Outsourcing Call Centers
- June 28th, 2009
- Posted in Outsourcing . Systems Thinking Concepts . Systems Thinking and Contact Centers
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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.
Hi Tripp: Hope you mean you can take it. Though we consistently agree on what makes call centers better, we are at opposite ends of the spectrum on outsourcing: There are many reasons I don’t like the idea of calls centers being outsourced, so let’s outline the reasons why. 1. 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. 1. Non issue – Customers don’t care if you are getting a paycheck directly from the client or not. They care if their issue is resolved professionally and in a timely fashion. Your brand is no more exposed by an outsourcer than it is by a direct employee. (yes, plenty of data to support that from well-managed BPO relationships) 2. 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. 1. Don’t outsource waste – Repeat calls are not the fault of call center service providers (In or Out sourced). They are the fault of mis-management and poor communication. 3. 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. 1. Mis-focused objectives hinder flow – Again, not something specific to outsource relationships, but an overall miss for those managing customer care. 4. 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. 1. Failure to properly focus and let go – Outsourcing contracts do not have to have SLA’s like this. Right now the primary SLA of one of my contracts is Issue Resolution with bonuses for reduction in transfer rates and first call resolution. The client still has a few lone gunmen out there that want to manage AHT and staffing, but for the most part, you can’t get better than that. You get paid per call. You get more volume of calls by Issue resolution, measured by a 3rd party. It can be done, and the vendors are outperforming the internals. 5. 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. 1. Again a non customercentric metric for the example – Just because optimization of one piece “usually” leads does not mean it has to. Again, focus the statement of work on the right metrics and you aren’t taking a risk – your taking a step towards improvement. 6. 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. 1. You totally lose me here – Communication is definitely the name of the game. Communication that improves performance can just as easily be shared in an outsource relationship. There is some hesitance on the vendor’s side if you are using multiple BPO’s – no one wants to share their secret weapons with the competition – but that can also be managed. As a client you normally have a right to know how objectives are achieved. Vendors don’t’ tell clients “no” when it comes to disclosure. It’s a sure way to sour the relationship. (tripp->)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. (JIm->)I urge any organization that wants to ensure calls are handled effectively to understand their customer’s needs, put the right metrics in place and get the calls answered in the organization that best meets the customer’s needs. That does not preclude outsourcing with the right vendors.
Jim: Thank you for your comment. Branding – Customers care about getting value. When they can’t they leave whether an outsourced organization or not. A systems thinking organization outsourcing vendor can add value to help enable the entire system. I have not found an organization in the US that is capable of this level of service as they don’t understand the principles of systems thinking. Outsourcing Waste – Repeat calls certainly can be the fault of the vendor. Depends on what is outsourced. A screwed-up order could have begun in the call center and driven repeat calls. Regardless, having a outsourced vendor only adds to the communication problems and mis-management if that is the problem. The issue here is that we are not dealing with customer demand end-to-end, we are dealing with customer demand function-by-function. If failure demand is ignored and outsourced no one is working on the real problem . . . the ability to provide good service at low cost. Blaming the company doing the outsourcing as their communication and management problem doesn’t make things better. Costs are not in transactions, they are in the flow – I agree this is an overall miss, but why would I want to outsource my waste when I my own management is poor. This is a poor reason to outsource. SLAs – Look at all the third party verification and contract that add cost to the relationship. Monitoring and inspection come with a cost in the way you describe. Getting a bonus for issue resolution is “mis-guided”. Preventing the issue from presenting itself in the first place should be the focus. More issues, more reward seems to only perpetuate the bad system in place. Just because you reduce the transfer rates and increase FCR does not mean that you should have had the problem in the first place. SLAs are function-by-function and not end-to-end. Non-core competencies are part of the system. – I do not see any contracts built end-to-end, as outsource vendors only want to contract for what they can control. What they can control is a function, like a call center. You are correct it doesn’t have to, but it does. We are all Tayloristic, scientific management theory beings that is part of our mindset. Optimizing each piece leads to poor synthesis (improving the whole) at a minmum and usually much waste is prevalent. 6. Loss of innovation and feedback loops. – It goes well beyond communication. I can become very good at communicating failure demand and still not actually fix anything. I find that finding out “what matters” to the customer is an important part of call centers activities and can provide feedback to improve the system or provide new services. Closing statement – There is only one customer in any system and the customer in your scenario is the outsourcing customer, but it is really the outsourcing customer’s customer that needs to be the focus of the system and the improvement of it. My challenge to outsourcing vendors is this . . . you need to know how to optimize a system and not a function (this case call center). There are no vendors I have found in the US that understand this. The loss for not understanding how to optimize a system is costing us billions of dollars in public and private sector. Until we understand that costs are in the flow and not in the transactions, waste will continue and multiply. Regards, Tripp
Owning a call center company should require some abilities of an agent to handle customer’s concern. Problems do encounter but it depends on the agent on how to resolve it.