Outsourced Call Centers: Friend or Foe?

Cost pressures and a lack of specialized skills to manage a large workforce have driven many telecom and cable companies to outsource and offshore their call centers aggressively. Too often, the benefits have come at the expense of poor customer experience and increased churn.

Companies are quick to point fingers at their suppliers, blaming the poor customer experience on a lack of agent training, accent issues or inadequate agent incentives. As a result, they often end up meddling with the supplier’s day-to-day operations. More likely, however, the root cause lies in how the relationship with suppliers is set up to begin with.

Companies need to pull back and allow call center suppliers to run their businesses. The question is how to step away while also ensuring that suppliers deliver a high-quality service. One key is to take a fresh look at the commercial construct that determines how you compensate your suppliers. Applying a few simple principles to your commercial construct can dramatically improve outcomes.

Get the revenue, service and cost balance right. Commercial models must balance all three strategic dimensions—revenue, service and cost. The balance varies, depending on corporate priorities and the nature of different call types. For example, incentives for a sales call should emphasize revenues over costs, while for a technical support call should place a greater emphasis on service. Seems simple, but it can get challenging when you’re juggling hundreds of queues. One approach is to create buckets for similar call types. At a high level, these might include outbound sales, inbound sales, customer service, credit and collections, and back office. Once you agree on the priorities, you can start drilling down into more detail.

Understand the tradeoffsamong different approaches. Companies will generally develop a commercial model by breaking it up into its basic components: unit rate, key performance indicators (KPIs), incentives and targets. There is no perfect approach; each has its own tradeoffs. For example, a “cost per call” unit rate drives suppliers to end calls quickly without resolving the customer’s question, and must be managed by KPIs such as first call resolution. On the other hand, “cost per minute” encourages suppliers to spend more time with the customer, but may increase handle times. We find that for mature, complex call center operations a “cost per minute” framework is more effective for protecting the customer experience and reducing downstream costs resulting from low resolution and high transfer rates. Either way, incentives need to be meaningful enough to counterbalance the natural tendencies created by the unit rate.

Keep it simpleand easy to manage. Companies fall in the trap of creating multiple commercial models to manage different call types, or adding performance measures to manage day-to-day headaches. Managers often fail to prioritize or distinguish operational KPIs from strategic KPIs, resulting in a proliferation of “dumb performance indicators.” We frequently see cases in which companies are managing more than 10 KPIs for individual call types; often they overlap, are unnecessary or cannot be measured properly. The result is needless complexity, which drives higher administrative costs, confuses the supplier and ultimately hurts performance.

Focus onoutcomes, not inputs. Companies can easily get in the habit of micromanaging suppliers, particularly when they focus on metrics that have little bearing on whether the supplier is meeting key business objectives. For example, companies may hold the supplier accountable for the number of agents on the floor, when wait times are tied more closely to the customer experience. Such measures may be key to running a call center, but are none of your business in an outsourced environment.

Set realistic targetswith real upside (and downside) potential. Companies often set unattainable targets or continually “move the goalpost” as a way of controlling their budgets. “Budgeting to penalize” sets a dangerous precedent, leading suppliers to pad their rates to avoid a hit on their margins. It is also misguided; paying an extra 20 percent bonus to a supplier may hurt the budget in the short term but can dramatically improve the bottom line. Companies often focus on the costs of serving customers, but losing customers through poor service can cost the business many times more in the long run.

Recently, companies have sought to change the paradigm, tying remuneration clearly to the bottom line while increasing the supplier’s accountability for managing the customer relationship. Outcome-based approaches offer a powerful means of transforming the supplier into a true partner and reducing the need to manage intermediary issues like call length or volumes. These models tend to work well when suppliers share accountability for the customer experience, but need careful consideration, particularly in a multi-supplier environment.

Commercial models are a powerful tool to encourage suppliers to perform at their best. The “right” model may exist as a snapshot in time, but companies may need to reevaluate their approach to supplier compensation along with their call center portfolios every two or three years. As they do this, companies will benefit from a keep-it-simple approach that balances strategic priorities and focuses on outcomes, not inputs. Applying a systematic approach that addresses all elements of the commercial construct in an integrated way will help companies get the most out of their suppliers.

Authors:
Alex Liu is a partner at A.T. Kearney and leads the firm’s communications, media and technology practice in North America. Reach him at Alex.liu@atkearney.com.
Rashid Ahmed is an associate at A.T. Kearney and can be reached at rashid.ahmed@atkearney.com
Raghu Viswanathan is a manager at A.T. Kearney and can be reached at raghu.viswanathan@atkearney.com