By Eric Miller
In the highly competitive market of outsourced call centers, the ability to differentiate from the pack and provide an exemplary level of service is critical to success – particularly in today’s difficult economic times. Convincing the client to outsource is the half of the challenge; selling them on your operation is the second mountain to climb.
The initial decision to outsource is often first met with the concern of loss of control. After all, “how can anyone know our clients and what they need as well as us?” Or “our business is based on our quality and responsiveness, how can we ensure these levels of service in an outsourced environment?” Clearly, the reputation of your operation is invaluable in overcoming these cultural hurdles. Also, convincing clients that you know their customer and customer behavior and needs as well as they do, if not better, is critical in getting them to select your center.
While the initial scrutiny may focus on quality, the discussion quickly changes to dollars with the client negotiating for the highest levels of service at the lowest cost. Since your call center profit is highly dependent upon an acceptable margin, how do you price effectively to remain competitive without whittling away at your bottom line?
The Challenge: Exemplary Service, Maximum Margins: These appear to be two opposing goals. If you focus on improving levels of services, isn’t that going to mean a higher cost of doing business with more investment in people and technology? It won’t if you have the facts to work with – the operational facts, that is.
Unless you know the operational costs and efficiencies down to the minute detail, you’re essentially flying blind. In the past, technology has been viewed as the cure-all for operational inefficiencies. The concept was simple: invest in technology to do more with less people, thereby achieving tremendous returns on technology investments. That may have been true in the past when there were manual tasks crying for automation. Although, now that you’ve streamlined the obvious jobs, how can you make the technology decisions that give you the biggest bang for your dollar while balancing service and cost?
The answer comes in selecting the right technologies and implementing them in the most effective manner. In order to accomplish this, you need to know your operational facts – process, cost, time, and impact of change – in detail.
Defining your Outsourcing Value: Operational Cost Modeling: Knowing the call center operation to the point where you can predict the impact of any change in manpower, call volumes, or call characteristics is the challenge. When a new client comes aboard, how do you effectively handle the increased call volume while maintaining or improving your margins? Once the client is on board, the expectations set in the sales process now have to be met at virtually any cost. The balancing act comes in ensuring that the “at any cost” is “at minimal cost” to you in order to squeeze out the greatest margin while delivering the promised levels of service.
When change to the operation occurs, what are the cost impacts? What are the service level impacts? How can you get ahead of the curve and plan for the changes in order to be pro-active rather than reactive? Operational excellence is critical and only possible by modeling the operation and applying ‘what if’ scenarios to predict and plan for all conceivable situations.
If you don’t already have an operational cost model in place, where do you begin? Simply start with the information you have and commit to collecting (and continuing to collect) the rest going forward. You may already have call volumes, abandonment rates, average speed of answer, and average call time. But do you know the characteristics of the call? Which calls remain in voice mail or IVR? And which go to the agents? Would a simple change in process keep more calls in voice mail? It’s a fine balance that should be continually monitored to ensure maximum productivity and service levels at a minimal cost.
Operational Cost Modeling: An Ongoing Process: Operational cost modeling is not a one-time event, but rather an iterative process that continues to be refined over time until you have a finely tuned model of your operation. Any change to the operation can then be applied to the model and the impact on cost, time, manpower requirements, and service levels can be accurately predicted. Start with the information you currently have available and begin collecting the rest.
When it comes to deciding on an investment in technology, the operational cost model enables you to accurately predict the impact of the technology on the operation’s efficiencies and costs. The ability of playing the “what if” scenario to determine the impact of one technology over the other, or automating one function over the other allows you to make more informed IT investments and essentially get more from your precious technology dollar.
It’s not as complicated as it may sound. Operational cost modeling is more an ongoing commitment to capture operational facts than it is a commitment to a major project requiring resources, time, and dollars. Also, there is no need to get caught in the unproductive ‘analysis paralysis’. The information you collect doesn’t have to be perfect, just accurate enough to be representative of your call center operation. Certainly if you’re just starting out collecting the operational facts, the model won’t be as complete and accurate as if you’d been collecting and tracking for years.
If there’s a hard part to operational cost modeling, it’s in getting started. But, you have to start sometime. Rome wasn’t built in a day and neither is an operational cost model. As the operational cost model evolves over time, any impact or change to the operation can be easily incorporated into the model with effects to the operation accurately forecasted: wait time, abandonment, call time, percent to agents, and percent to self-service,
Just start the process, follow these steps: commit, collect, track, forecast, evaluate, modify, and repeat:
Armed with Knowledge: With operational cost modeling in place (and continuously being refined over time), you now have the information and facts to achieve operational excellence at maximum margins. You’ll know the cost to service each type of call and you’ll be able to predict caller behaviors and mix of calls.
Armed with this knowledge, the benefits of an operational cost model translate into benefits in the sales effort. If you know your cost of doing business and have facts that support your levels of services, you can use the operational cost model as a sales tool to demonstrate and support your value proposition to the prospect. By analyzing the prospect’s call volumes and predicting call types and caller characteristics, your ability to anticipate the impact on your operation becomes an educated analysis based on historical fact rather than a guessing game, hoping for the best.
Your sales approach becomes a consultative effort that further differentiates you from your competitor. You know your operation, have the facts to back it up, and can demonstrate consistency and predictability in service and costs. After all, isn’t that what your prospect is looking for when considering your call center?
The Bottom Line: In the world of outsourced call centers, you have to live with the margins. There is continuous competitive pressure to squeeze the margin to a minimum. Armed with the facts of your operational excellence and the knowledge of your costs for doing business can only help your competitive position and protect the all-important profit margin.
Eric Miller is a senior principal with Highpoint Partners, LLC. An industry expert in operations management, Eric specializes in technology-related cost benefit analysis. He may be reached at email@example.com.
[From Connection Magazine – July/Aug 2002]