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Multi-Sourcing: Labor vs Loyalty in Customer Service

Multi-Sourcing: Labor vs Loyalty in Customer Service

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Published by lwimberly
Discusses how to de-couple the link between outsourcing and lowerered customer satisfaction and loyalty.
Discusses how to de-couple the link between outsourcing and lowerered customer satisfaction and loyalty.

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Published by: lwimberly on Jun 15, 2009
Copyright:Attribution Non-commercial


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There has long been tension between the CFO and the executive responsible for customer care over the expensesof operating call centers and their overall value to the organization. In many companies, the call center is animportant driver of customer loyalty and the head of care is concerned with maintaining quality standards for allagents. On the other hand, the CFO has been vigilant about containing call center costs that could easily spiralout of control if left unchecked. Driving the tension between these two factions is the widely held belief that a decrease in labor costs must mean a decrease in quality and ultimately, customer loyalty.
The Labor vs. Loyalty Dilemma
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 A reduction in labor cost doesn’t have to mean a reduction in customer loyalty.
Some thoughts on how to achieve both.
The Labor vs. Loyalty Dilemma
By Matt McConnell
 What is needed to restore harmony in theexecutive suite is a method to simultaneously reduce labor costs while maintaining and evenimproving customer loyalty.
Figure 1
 Always on the hunt for cost savings and efficiencies, the CFO has taken dead aim at the call center. With 70percent of its costs tied up in labor, the call center is a primary cost-reduction target and, for the past twenty years, the CFO has eagerly endorsed headcount reduction projects. Recent projects such as automatic call distributionand automated voice response systems, as well as improvements in call-handling efficiency, workforce utilization,and agent productivity, are all examples.But the biggest cost savings development in the CFO’s arsenal for the past three to five years has been labor arbitrage or multi-sourcing. This is an alternative to a premise-based only call center staff and includes the use of some combination of outsourced agents, at-home agents, or off-shored staff. Typically, these staffing modelsrepresent a sharp reduction in labor expenses for the call center.Further driving this decrease in labor costs are recent technological advancements like VoIP which have enhanced the viability and cost-effectiveness of these alternative call center staffing models.If the CFO had the only say-so in call center labor force decisions, the story would be a short one—cost benefits would dictate that most, if not all, call center labor forces would be outsourced. As it stands, of the 6 million agentpositions in North America, less than 15 percent are outsourced (and only a fraction of outsourced agents are off-shored). So what’s holding the CFO back?
The CFO Position
The Head of Care Response
 At some point, cost efficiency initiatives run out of gas and reach a level of diminishing returns. At the other end of the hallway, the head of customer carehas a different set of worries and responsibilities. Typically a direct report of theCOO, the head of customer care is responsible for ensuring customer satisfactionand loyalty. Many companies have recently discovered that customer experiences with their call centers are a critical component in maintaining customer satisfaction.According to JD Power & Associates, satisfaction with call center experiencesdrives up to 1/3 of overall customer satisfaction with a company. And satisfactionis an important driver of loyalty and everything that it influences, including a person’s willingness to remain a customer, their willingness to spend more money  with a company, and ultimately, their willingness to recommend a vendor to their friends.
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Technology Lends a Hand
In a recent study published by the University of Michigan’s National Quality Research Center, the following statisticsstrongly support the case for loyalty:
Loyalty Pays
1. A 1% decrease in cost improves profitability by 1%.2. A 1% increase in sales improves profitability by 0.25%.
3. A 1% increase in customer satisfaction or retention improves profitability by 5%.
Clearly, loyalty pays and pays big for companies. With the continued reliance on multi-sourcing and the use of new technologies that make the call center more virtual than ever before, the head of customer care is facing anenormous quality and customer loyalty challenge which, for the first time, can be directly tied to profitability.
Figure 2
Because CFOs are measured on profitability, if left to their own devices, they would drastically reduce the callcenter labor force and shift the remaining call center staff to the lowest-cost alternative (some combination of outsourced, at-home agents, or off-shored staff). However, this approach has traditionally resulted in a drop inquality in the call center—a direct threat to customer loyalty. The quality drop usually results from a company’sinability to maintain consistency in hiring, training, communication, coaching, and incentives among an increasingly remote and disparate call center labor force.Conversely, because heads of care are measured on customer satisfaction, if they called all the shots, companies would boost their investment in labor improvements—perhaps through intensive performance improvementprograms or by maintaining a strictly premise-based workforce—to increase quality as a means to enhance customer loyalty. But increased competition and aggressive cost-cutting goals have left limited dollars to spend in theseareas. What is needed to restore harmony in the executive suiteis a method to simultaneously reduce labor costs whilemaintaining customer loyalty. As in the past, modern technology can do much to resolve the apparent conflict between the need for cost containmentand the imperative to deliver great service. Modern, on-demand technology, which is available across the Internet,significantly improves a call center’s ability to manage itsremote agents and analytic solutions can pinpoint whereagents need improvement whether they are down the hallor on the other side of the planet.
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