October 1998
Big Decisions For The Small Call Center
BY ILLAH NOURBAKHSH AND SHANNON HUGHES,
BLUE PUMPKIN SOFTWARE
Small call centers encounter tremendous difficulties in today's competitive markets.
Larger call centers benefit from the same economies of scale that place the small call
center at a disadvantage.
If you have 35 call center agents or fewer, you face the difficult task of providing a
world-class center that executes its mission statement in a cost-effective manner.
Although small call centers vary in needs and characteristics, they share common
challenges: high capital expenditures, low occupancies, shortage of technical knowledge
and high training costs.
In this article, we examine some of the issues surrounding the following strategic
operational choices for the small call center:
- Running your call center in-house,
- Outsourcing your center's functions,
- Hiring an insourcing firm to run your call center in-house.
To make the right decision for your center, you need to understand the relative
advantages and disadvantages of each approach. This article will help you in that process.
We begin by looking at an important question many call centers face: what are the
implications of outsourcing? After discussing the issues concerning outsourcing, we will
focus on some important considerations when running your small call center. Last, we will
offer several tips to improve operations in small call centers.
The Big Picture: What Does Outsourcing Really Mean?
About 17 to 20 percent of all call center functions are outsourced. Outsourcing involves
purchasing a call center service where another company, the teleservices agency, manages
and runs your company's call center off-site. In the outsourcing model, the third-party
vendor uses its call center expertise on your behalf.
An attractive feature of outsourcing can be the shift of management and legal demands
from your company to the teleservices agency. In a high-turnover environment like the call
center, the logistics of recruiting, hiring and (sometimes) firing agents can be somewhat
mind-boggling. Outsourcing mitigates call center management demands, so a company is able
to focus on its business, not running the call center. At the same time, real investment
in a physical call center is compromised.
When evaluating the relative merits of outsourcing and the do-it-yourself call center,
it is crucial to look beyond simple cost estimates. The following questions and discussion
will help you begin the process of examining how each operational model would work for
you.
Can Outsourcing Work For You? - Some Diagnostic Questions To Consider
- Do you have the most current call center technology and expertise, or are you willing to
invest in call center technology and expertise?
- Is there a good labor pool in your area from which to hire agents?
- How much does each alternative cost?
- How much control do you need?
- What are the future plans for your call center? Do you anticipate a lot of growth or
changes in your organization?
Do you have the most current call center technology and expertise, or are
you willing to invest in call center technology and expertise?
If your answer is "no," you should think twice before embarking on establishing
a call center on your own. As a small call center, it is vitally important that you have
the most current technology. In many instances, you are trying to look like a much larger
center, and any breakdown in your systems would be detrimental to your business. Although
you are small, the demands on your hardware and software are great, especially if your
call center is open around the clock. If your company is not willing to invest (or doesn't
know how to invest) in developing a sound infrastructure, you should consider outsourcing.
Is there a good labor pool in your area from which to hire agents?
In a tight labor market, it is extremely difficult to recruit and hire agents. Call
centers are high-turnover environments, and a small labor pool will make recruiting a
time-consuming and frustrating task. You also pay agents higher wages in a tighter market.
If you know that unemployment is very low in your neighborhood, you should consider
outsourcing. Outsourcers are typically located in areas where labor is more available and
less expensive.
How much does each alternative cost?
This question can only be answered after careful research. A company without call center
experience will be unable to create an accurate estimate of costs alone, and the price of
a call center consultant can be well worth avoiding the danger of using a call center
operational model that is wrong for you.
The per-seat cost of outsourcing varies widely, from as little as $25 per hour up to
$60 per hour. Price variation depends primarily on the "kind" of agents required
to staff a campaign. For example, if a software company decides to outsource overflow from
its software support center, it might require trained software engineers to answer
technical support questions. In this scenario, the per-agent cost would be much greater
than a campaign requiring agents to take routine customer orders. This is because the
teleservices agency pays trained software engineers higher wages than customer service
representatives.
When outsourcing costs are compared to do-it-yourself costs, a difference in price is
likely. This price differential is frequently due to economies of scale (refer to Table 1: Erlang Can Equal Trouble For The Small Call Center). Whereas an
in-house call center must provide a complete solution for just a single call center, an
outsourced center is part of a much larger, blended call center operation, where several
separate companies' calls are handled. Such a model means fewer idle agents and the
overall efficiency of the call center increases. In addition, a third-party teleservices
center's capital investments are amortized over long periods of time and over a number of
campaigns, further mitigating the per-seat cost.
How much control do you need?
Outsourcing involves very little control or management over the call center by the
contracting company. This may seem like a good thing: after all, your company can
concentrate on the business itself.
However, companies sometimes need a high level of control over their call center, for
the good of the business. From this control perspective, there is an attractive
alternative to both the outsourced and do-it-yourself call centers: insourcing. Insourcing
means that an outside firm comes to your location and operates your call center for you.
Insourcing releases the company from a great deal of responsibility - the insourcer
becomes the legal employer of the agents. This means that the insourcer recruits, hires,
trains and (sometimes) fires the agents. Another attractive feature of the insourcing
model is that the insourcer provides MIS support, which is crucial for the small center.
With insourcing, your company buys more than a service: it buys technical expertise and
infrastructure. Insourcing gives your company the option of exerting as much control as
needed to keep the call center coupled tightly to business practices.
Of course, the advantages of insourcing come with a penalty: cost. Because insourcing
requires investing in call center infrastructure and purchasing the services of an
experienced call center management company, it may be as costly as both in-house and
outsourcing options, combined!
What are future plans for your call center and your company? Do you
anticipate a lot of growth or changes in your organization?
If you are looking to implement new technology in your call center, like e-mail, you might
want to think twice about doing it yourself if you don't have the infrastructure. Many
small call centers have found outsourcing to be particularly beneficial when bringing new
technology into the mix. The latest technologies typically exist at teleservices agencies,
and agents are already up to speed on how to use it.
If your company is going through a merger or another dynamic change, it might be best
to have the call center off-site. This leaves the company time to focus on other
operational activities outside of the call center.
Doing It Yourself
After conducting the appropriate research and running your numbers, you may decide that
your company should have its own, in-house call center. The following tips will help you
set up and run your call center smoothly. Of course, there are many more keys to success
that will only be discovered through your particular experiences. However, the following
will help you start out on the right foot.
Design Flexibility Into The Call Center Model
Inefficiency is the most dangerous enemy of a small call center. Because of its small
size, a drop in the incoming call rate can cause a low-occupancy, low-efficiency situation
extremely quickly (recall the Erlang table). To guard against this type
of inefficiency, maintain as much flexibility as possible. You will need a fixed number of
full-time agents, but a flexible group of full-time agents, part-time agents with movable
hours, and on-call agents for particularly heavy times. Another option is to make
arrangements with a teleservices agency to take overflow calls during particularly busy
times. This brand of outsourcing enables your call center to scale in size without making
a commitment to managing a larger call center.
Take advantage of the fact that agents are in-house. Design additional responsibilities
(answering e-mail, filling out paperwork) for agents to fulfill during idle time so that
overall productivity can be sustained even if call volumes are variable.
MIS Expertise Is Mission-Critical
The technical expertise to correct call center failures in software and hardware must be
in-house or instantly available. As a small call center, you often wish to give the
appearance of a much larger center. Therefore, you need to make sure you have the support
you need so your call center can be online quickly after any plausible failure. The need
for solid MIS is often underestimated because it may appear to have a prohibitively high
cost. It is, however, well worth the price when you consider the alternative of a
nonoperational call center.
Choose The Right Hardware And Software
A large call center needs effective software support to manage its plentiful resources
effectively. A small call center also needs effective software - not because its resources
are plentiful, but because its resources are so limited that efficient management has a
significant impact on overall productivity.
Critical software ingredients include scripting, workforce management and database
management software. Software integration with the rest of the company may be desirable as
well. A small call center definitely needs to invest in a quality ACD, but may not
necessarily need an IVR.
While making these hardware and software investments, small call centers should always
keep in mind the possibility of purchasing high-quality, previously-owned call center
equipment. Used equipment keeps costs down without sacrificing quality.
Invest In Your Agents
The cost of recruiting, hiring and training agents is high. In Purdue University's latest
Call Center Benchmarking Report, call centers report that the average cost to train a new
agent is over $6,500. The average call center spends over 180 hours training each agent
(including both classroom time and on-the-job training). These statistics show how
expensive and time-consuming it is to hire and train new agents, especially in a
high-turnover environment like the call center.
To reduce employee turnover, it is best to give agents some time off the phone. Have
agents respond to e-mail or perform other administrative tasks. Another necessity is
ongoing training or seminars.
It is important to remember to develop agents' product knowledge and their expertise in
dealing with customers through the development of skills and techniques. Weekly updates on
products and campaigns are essential. Both kinds of training will increase their knowledge
base and also let them know that you value them enough to make an investment in them.
Attend seminars and trade shows. Invest in videos. Read your trade publications, and
look to other call centers for innovative ideas.
Be An Advocate For The Call Center
Your small call center will often be up against other "departments" when it is
time to dole out the budget. Always remember that a call center is mission-critical. In
our competitive business world, customer service is rapidly emerging as an important
differentiator between companies. As the sole point of contact for many customers, call
centers often provide customers with their only impression of the company.
Summary
Small call centers face a number of operational difficulties relatively unknown to the
large call center. With limited resources, a small call center needs to carefully guard
against inefficiency, closely monitor capital expenditures, continually renew technical
knowledge and watch training costs - all while keeping up with significant hardware and
software demands.
At first glance, these challenges appear overwhelming, but there are several workable
solutions available to the small call center. A small call center should consider the
issues surrounding the following operational options: outsourcing a small call center's
functions, running a small call center in-house, and hiring an insourcer to manage the cal
center. For each operational scenario, issues to evaluate include: the cost of
alternatives, current technology, availability of labor in their area, the amount of
control needed in the call center, and future business plans. If a small call center
decides to keep its operators in-house, designing a flexible model and increasing MIS
expertise can aid greatly in any call center's success. Also, selecting the right hardware
and software, investing in agents and being an advocate for the call center can have very
positive effects on operations.
Although a small call center differs in scope from a larger one, the ultimate goal of
both is an effective call center in line with a company's mission statement. Small call
centers perform many of the same important functions of those that are larger, yet are
sometimes ignored by the call center industry. While small, these centers are just as
mission-critical as their larger counterparts. It is time to give small call centers the
options - and respect - they deserve.
Dr. Illah R. Nourbakhsh is chief scientist at Blue Pumpkin Software and assistant
professor of Robotics at Carnegie Mellon University. He received his Ph.D. in Computer
Science from Stanford University. Shannon Hughes is a marketing manager for PrimeTime
F&S, a workforce management system developed by Blue Pumpkin Software. She is a
graduate of Wellesley College.
The authors would like to thank the following people for help in the preparation of
this article: Steve Darnell and Tom Rocca of Intek Information, Mary Jo Kulp and Gregory
Burton of Primary Matters, and Ofer Matan of Blue Pumpkin Software
|