Let’s assume that we already have a call center, as opposed to the question of whether we need a call center (different blog).  In command and control thinking organizations they see an expense of $s for personnel or $s per transaction and say if I outsource this to India, Philippines, etc. (doesn’t really matter where) I will save 50 to 75% of my per head costs.  Call center management or some executive thinks “I would be an idiot not to reduce these costs on my financials.  After all, I want to hit that performance target  and get that bonus to take the wife and kids to Disney this year.”  OK, I have embellished a little here, but I promise I am not far from the truth.

This argument is plausible to the command and control thinker.  What they don’t consider is looking at their organization as a system.  Scientific management theory is the root of this thinking where we have the functional separation of work to optimize production.  Economies of scale for that function.  Taiichi Ohno and W. Edwards Deming taught a better way Ohno to thinking in terms of economies of flow and Deming in terms of viewing an organization as a system.  By optimizing one part we stand the chance of sub-optimizing the whole (and usually do) with command and control thinking.

Further, what no one accounts for is failure demand that call centers receive from customers.  These are the number of phone calls that a call center receives because of a failure to do something, chase calls, errors, etc.  This failure demand accounts for between 25 and 75% of all calls into a call center (and if you are in the public sector even higher).  Essentially by outsourcing call centers we wind up outsourcing our failure demand or waste. Locking in the costs that can’t be seen by the command and control thinker.  Also, we lose our feedback loop to help optimize economies of flow which usually leads to finger pointing between the outsource vendor and it’s customers.

Wrong metrics are used in outsourcing.  Outsource vendors talk about their functional measures like talk time, abandon rate, etc that appeal to command and control thinkers without considering broader system measures.  In one bank, talk time was reduced at the expense of additional failure demand making customer service worse.  We can take more calls by reducing talk time, but in a management paradox increase failure demand leading to more calls and escalations.

You also have to deal with additional costs to manage a contract with the outsource vendor, sometimes hiring someone to help with this, SLAs, performance metrics and a slew of seldom talked about costs.

We live in an outsourced world, but service organizations need to run their organizations as systems as Deming outlined and have consideration for economies of flow.  In addition, technology has enabled our ability to outsource . . . at great cost to service organizations.  Failure to recognize these aspects leads to increased costs and poor service.

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 management 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 www.twitter.com/TriBabbitt.