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CIS: April 29, 2009 eNewsLetter
April 29, 2009

Improving Bottom Line Performance through Precision Forecasting and Scheduling

By TMCnet Special Guest
Kevin Hegebarth, GMT Corporation

The refrain is common: We need to adhere to our targeted service levels…but at the same time, we also need to keep staffing costs down. Whether in a contact center or bank branch environment, workforce managers everywhere face the constant challenge of balancing the yin and yang priorities of service levels and labor costs. This is especially true in today’s economic environment where inaccurate forecasts can lead to poor scheduling decisions and can have dramatic impact on bottom line profitability.

 
Workforce management (WFM) software has long been used to match demand in the form of calls, e-mails, web chats and other agent work with supply in the form of the agents themselves. Regardless of the sophistication of the WFM tool or processes, the foundation of optimizing staffing levels lies in the precision of the forecasting engine.
More precise forecasting is a classic win-win scenario, enabling managers to more closely align demand and supply resulting in optimal cost and profit
performance.
 
The laws of supply and demand Introductory economics classes taught many of the basic laws of supply and demand. Where demand is greater than supply, prices rise. When demand falls to the point where supply is greater than demand, process fall. It’s a bit of an oversimplification, but a similar phenomenon occurs in today’s contact centers.
 
When demand (inbound calls, outbound calls, e-mails, web chats, etc.) is greater than supply (the agents themselves), the price, in the form of reduced service levels, falling customer satisfaction and poor agent morale, rises. When supply is greater than demand, service levels tend to improve, but at the cost of idle and unproductive agents.
 
The key to optimizing the bottom line performance of your contact center is to find a harmonious balance between supply and demand. This bottom line performance is directly impacted by the direct costs of hiring and employing your agents, but it also influenced by client satisfaction, agent morale and other factors.
 
The Importance of Precision Forecasting

Let’s start by drawing a distinction between “forecast accuracy” and “precision forecasting” as they are not interchangeable terms. Very simply, forecast accuracy can be defined to be the difference between the amount of work per time period projected to be presented and the amount of work that is actually presented. In a real world environment, this work may be inbound calls, outbound calls, e-mails, web chats, etc. In the interest of simplicity, we’ll just call these “calls.”
 
Many vendors advertise their forecast accuracy and many customers use this metric as part of their buying criteria when evaluating commercial WFM systems. However, forecast accuracy is only one component in the precision forecasting equation, albeit an important one. Another factor is how configurable the forecasting engine is to account for changing conditions.
 
By example, a linear forecast is one that says just as many calls will be presented today as were presented yesterday. This is as unrealistic as it is oversimplified.
 
Many factors affect the demand presented to the average contact center. The number of factors can be virtually unlimited, but can include regular events like: day of week (volumes may be higher on Mondays than they are on Wednesdays); day of month (volumes may be higher on the 1st, 15th or 30th); or season (holidays, anyone?).
 
For many contact centers, however, being able to create forecasts based on regular events by themselves is not enough.
 
A catalog retailer, for example, would need the flexibility to forecast the increase in calls soon after a catalog drop. An entertainment ticketing company would need the ability to predict the demand that might generated when tickets go on sale for a leading musical act. A public safety agency would need a forecast that accounts for an increase in calls as a result of a major convention or sporting event. You get the idea.
 
Campaign forecasting provides the ability to include those non-recurring or irregular events in the creation of a forecast. When coupled with the ability to account for the effects of regular events, the contact center now has a very powerful, flexible tool to create very precise forecasts. Other factors that can affect the forecast include variations in the volumes of the types of calls offered, average handle time for each type, and abandon rates.
 
Here’s where the metric of forecast accuracy becomes meaningful. One way to look at forecast accuracy is it provides a level of confidence as to how well the actual call volume will match the projections. Many times, inaccurate forecasts are a product of not fully appreciating the impact of these regular or nonrecurring events.
 
Completing the Balance: Scheduling the Rght agents
 
Now that a precise forecast has been developed, we shift our attention to the supply side of the equation – the agents. In an ideal world, there would always be enough of the properly skilled agents to handle each call as it arrived to satisfy service level, customer satisfaction, cost and revenue objectives. However, as we all know, the contact center is rarely, if ever, a perfect world.
 
To state the obvious, every agent is different. They have different skills, competencies, proficiencies and schedule preferences. In addition, myriad external factors affect an agent’s ability to perform well.
 
Completing the balance means creating schedules that match the right agents to the projected work based on these factors.
 
Relatively speaking, creating the initial schedule is fairly easy and most of the commercial WFM products do it pretty well. It’s when agents start calling in sick, or call volumes are different than what was forecasted, or agents leave and return from meals and breaks early or late that the real fun begins.
 
The best scheduling plan is not one that is set in stone. Rather it is one that can be easily adjusted by workforce analysts and supervisors who are close to the action.
 
Powerful process automation wizards can make this job much easier. Say an agent calls in sick or is going to be late for their shift. A couple of simple keystrokes in a wizard can note the agent’s disposition and immediately identify potential replacements based on user-defined factors. For those agents calling in sick, this wizard can also identify whether or not that agent had previously requested time off for that day that had been rejected.
 
This is not only a powerful and efficient scheduling tool; it also helps identify agent coaching opportunities. Intraday management, the real-time shifting of agent schedules in the heat of battle, if you will, is also made much easier through process automation wizards and drag-and-drop user interfaces. Extending, or shortening an agent’s schedule is easily accomplished in this manner. Advanced WFM systems will also provide immediate feedback regarding impact to service levels, workload fit (the relative balance between supply and demand) and agent costs.
 
Three Key Take-Aways...
 
  • Use recurring and non-recurring events to create a precision forecast. Forecasting best practices suggest that more accurate forecasts will result enabling more effective scheduling.
  •  Be prepared for frequent changes to your staffing plan. Agents call in sick, will be late, will need to leave early, won’t leave or return from meals and breaks on time for a variety of reasons. Streamline the schedule change process to reduce administrative overhead (and associated costs!) and ensure key metrics continue to be met.
  • Consider your over-staffing and under-staffing impacts independently. Have a keen understanding of what factors drive the business. If customer satisfaction is “Job 1,” some overstaffing may be desirable, even if it results in increased agent costs. If revenue generation and profit maximization is most important, then understaffing may be desirable.
 
Too much. Too little. Just right!
In most high-performing contact centers, the two key metrics most closely watched by management are targeted Service Levels and operating budget (commonly up to 90% in labor costs). Given differences in business priorities and resources, each organization needs to analyze their unique situation to determine the right balance between these two competing needs.
 
When demand out paces supply (understaffed condition), callers wait longer for their calls to be answered, lowering service levels. This also had the collateral effect of reducing customer satisfaction and potentially negatively impacting customer retention.
 
In virtually every contact center environment, customers represent the revenue side of the profit equation. At the risk of stating the obvious, lost customers means lost revenues. Another unintended consequence is poor agent morale leading to increased agent attrition.
 
When supply outpaces demand (overstaffed condition), agents are idle and non-productive. Service levels may be high; customers may be delighted; but money is essentially wasted due to these idle agents. Agent salaries represent the lion’s share of the variable cost component in a contact center. Optimizing these costs has a direct and positive impact on profits. This is especially true in today’s tightening economy.
 
Like a seesaw, the operation of the average contact center oscillates between these two conditions. With the precision forecasting and powerful, flexible scheduling capabilities of many advanced WFM solutions, these oscillations can be minimized (but not entirely eliminated), creating a profitable, harmonious balance between supply and demand.
 

TMCnet publishes expert commentary on various telecommunications, IT, call center, CRM and other technology-related topics. Are you an expert in one of these fields, and interested in having your perspective published on a site that gets several million unique visitors each month? Get in touch.

Edited by Tim Gray

(source: http://www.tmcnet.com/channels/call-center-workforce-management/articles/55214-improving-bottom-line-performance-through-precision-forecasting-scheduling.htm)

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