centers

Attacking Call Volume

In the last post we did a show me the money analysis to seewhere all the untapped cost and in some cases revenue was lying:

(Direct Labor x DLRate) + (Indirect Labor x IDL Rate) + (Capital Expense X CE Rate) + (Other) =Total Opportunity Cost of Call Center
The keys from that discussion were:

The industry's efforts to date have been focused on rate reduction…move to lower cost markets and your labor and real estate costs go down.

2) Direct Labor is the biggest bucket of cost.

3) Though Indirect Labor and Capital Expense havetheir own drivers, the amount of Direct Labor is the biggest driver of thosetwo expenses.

4) The catchall “Other” bucket of cost and revenue in some cases drives the other costs and in some cases is a cost or revenue lost category of its own.

So the biggest opportunity area is the reduction of absolute amount of direct labor. To unlock thevalue, we will need to look at the drivers again. As stated, the amount of direct labor youneed is a function of Call Volume, Handle Time, Service Levels, and Shrinkage (Time Not Spent on the Phone). Let’stake each in turn.

Sine Qua Non: A CallVolume Pareto

That call volume is a big driver of cost is not news to callcenter leaders. They have been trying toreduce the volume of calls by implementing more self-service channels…websites,Interactive Voice Response, and Community Support Boards.

But the way to tell if a company is trying to systemicallyand systematically go after call volume is if they can produce a pareto chartof call volume…a graph that shows the call volume and handle time associatedwith exactly why customers are calling.

Tracking Handle Time and Volume together allows you to orderthe opportunities in terms of Volume X Handle Time. That way low volume calls that may take along time to solve have as much weight as high volume calls that are easy tosolve.

There are a lot of ways to proceed from here. One way simple way is to break the list intothree buckets: 1) Calls due to NotResolved the First Time or Call Center Errors, 2) Calls that are preventablewith a process/procedure change in call handling, 3) Calls that are preventablewith a change in another part of the business and 4) first time requests forservice that are not preventable.

Let’s take the last category first. You set up a call center to service yourcustomers. That is what you are therefor! If a customer has a change ofaddress or a death of a spouse or moves, it is perfectly legitimate for them tocall and request service. You should ofcourse offer web or IVR self-service, but some customers just want to talk tosomeone and that is fine. This is a lowpriority bucket to worry about.

The bucket you must focus on first is Calls due to NotResolved the First time or Call Center Errors. If customers are calling back because of an error you made, you areadding to your own cost and you just have to fix it immediately. An example is a customer calling to fixsomething about their bill only to have the same problem appear the next monthbecause the agent forgot to do something in their system. Another example is a tech support call thatdoes not resolve the customers issue due to the agent not following the properdiagnostic path. Both are pure waste.

The second bucket is Preventable Calls with a ProcessChange. A good example here is the highpercentage of customers that call after they get their first month’s bill. If the proper disclosures are done and stepsare taken to ensure understanding, many of these are likely preventable.

The last category to be discussed is calls that arepreventable with a procedure change in another part of the business. There are lots of examples here as callcenters are often the place where all the poor quality problems show up. Product defects generate calls. Problems with field work generate calls. Problems with billing generate calls.

Armed with a Volume X Handle Time Pareto Chart, you can goto other parts of the business or to the GM over the whole business andhighlight the cost associated with errors in other departments. Having specific cost detail helps increasethe focus on finding a fix.

Of course another approach is to just develop a strategy forthe top Volume X Handle Time drivers. Fromthere, assign resources to come up with coordinated strategies forsystematically attacking each driver, no matter what bucket it is in.

But at the end of that analysis, you will have a list of processchanges you want to make and you will a list of things you want to make surethe agents do/say every time. Whatnow? Pull the agents off the phone fortraining? More monitoring and coaching? Put a sheet of paper on the agent’s chairstelling them to do it this way instead of that way?

This is what we have been doing and it is not working. Call center leaders have to think aboutautomating and error-proofing work with agent-assisted automation ( Build the proper “first bill” set ofdisclosures, prerecord them and let the agent play them. Automate the updates in a second system whenthey are made in the first system so the agent doesn’t have to remember to doit. Develop the proper diagnostic pathfor a particular problem and let the agent play the questions to the customerto ensure the proper steps are taken.

It is the overreliance on monitoring and coaching thatcreated many of these problems. Lookingto monitoring and coaching to fix them, is, well, you decide how smart that is.

But however you do it, the big picture idea to not lose sight of is that because callvolume is the big driver of Direct Labor and because Direct Labor is the bigdriver of Indirect Labor and Capital Expense, systematically reducing callvolume is going to have a multiplier effect on cost reduction.

Monday, September 26, 2011

The Unturned Stone: The Untapped Profits Hiding in the Poor Quality of Modern Call Centers

The call center industry has been around for about four decades. When it began, call centers and mail were the only ways for customers to get their issues resolved. Over the last couple decades, websites, self-service kiosks (e.g., ATM’s), chat and many other channels have been developed for our customers to get help.

So by one measure, the ratio of customer touches per call center agent has gone through the roof and the service sides of these businesses are dramatically more productive. The number of call center agents may or may not have dropped depending on the growth of the business, but businesses are supporting more revenue with less call center agents.

Moreover, the cost of those agents has also dropped dramatically relative to other costs. This is because businesses keep moving their call centers to lower cost labor and facility markets, including, for better or worse depending on your perspective, offshore.

So more touches, relatively less agents, and at a lower cost equals success right? If close enough is good enough for you, then declare victory. But if stopping in the middle of a mountain climb is not your idea of success, then this article about the dramatic amounts of cost and revenue being lost in modern contact centers will be of interest.

Show me the Money

A quick overview of drivers of cost and revenue in contact centers will help reveal where and how this money is being tied up.

At a high level, the total cost of contact centers is:

(Direct Labor x DL Rate) + (Indirect Labor x IDL Rate) + (Capital Expense X CE Rate) + (Other) = Total Cost of Call Center

Now, of course, there is no one rate for Direct Labor, Indirect Labor and certainly not for Capital Expenses, but this rate idea is just there to highlight that costs are affected by those rates.

And this is in fact what businesses have done to reduce their call center costs. They have moved to lower cost labor markets. There used to be call centers in Silicon Valley and New York and Boston, but not anymore as the real estate and labor costs are too high. So now you find call centers in more rural areas of the US and even offshore to further reduce the costs. Can we continue to reduce those labor and real estate rates, yes, but as other parts of the world become more developed the rate of rate reduction is rapidly diminishing.

So that leaves the amount of direct labor, the amount of indirect labor, the amount of Capital Expense, and Other. What drives them?

As you will soon see, direct Labor is the biggest piece, so let’s start there.

Direct Labor

As an absolute number, the amount of direct labor is the biggest bucket of cost. At a conceptual level, the amount of direct labor you need is a function of Call Volume, Handle Time, Service Levels, and Shrinkage (Time Not Spent on the Phone). Let’s take each in turn.

Call Volume. This is one of the two big drivers. In general, if the call volume increases you need more agents to handle it. Your call volume could double because your revenue is doubling. This might not be so bad. However, your call volume could double because there are problems with your product or service. This will be expensive.

Handle Time. The second big driver is Average Handle Time. If the AHT per call is 10 mins, you will need a lot more direct labor than if the AHT is 1 minute.

Service Levels. If you want to answer 95% of your phone calls in under 30 seconds, you will need more agents to be waiting around in case the call volume spikes. If you decide answering 95% of your calls in less than five minutes is good enough, you will need less.

Shrinkage. If all your agents never leave their desks and you got 8 full hours of productivity out of each of them, you would not need as many agents. But they have to have breaks and lunches so you need more. In addition, there is the time they are off the phone for training and meetings and other call center functions. The more off phone time, then the more agents you will need.

Indirect Labor is all the people in the call center that are not on the phones: Coaches, Subject Matter Experts, trainers, monitors, IT personnel, etc. Capital Expense is all the technology used in the call center, and sometimes real estate. Generally anything that is depreciated.

Now lest this begin to get too complex, the good news is that the big driver of Indirect Labor and Capital Expense for Call Centers is the amount of Direct Labor. While not the whole story, the more people on the phones the more coaches that are needed, the more monitors, the more desks and computers, the more software licenses, etc.

We are left with one rather non-descript bucket: Other. The other bucket has important cost drivers that can be more challenging to quantify, but are important to look at. Here are some of the biggest.

The Effects of Poor Call Center Performance. We could get really theoretical here and try to quantify how poor service agent performance affects Customer Loyalty, share of wallet, decision to renew, etc. This is important and should absolutely not be overlooked, but we want to be more concrete in this article.

One effect of call center performance that adds up quickly is sales rate. Let’s say the upsell rate in a call center averages $5 a call. Not bad. What if you find out that the agents are trying to upsell on only 20% of the calls? That is a lot of money being left on the table.

Another quantifiable aspect of poor call center performance are any costs incurred anywhere in the company when the contact center makes a mistake. A common example is warranty processing. What if the agent does not check the warranty and the customer sends the unit in to be fixed and it is not under warranty? What if the agent does not check the customer’s address and the goods are sent to the wrong location and have to be resent internally? What if the agent does not remind the customer to remove their software before returning the console and the customer writes to complain and employees have to spend time working that issue?

Turnover. Turnover is a huge driver of seen and unseen cost. The part that is easy to see is that if I have a lot of turnover, I need more indirect labor to hire and train them and they spend a lot of time off the phone getting coached. The part that is hard to see is that, in general, the more inexperienced my agents are, the slower they are and the more mistakes they make. High turnover centers are much more expensive to run than low turnover centers.

Fines. Some call centers have to pay fines due to non-compliance. This can be true of any call center, but it is especially true of outsourcers. Outsourcers often pay fines to their clients for a failure to perform all the call steps correctly, especially recapping the call.

Over the next few posts, I will describe specific ways to attack each bucket.

Friday, September 23, 2011

On Twitter

I am not sure why it took me so long, nor why I decided to sign up, but you can follow me on Twitter at: DennisAtKombea.

Also, I am about to begin a long series of posts...all under the title of The Unturned Stone...about the slacked-jawed amounts of money corporations are leaving on the table because the call centers they run and outsource to are so staggeringly inefficient.

Stay tuned...