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Reducing resource cost
Module 3 of a 5 part series on cost control
Background
Part 3 in this series on cost control addresses the second of three components to call center costs: resource cost. Specific recommendations are made for systematically reducing resource costs in your contact center. The descriptions and action steps described below are summaries of the detailed information and checklists provided in the Cost Control Toolkit.
Reducing resource costs
Reducing the cost of resources includes three primary areas that relate to the cost of people, equipment or facilities necessary to handle customer contacts. The major branches include:
lower cost channels
agent payroll costs
overhead costs
Area 1 - Drive volume to lower cost channels
Driving contact volume to lower cost channels is one of the most effective ways of reducing the cost of resources. Methods to direct volume to lower cost channels include:
Implement voice response system for automated routing
Implement voice response system for self-service
Implement web-based self-service
Provide incentives to use lower cost media
Outsource to lower cost center
Enable email as a contact channel
Implement voice response system for automated routing
Voice response systems (also called VRU or IVR) enables customers to listen to menu options and make a selection based on why they are calling. This functionality replaces human operators who would perform a similar function. The cost of performing a routing or transfer function with a VRU application is a fraction of the cost compared to human operators.
Implement voice response system for self-service
Voice response systems (also referred to as VRU or IVR systems) are automated systems that can be used to provide answers to many types of customer inquiries and redirect the call volume from live agents to lower cost IVR applications. IVR self-service applications are used in nearly every industry today for everything from banking transactions to status requests.
Implement web-based self-service
Internet self-service is the general term used to refer to any type of web-based service that may avoid a telephone call to a live agent. These services could range from simple information presented about the company's products or services to complex search and troubleshooting applications to solve technical problems. Today's call centers typically do not control the website for their company.
Provide incentives to use lower cost media
Using customer incentives has been effective in redirecting call volume to lower cost channels. Incentives are usually financial (e.g. making it cheaper to buy over the internet then by talking with an agent over the telephone). These type of incentive programs result from a financial analysis of the cost of providing the service via each media, and offering a fraction of the savings for lower cost channels to the customer.
Outsource to lower cost center
Outsourcing all or part of your call center contacts to an outside vendor may result in lower costs to handle some types of contacts. An analysis is required to compare your cost structure and cost per call minute with outsourcing vendors. It is also possible to outsource only a fraction to the total call volume during busy periods to avoid staffing based on peak calling periods. The Outsourcing Toolkit provides a process and supporting resources for making a successful outsourcing arrangement.
Enable email as a contact channel
Email is the most commonly used technology application for customer contact as an alternate to voice calls. Email contact channels must be developed carefully to avoid adverse affects for the call center. In email contact channels with long response times, customers may also telephone the call center resulting in twice the contacts per inquiry. First time resolution rate for email are typically lower than phone contacts since customers do not always provide the required information in the first email. This increase in average number of contacts to complete the inquiry potentially makes the total cost per inquiry higher even if the cost per each email contact is lower than a phone contact.
Area 2 - Reducing agent payroll costs
Reducing payroll costs is a more problematic area for cost reduction but should not be overlooked given that payroll costs make up 70% to 80% of the total costs for a majority of contact centers. In some cases, reducing payroll costs can be achieved without adverse affects on service quality or turnover. In other cases, there is a clear trade-off between cost and service quality. Methods for reducing agent payroll costs include:
Reduce hours of operation
Increase agent utilization
Reengineer contact handling processes to allow for lower payroll cost structure
Reduce base salary for new hires
Reduce staffing levels
Relocate or add center in lower labor cost area
Reduce benefit offerings
Reduce hours of operation
Although not a popular alternative from a customer service perspective, reducing the hours of call center operations directly reduces payroll costs. The historical trend has actually been in the other direction (to extend hours of operation to improve service access to customers). With the deployment of improved self-service options including new IVR and speech recognition technology and improved web services, call centers may be able to reduce hours of operation for live agents.
Increase agent utilization
Agent utilization rates are directly related to payroll costs. If agent utilization increases, then staffing levels decrease and payroll costs decrease. Agent utilization is defined here as the fraction of available work time that agents are handling customer contacts. Several options are available for increasing agent utilization. Some of these options may have adverse affects on your customers or employees and therefore must be evaluated carefully.
Reengineer contact handling processes to allow for lower payroll cost structure
If your contact center has multiple levels of agents based on knowledge and skill, then this strategy may reduce the cost of agent payroll. Essentially this strategy is designed to route contacts, based on contact type, to the lowest cost agent that can handle these contacts. The goal here is to reduce the staffing levels at higher paying job levels and increase the staffing levels at entry-level or lower paid job levels. You may be able to create a new job level and job description to handle some contact types. You could then hire new employees into this role at a lower base salary then existing employees.
Reduce base salary for new hires
Depending on your labor market and area conditions, reducing the base salary for new hires may be an option. This strategy may also be employed if significant investments have been made in new processes and technology such that lower-skilled or less-experienced employees are required to implement those new applications. Another alternative is to hire new part-time employees rather than full-time employees. In many cases part-time employees are less expensive than full time employees.
Reduce staffing levels
Reducing staffing levels is the most general area for reducing agent payroll costs and is often the result of other improvement initiatives. We address this area specifically and independently of other potential initiatives covered in this tutorial. The reason for this separate attention on reduced staffing levels is that call center managers always have the option of reducing staff and balancing the effects of this change with declining service levels and increased abandon rates.
Relocate or add center in lower labor cost area
Employee costs vary dramatically from region to region. Relocating or opening a second call center in a lower cost labor market area can greatly reduce labor costs. In some cases a satellite office can function as a second location. Future growth of the call center can then be evaluated to determine which call center operation offers the lowest cost structure.
Reduce benefit offerings
Reducing benefit offerings to employees or requiring employees to pick from benefit options with the requirement to pay for improved coverage reduces the cost per employee. This strategy has come to the forefront for many companies as the cost of health care continues to rise dramatically year over year.
Area 3 - Reducing overhead costs
Reducing overhead costs includes all cost elements other than direct agent cost. This would include cost elements such as facilities, management, toll and network costs, training, IT, human resources and any other support functions. Methods to reduce overhead costs include:
Reduce network and toll costs
Enable remote agents to reduce facility costs
Redesign facility usage or use shared workspace
Consolidate call centers
Reduce turnover
Increase supervisor span of control and reduce number of supervisors
Reduce cost of support services including training, HR, IT and quality
Reduce network and toll costs
Reducing network and toll costs, although only a fraction of the total call center budget, can have a significant impact over time. Contracts with long distance carriers and local telephone company for leased line should be reviewed on a regular basis to ensure the best possible prices and to do competitive comparisons. VoIP solutions can also drive down network costs as well as network management costs.
Enable remote agents to reduce facility costs
Enabling remote agents can reduce the required facility space and associated overhead costs for the facility. This option is applicable for call centers that are reaching their space capacity and looking for expansion alternatives, for call centers that may be planning to offer remote offices as an incentive for employees or for those hiring employees that reside in lower-cost labor market areas.
Redesign facility usage or use shared workspace
Facility redesign or utilizing shared workspace can increase the total capacity of the building. New furniture designs and call center layouts can also improve space utilization. As paper documentation in the typical call center decreases, the required amount of shelf space and total office space is declining.
Consolidate call centers
Consolidating call center operations can decrease redundant overhead costs often associated with multiple locations. This could include redundant HR, training, IT support, workforce scheduling and other support services for the call center. Call center consolidation can also increase agent utilization and capitalize on economies of scale.
Reduce turnover
Reducing employee turnover has a direct impact on several overhead components for the contact center including training and HR support for recruiting and hiring.
Increase supervisor span of control and reduce number of supervisors
The number of supervisors may be reduced if the span of control is increased. This directly reduces overhead cost related to agent supervision. However, increasing the span of control can have a negative impact on employee performance, job satisfactions and customer service levels if not properly implemented.
Reduce cost of support services including training, HR, IT and quality
Many contact centers evolve over time. The resulting overhead components such as IT, HR, training and quality grow with the call center. In many cases this growth is an evolutionary process in reaction to the current needs of the day. Over a period of time, these support services can be overly costly to the organization. New processes and alternative delivery mechanisms can result in much lower overhead costs for these services.
Coming next - reducing volume of contacts
Related Resources
About the toolkit:
Controlling the Cost of Call Center Operations provides a systematic approach to reducing your call center costs. With this toolkit, you will critically examine multiple channels for reducing expense. The outcome is a set of identified and prioritized cost saving initiatives that are most suited for your contact center. The toolkit includes worksheets and templates for reducing your costs and prioritizing your initiatives."A truly comprehensive guide for reducing call center costs.
A resource with this perspective is long overdue."Gerald Tschikof, Founder of Center Partners
Other resources:
Call center bookstore and reference library
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