The IVR Fallacy – It Doesn’t Save You Money

Monday, May 11, 2009 by Tripp Babbitt
I read them all this past weekend.  Technology to the rescue!  We (tech firm) have an IVR systems that is bigger and better than the rest!  Our IVR system will save you time and money!  Everybody uses IVR, you would be stupid not to use this technology!  The conventional wisdom is the IVR!  But we are in need of a shepherd, not sheep!

So why am I the one guy (other than my Vanguard Partners) saying that the IVR is typically a waste of money and worse . . . a customer satisfaction killer?  The IVR is really just a self service "sort and batch" front-end system built off of a functional design (scientific management theory – read more on this here).  This functional separation gives us tremendous opportunities to improve by replacing it by designing against demand.  However, it would be wrong to simply turn-off the IVR system (similar to mistakes made by by manufacturers in 1980s by stopping inspection when W. Edwards Deming said "Cease reliance on inspection").  The IVR system was built on existing management paradigms regarding work with the aim to increase productivity.  Human Facts International says that "shaving a second off the phone time could save organizations hundreds of thousands or even millions of dollars a year" . . . all I can say is stupid is as stupid does.

In a management paradox, this productivity mindset leads to the thought that saving time on the phone is the end game. It is not.  To lower costs we have to change our thinking from a productivity mindset to a systems thinking one.  Meaning understanding where costs come from to achieve business improvement and designing out the waste.

So, what should be done to achieve a better way?  The process of designing out needs to start with an understanding of the nature of demand.  This means an understanding of the type and frequency of demand from customers.  This will lead to understanding demand as value (calls we want) and failure (calls we don’t want), failure demand offers huge areas of possibilities for improvement and represents between 25% and 75% of all phone calls.  As opposed to the productivity mindset of reducing "a second from talk time" part of the redesign involves eliminating failure demand which represents a larger opportunity to improve.  Over and over again do I see call center management focus on the wrong measures, creating increased costs and customer dissatisfaction.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  He is focused on exposing the problems of command and control thinking and the termination of bad service through application of new thinking . . . systems thinking.  Download free 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

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