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Outsourcing Call Centers

There are many reasons I don’t like the idea of calls centers being outsourced, so let’s outline the reasons why.

Branding.  Customers see your organization through who they come in contact with and organizations reducing costs fail to realize that can have a big effect.  Dell is probably the best recent example, the outsourcing has cost their brand dearly.  As a former Dell customer I was always frustrated with dealing with customer service.
Outsourcing Waste.  Probably my largest objection and originally pointed out to me by my Vanguard partners (UK).  Call centers have a large percentage of failure demand 25% to 75% of all calls.  These are calls that are problems, call backs from incomplete answers, follow-ups, missed appointments, etc.  If we eliminated this type of demand we would have fewer calls and happier customers.  Companies need to eliminate this failure demand before outsourcing call centers.  Otherwise we lock in the cost of the waste.
Costs are not in transactions, they are in the flow.  Most people see transaction costs go down with outsourcing . . . true.  What they fail to see is not only the failure demand they are outsourcing are costly, but that the customer sees service end-to-end and not by function.  Too often already bad flow (end-to-end or systemic flow) is outsourced increasing the number of transactions at great cost.  You see cost savings are not gained through economies of scale, but through economies of flow.
Failure to see that SLAs, inspection and monitoring are costs that rise in outsourcing.  Outsourcing contracts become full of SLAs that have little or no relation to the customer experience, as vendors seek measures that they can “control.”  These metrics are never representative of the end-to-end metrics customers seek.  SLAs are by function not the end-to-end as they become too difficult for the outsourcing vendor.  Someone can very well be hitting the SLA for their outsourced call center while overall costs increase and customer service deteriorates.  Inspection and monitoring increases as the service deteriorates and costs continue to escalate.
Even non-core competencies are part of your system.  An argument I hear often is that call centers are not part of the companies core competency.  Other than the branding argument, being a specialist in a function can be a big disaster.  We live the belief that optimizing a piece optimizes the whole . . . it does not.  It is how all the components of the system work together is where cost savings come from.  The optimization of one piece usually leads to sub-optimization of other parts of the system.  Example, I can reduce handle time by not getting all the information needed to transact business causing chaos in the rest of the system with errors and more calls.
Loss of innovation and feedback loops.  Innovation leadership comes from the ability to leverage all parts of the system to optimize the whole.  The front-line worker (call center) has the best ears to hear opportunities to improve service and/or product.  Tied down with SLAs, scripts, monitoring, etc. inhibits the front-line as their purpose becomes to meet the target and not the customer needs.  Feedback that helps optimize the system are usually targeted to optimize the function and systemic feedback is lost.
I urge any organization that is considering outsourcing to look first at their own system and understand the what and why of current performance before outsourcing.  If you have already outsourced or you are an outsourcing vendor I urge you to find ways to work together to optimize the system.  This will require new thinking in your outsourcing strategy for call centers.  We often find in working with call center management ways to optimize the system before outsourcing through business improvement . . . and for outsourcing vendors there are better ways to partner.  There is much at stake because if the outsourcer dies the outsourcing company stands to die with it.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Bryce Harrison, Inc.
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