June 1999

Probe Below The Surface For The Best

BY JOHN NASH, SOUTH CAROLINA DEPARTMENT OF COMMERCE

As business recruiters, we have come to view call centers as something of an anomaly. Why? The call center industry evaluates locations by a drastically different set of criteria than most other industries: market proximity is not an issue. Call centers do not require access to interstate highways or airports. They are not significant users of power or water. Their two basic requirements are affordable, reliable telecom service and an abundant source of labor.

In a way, this pared-down list of criteria simplifies the process for call centers looking for a new location. But there are still plenty of pitfalls. Here are a few factors to keep in mind when scouting for a new location.

Labor Availability
Labor is easily the most important item at the top of everyone's list. The need is especially acute for call centers because of the labor-intensive nature of their business.

The easy solution (but not always the correct one) is to locate your call center near a college campus or retirement community. Indeed, these may be adequate sources of labor for telemarketing operations and other outbound call centers, which require a deep labor pool to replenish a workforce that is constantly turning over. However, individuals available for hire in these communities may be completely unsuitable for service centers, back offices and inbound call centers, which depend on more permanent, knowledgeable people who are familiar with their products and services.

For a more "retainable" pool of workers, ask your site selection consultant to look for areas with erosion in their traditional industries. For example, the textile and apparel industries cut 54,000 jobs throughout the Southeast last year. Most of these people are long-time residents of their communities looking for a way - any way - to avoid having to relocate.

Look to second- and third-tier communities, especially rural ones. These areas tend to be labor-rich and generally have lower occupancy rates and telecommunication costs. Equally important, 100 jobs mean a great deal to a rural community.

Finally, look beyond the pool of the unemployed. The fact is, unemployment statistics paint a misleading picture of labor availability. For more than a year, South Carolina's unemployment rate has been below 4 percent, yet we still achieved a record-breaking number of business expansions last year. Where did businesses find the people to staff these expansions? In the ranks of the underemployed, those people currently making less than $10,000 a year.

Underemployed people bring a lot of benefits to the table. First, they tend to bring strong skills and well-developed work habits to their new jobs. Furthermore, they are looking to make the jump from job to career. This is important, because it means they are likely to be highly motivated and positive-minded employees.

Labor Quality
Everything your customer understands, thinks and feels about your business comes from the people who answer your phones. This is especially critical for inbound call centers, since these customers who call you often have a problem related to your product or service. The computer you sold them doesn't work. You billed them for something they didn't order. Their monthly payments have gone up since you bought their mortgage and they don't understand why.

These customers are at a critical juncture in their relationship with your company. When they hang up the phone, they will either be loyal customers or embittered ex-customers. At this point, the person who answers the phone has two jobs: to solve your customers' problems and to make them feel good about doing business with you.

The first part of the job can be achieved through training. Many states offer training, but there are important differences in what each offers. Some may provide telephone skills, but that is not enough. Look for a state that can customize the training as much as possible to your specific operation. If you sell computers, look for a state that will train your employees on how your computers work and how to solve problems, should they arise.

The second part - making your customers feel good about doing business with you - can also be achieved through training, but most of the job depends on your employees' attitudes and innate "people skills."

In the past, call centers preferred employees who spoke with unidentifiable accents, but that is changing. Some call center executives have discovered that a light Southern accent can convey a friendliness, politeness and empathy that goes a long way toward defusing and smoothing over problems with customers.

Incentives
Beware of one-time, out-of-pocket cash incentives. In general, a blank check may be tempting and may reduce your initial start-up costs, but it will do nothing to improve your long-term competitiveness. Furthermore, states that offer hefty cash incentives often do so to compensate for shortcomings elsewhere.

Instead, look for performance-based incentives - incentives that reward you as you grow, expand and create more jobs. The ultimate goal of these kinds of incentives is not so much to "land the deal" as to promote growth of the company once a site is chosen. In addition to reducing your long-term operating costs, these types of incentives also create a shared interest in the success and growth of your company. Given the labor-intensive nature of call centers, incentives that either add value to your workforce or reduce labor-related operating costs are especially valuable.

Job tax credits are a good example. These are credits awarded for each job you create, applicable against your corporate income tax liability. Of course, if you don't create the job, you don't get the incentive (therein lies the performance-based aspect), but job creation generally is not a problem for call centers. For labor-intensive operations, this incentive can significantly reduce long-term operating costs.

Business Costs
Pay attention to all factors that impact your labor costs.

Refer to the ACCRA index to check the community's cost of living. Talk to other industries in the area to learn more about wage growth. Look very closely at non-wage labor costs, such as workers' compensation costs and insurance costs. Ask about state and local unionization rates. Unionized companies can drive up labor costs considerably, even for their non-unionized neighbors.

If you are planning to build from the ground up, ask about construction costs in the area. Make sure to check industrial construction costs, not residential costs. There is a significant difference. Check the Means Construction Cost Indexes for this information.

Business Climate
Business climate is hard to define, but you know it when you see it. Of course, every business recruiter in the country will tell you their state is pro-business and behave accordingly while courting you. But what about after the deal is done and the ink has dried?

For the best indicator of how you will be treated in the long-term, talk to existing industries in the community you're considering. Ask about the regulatory climate, taxes and access to state and local decision makers.

Also, look at the percentage of the state's operating budget that depends on business taxes. This reflects the position of importance that business occupies on the state's agenda * a key indicator of how you will be treated once you get there.

A final point to keep in mind: call centers are huge job creators. That makes you extremely attractive to industrial recruiters. As a result, you can expect to find states very helpful and responsive in helping you find the right location for your new facility. If they are not, look elsewhere.

Also, if you plan to build your new facility or invest a lot in equipment, ask about property tax incentives. In some states, you may be able to negotiate with local governments to pay a flat annual fee instead of property taxes. Under this "fee-in-lieu" incentive, the company may lock in at the current millage rate and pay a reduced fee as low as 4 percent of the assessed value of the property, the same rate paid by homeowners. In addition to lowering ongoing costs, the fee-in-lieu incentive also helps stabilize long-term costs, making corporate planning easier and more predictable.

John Nash is public information director with the South Carolina Department of Commerce.