The Labor vs.

Loyalty Dilemma
A reduction in labor cost doesn’t have to mean a reduction in customer loyalty.
Some thoughts on how to achieve both.
By Matt McConnell

The Labor vs. Loyalty Dilemma

The Labor vs. Loyalty Dilemma

There has long been tension between the CFO and the executive responsible for customer care over the expenses

of operating call centers and their overall value to the organization. In many companies, the call center is an

important driver of customer loyalty and the head of care is concerned with maintaining quality standards for all

agents. On the other hand, the CFO has been vigilant about containing call center costs that could easily spiral

out 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.

Multi-sourcing

Labor Loyalty
Figure 1

What is needed to restore harmony in the

executive suite is a method to simultaneously

reduce labor costs while maintaining and even

improving customer loyalty.

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 The CFO Position

Always on the hunt for cost savings and efficiencies, the CFO has taken dead aim at the call center. With 70
percent 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 distribution
and automated voice response systems, as well as improvements in call-handling efficiency, workforce utilization,
and agent productivity, are all examples.
The Labor vs. Loyalty Dilemma

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 models
represent 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 agent
positions 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 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 care
has a different set of worries and responsibilities. Typically a direct report of the
COO, the head of customer care is responsible for ensuring customer satisfaction
and 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 experiences
drives up to 1/3 of overall customer satisfaction with a company. And satisfaction
is 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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 Loyalty Pays

In a recent study published by the University of Michigan’s National Quality Research Center, the following statistics
strongly support the case for loyalty:

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%.
The Labor vs. Loyalty Dilemma

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 an
enormous quality and customer loyalty challenge which, for the first time, can be directly tied to profitability.

Technology Lends a Hand

Because CFOs are measured on profitability, if left to their own devices, they would drastically reduce the call
center 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 in
quality in the call center—a direct threat to customer loyalty. The quality drop usually results from a company’s
inability 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 improvement
programs 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 these
areas.

What is needed to restore harmony in the executive suite

is a method to simultaneously reduce labor costs while
maintaining customer loyalty.

As in the past, modern technology can do much to resolve

Multisourcing
with
the apparent conflict between the need for cost containment
and 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 its
remote agents and analytic solutions can pinpoint where

Labor Loyalty agents need improvement whether they are down the hall
Figure 2 or on the other side of the planet.
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 Outsourcing providers also have

Off-shoring’s added challenges

Vision of a New Solution a vested interest in seeking ways
to de-couple lower cost from
lower quality customer service
Consider the following example provided by a since their entire business model
leading healthcare company. relies on the performance of their
labor forces. For example, a well-
The company fully embraced multi-sourcing and, as a result, known call center outsourcer has
restructured its call center labor force. The call center was staffed been able to drive up a variety of
quality metrics that positively
with a combination of at-home and on-premise agents, as well as affect customer loyalty by
The Labor vs. Loyalty Dilemma

delivering training and

offshore outsourced agents, with a total agent population of 3,000.
communications directly to each
The cost savings were significant, but quality—more specifically the call-center employee’s desktop.
For the company’s offshore
consistency of quality service delivery—began to suffer and threatened
employees, the desired quality
customer loyalty. metrics were communications
skills and cultural training.
The complexities of the healthcare industry and its constantly changing
An early concern for many
systems, rules, regulations, and customer offerings made constant companies off-shoring their
customer service was the
agent training and coaching a necessity. Agents also needed to develop
potential for customer
problem-solving skills and other critical customer-facing techniques dissatisfaction—or even rage—
resulting from language and
to successfully address a variety of customer types (customers,
cultural barriers between the
administrators, doctors). This task was hard enough for an on-premise customer and offshore agent.
Through a solution that included
call center staff, but achieving customer loyalty with such a diverse
repetition and positive
staffing model seemed all but impossible. reinforcement, this call-center
outsourcing company was able to
To ensure consistent, high quality service among multi-sourced agents, drive up the number of calls
successfully handled, minimize
extensive training seems logical. But for a global workforce, classroom
elevated or additional calls
training would have been costly to implement, logistically difficult, resulting from the original call,
and drastically reduce the number
and a drain on staff productivity. Instead, the company chose a solution of times the customer or agent
that could be delivered directly to the desktop of every call center had to repeat themselves.

employee, regardless of their physical location. Customized training Call center executives are still
reserving the more sensitive calls
modules were delivered automatically to agents during periods of (elevated calls, or any call where
the customer has to be told “no”
low call volume or during regularly scheduled intervals—rather than
or some other form of bad news)
being subject to classroom or instructor availability. Training content for on-premise agents or other
in-house alternatives. To some
was tailored to the needs of each agent based on performance and
extent, cultural barriers will never
quality monitoring systems as well as supervisor input. be completely overcome.

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 These short, but engaging learning breaks became integrated into It is human nature for a customer

Off-shoring’s added challenges

to seek empathy from someone
agents’ routines and quickly drove up quality metrics without affecting
they feel understands them. But
productivity. Because training sessions were customized to each as customers become more
accustomed to the new global
agent’s needs, it did not matter if the employee was on-premise, at economy, and as companies
home, or even halfway around the world. Global consistency and continue to maximize the
customer experience with a mix
higher overall quality were achieved—two key ingredients for of call center agents, this trend is
improving customer loyalty. Other benefits to the company included likely to change.
The Labor vs. Loyalty Dilemma

There are still other solutions that

higher new-employee retention, a flattened learning curve, and higher
can help companies realize the
new-employee quality scores. full potential of multi-sourcing by
addressing the areas that most
The call center’s customers reaped benefits as well. Across the board, affect agent performance and
service quality. Solutions that
claims processing accuracy increased while processing time was
focus on recruiting and hiring the
reduced. Most importantly, labor costs and customer loyalty now right people for the right job
based on existing talents and
have more of an inverse relationship.
abilities result in minimized
employee attrition, reduced initial
training needed to build up
proficiency and a consistently high
Matt McConnell level of quality regardless of
where an agent takes customers’
is co-founder and co-chairman of Knowlagent, calls. In addition, coaching tools
an innovative strategic call center solution are available to help call centers
track, measure and influence
company that shows call center operators
agent performance anywhere in
how to contain costs and drive revenue and
the world.
customer loyalty initiatives. McConnell also
Modern call center management
co-authored “Customer Service at a technologies provide the
Crossroads: What You Do Next To Improve wherewithal to contain costs
Performance Will Determine Your Company’s while still delivering high quality
customer experiences. With that,
Destiny” with Dr. Jon Anton.
it’s now possible for CFOs and
executives responsible for
customer care to see eye-to-eye
on managing the call center’s costs
while still meeting the mission’s
objectives.

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