November 2004

The Economics Of Looking For A New Call Center Home

By Penny Reynolds, The Call Center School

Most people think of site selection as something they need to consider only when opening up a new call center. However, call centers that operate in cities such as Phoenix or Dallas (both of which are saturated with call centers) may be losing qualified staff to other companies. They’re likely paying higher rent for space in these larger cities, and they are probably paying a higher wage rate as well, compared to those centers located in smaller towns.

Call centers are increasingly looking at the economics of moving to a new site to house their current operations. Over the last few years, we’ve seen an exodus from the lights of the big city to small towns where the call center is the employer of choice.

Now you may be asking, “Isn’t it expensive to move to a new place?” The answer is yes. There are significant costs involved in terms of relocation, severance packages for staff members who won’t be moving, recruiting and training costs all over again, and more. But if the savings are big enough in terms of labor (a call center’s biggest operational cost), you may find that relocation costs can be made up in a very short time.

Let’s look at an example of one call center that was tired of facing high turnover and of rising wage costs to stay competitive in a large city. The company didn’t really want to consider offshore options but were willing to go down the road a bit. It looked at relocating its call center operations about 90 miles away to a small town where no other call center operations existed. The cost in tradeoffs in each major cost category are listed in Table 1.

Relocation costs were quite steep: a cost of about $1.8 million to pick up and move. However, compared to the savings that would be generated in the first year alone, the move was easily justified. The company found it could hire the same skill-level employees for $16.25 per hour (fully loaded cost), compared with the $20.40 per hour it was currently paying — a savings of $4.15 an hour, or an annualized savings of over $2.5 million. This labor savings alone was big enough to justify the move. In addition, because of the lack of competition, the center estimated that it would lower turnover costs by 5 percent, which translates to another $67,500 savings annually. Real estate costs were also lower, yielding another $375,000 annual savings. Therefore, the net relocation savings in this scenario was over $1.7 million, with additional labor savings to be realized year after year.

In addition to better labor costs, another reason to consider a call center site review and potential relocation has to do with the chance to “start fresh” with the staffing plan. In a new site, creating new profiles for personnel may provide a better basis for recruiting staff members who better fit job requirements that have evolved over time. A new set of schedules may be better able to match the workforce to the workload than schedules “owned” by existing staff members — schedules that are now less effective from a service and cost perspective. The center must consider the loss of expertise that will result from relocation and new personnel, so the pure cost of training is not the complete picture. Regardless of size, type of center or existing location, every business should periodically review all the components of its call center operating costs to determine if there are economic benefits to locating its call center elsewhere.

Penny Reynolds is a founding partner of The Call Center School, a Nashville, Tennessee-based consulting and education company. She is the author of several call center management books, including Call Center Staffing ' The Complete, Practical Guide to Workforce Management. Contact her at [email protected] or call 615-812-8410.

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