The True Cost of Attrition

The True Cost of

Attrition
Executive White Paper
October 2007
The True Cost of Attrition
i
Table of Contents
Introduction................................................................................. 1
What Part Does Attrition Play? ........................................................... 1
Hard Costs ................................................................................ 3
Hidden Costs ............................................................................. 3
The Conventional Approach .............................................................. 6
A Lifecycle Approach ...................................................................... 8
Poor Performance, Poor Fit............................................................ 9
Poor Performance, Good Fit ..........................................................10
Good Performance, Poor Fit ..........................................................10
Good Performance, Good Fit .........................................................10
The Payoff of a Lifecycle Approach ....................................................11
In Conclusion...............................................................................11
References .................................................................................12
By Matt McConnell
Agent attrition costs more than most call center executives realize. In fact-
every 10 percent of attrition has been shown to lead to one percent of
customer churn.
Knowlagent conducted research to uncover the “hidden” costs that help make
up thetrue cost of attrition. Read this paper to explore these hidden costs
and discover how to minimize the effect of attrition on your business.
Introduction
In recent years, call centers have begun to deliver more value. In industries like
bankingwhere call centers can generate up to 25 percent of total new revenues or
telecommunications where they can contribute up to 60 percent of revenue, it’s
easy to see why. But even without the sales component, the link from satisfied
customer to loyal customer to increased revenue is not hard to make.
The call center organization has made significant progress in what is measured and
accomplished, but across the industry, the returns seem to have hit a plateau.
Customer satisfaction has held steady at about 75 percent for years, and customer
service satisfaction, at 71 percent, has also seen little progress. It seems that call
centers are finding the proverbial last mile an insurmountable hurdle.
Agent attrition, interestingly enough, has also stayed constant, generally hovering
around 30 percent. Since attrition always makes the list of top things to improve,
it seems that leaders are making the connection between attrition and other
business challenges, but most are seeing little progress.
This lack of progress in the battle against attrition has real, quantifiable costs.
While most organizations may track the hard costs of attrition, with line items such
as recruiting and training costs, the opportunity costs such as customer churn are
harder to quantify, but more critical. Knowlagent conducted research in the form
of a survey and executive interviews to discover the real impact of attrition in
August 2007. This executive white paper includes those findings and will prescribe
a comprehensive approach to solve the root causes of attrition across the agent
lifecycle.

What Part Does Attrition Play?

It stands to reason that the biggest opportunity for improvement in customer
service lies in working towards an optimal customer experience with every
interaction. While not all satisfied customers are loyal, all loyal customers are
satisfied. According to a Genesys report,40 percent of consumers have stopped
doing business with a company solely due to a poor call center experience. The
single biggest determinant of that experience is an agent’s performance.
40% of consumers have stopped doing business with a company
solely due to a poor call center experience.

According to widely reported industry attrition rates, one out of every three agents
answeringthe phone at any time is new, and typically less than proficient. Call
center leaders indicate they are aware of the problems this phenomenon causes.
When asked to indicate the obstacles to achieving their key goals, 53 percent of
the respondents in Knowlagent’s survey selected attrition, outranking all other
choices.
Additionally, when asked to directly describe what impact attrition has on
attainment of goals, 69 percent of respondents said that attrition “got in the way
of success,” while another 15 percent cited attrition as a “major reason for lack of
success.” (Figure 2)
Clearly, reducing the risk to customer loyalty is a compelling reason for any
attrition program.

What are the key obstacles to achieving the goal? (all that apply)
Not enough budget
19.3%
Not enough resources
37.7%
Other goal(s) in
conflict 23.8%
Organizational
alignment 21.7%
Other 14.3%
Agents not the right
personality fit 29.5%
Agents without right
skills and knowledge
41.0%
Agent attrition 52.5%
53% believe attrition is a key obstacle to their goals.

Impact of Attrition on Achieving Goals

Gets in the way of success
70%
Has little effect on success
13%
Doesn’t affect success at all
2%
Major reason for lack of success
15%

Hard Costs
The hard costs of agent attrition are well known and are accounted for in almost
any call center’s operating budget. Typically accepted as a fact of life, attrition is
dealt with in a pragmatic fashion. Acceptance of the high costs associated with
attrition such as recruiting and hiring, new hire training and productivity losses
have become ingrained in the call center culture.

Hidden Costs
While the hard costs of attrition often justify investment in retention programs on
their own merit, the opportunity, or hidden costs, of attrition are more difficult to
quantify but provide business incentive. Most people would agree that new agents
do not provide the same level of service as experienced agents. With the large
percentage of customers who churn solely based on customer service, the impact
of less than proficient agents is enormous.
Thefollowing chart (Figure 3) adds these hidden costs to the hard costs of agent
attrition to show the true costs of reaching proficiency. Figure 3

85% indicate attrition is

impacting achievement
significantly.

It is during the time between hitting the floor and reaching proficiency when
inexperience leads to outcomes such as multiple calls to reach a solution. Studies
show this failure to resolve an issue quickly largely influences a customer’s
intention to churn. In a study by the CFI Group, customers who do not have their
issue resolved are eight times more likely to defect.

So, what is the quantifiable impact of attrition on customer loyalty and company
revenue?
Let’s consider an example of a 100-person contact center with 30 percent
attrition:
Before:
A 100-seat call center has 70 agents who are proficient and 30 who are not. The
customers calling into the proficient agents have a natural, 10.7 percent churn
rate. The less than proficient agents are responsible for an 18.78 percent churn
rate. The center overall churns 13.12 percent of customers.
After:
By decreasing the level of attrition by 50 percent, the center now has 85 agents
who are proficient and 15 who are not. The 85 proficient agents experience the
same 10.7 percent churn rate. The 15 non-proficient agents still affect an 18.78
percent churn rate. The center now churns 11.91 percent of customers.

Figure 3
Customers who do not have their issue resolved are eight times
more likely to defect.
Agent reaches full proficiency,
e.g., 95% FCR
• Hidden costs occurduring the window oftime between when an
agents starts takingcalls and when theyreach “proficiency”
• High attrition keepsmore agents in thehidden cost window

No Show for New Hire Training

Cost = $3,000 to $7,000 per agent
Quits During New Hire Training
Cost = $5,000 to $9,000 per agent
Quits in Nesting or Once on the Floor for <
30 days Cost = $6,000 to $10,000 per agent
Quits in Post 90 Days on the Floor
Cost = $10,000 to $14,000 per agent
Proficiency
Time on FloorAgent starts taking calls
True Costs of Reaching Proficiency
Costs
Typically, a one percent increase in churn represents a one percent decrease in
revenue.That would mean that by improving its attrition rate by 50 percent, this
center increased its overall company revenues by 1.21 percent. If this fictional
company had annual revenues of $500 million, this improvement in attrition would
represent over $6 million saved in hidden costs.
Below is a look at the calculations used to determine this impact.
While high attrition persists, other quality and customer satisfaction improvements
need massive results in order to overcome the heavy and directly attributable
impact of attrition on the bottom line.

ABC Center
Assumptions:
􀂃 100 agents
􀂃 FCR goal of 85%
􀂃 Percent of customers receiving a resolution likely to churn – 5%
􀂃 Percent of customers not receiving a resolution likely to churn – 43%
Before
Center’s Churn Rate Before = 13.12
After
Center’s Churn Rate After = 11.91
30 Non-Proficient Agents
At 75% proficiency
FCR of 63.75%
63.75% resolved = 3.19 churned
36.25% not resolved = 15.59 churned
Total churn rate = 18.78 * 30% of calls = 5.63
70 Proficient Agents
At 100% proficiency
FCR of 85%
85% resolved = 4.25 churned
15% not resolved = 6.45 churned
Total churn rate = 10.7 * 70% of calls = 7.49
85 Proficient Agents
At 100% proficiency
FCR of 85%
85% resolved = 4.25 churned
15% not resolved = 6.45 churned
Total churn rate = 10.7 * 85% of calls = 9.10
15 Non-Proficient Agents
At 75% proficiency
FCR of 63.75%
63.75% resolved = 3.19 churned
36.25% not resolved = 15.59 churned
Total churn rate = 18.78 * 15% of calls = 2.82

The Conventional Approach

Survey respondents reported mixed results battling attrition over the long term.
While 41percent have had success lowering attrition and at least keeping it steady,
39 percent have either been unsuccessful or were unable to sustain results.
 (Figure 4)
Long-Term Effectiveness Against Attrition
10.0%
Lowered initially and more since then.
30.6%
Lowered and stayed at or near that level.
25.6%
Lowered temporarily but has since increased.
13.3%
Unsuccessful in lowering.
20.6%
Have not addressed.
Attrition typically ranks highly among problems to solve in the call center. A recent
study by Contact Babel had 27 percent of respondents ranking it as their biggest
issue. Combined with persistent high attrition rates, this suggests that the problem
doesn’t lie in recognizing the impact of the issue, but in the methods used to
address it.Knowlagent’s survey asked both what causes attrition (Figure 5) and
how effective certain methods are (Figure 6). While increasing salary is selected
most often as the cause of attrition, the most highly ranked reason is related to
unclear job expectations. When Number1 and Number 2 rankings are combined,
increased salary, unclear expectations and personality fit appear to be equal
contributors to attrition.
Figure 4
Only 40 percent have beensuccessful over the long
term against attrition.

Rank order the top 3 reasons for attrition.

0 5 10 15 20 25 30 35 40
The agent leaves to make more money
The job is not what the agent expected
The agent isn’t a good personality fit for the job
The agent does not have the right knowledge
and skills to perform the job
The agent does not have a clear career path for advancement
OtherThe agent has a poor relationship with the supervisor
Number 1
Number 2
Number 3
However, the most effective methods to combat attrition are reported as
improving new hire training and nesting, increasing training and communications
and implementing coaching programs. This disconnect between the highest ranked
causal factors and method effectiveness might suggest that respondents are
unclear about how to apply the right methods against causal factors or that they
do not have the tools at their disposal to do so.

Method Effectiveness Against Attrition

0% 20% 40% 60% 80% 100%
Using assessment tools for hiring
Improving new hire training and nesting
Increasing training and communications to
existing agents
Implementing supervisor-agent coaching
programs for existing agents
Improving/Creating mentoring programs
Focusing on career growth opportunities
Increasing salaries
Very effective
Effective
Somewhat effective
Not very effective
Not effective at all
Method not in use
Figure 6
Figure 5
Additional information was gathered via one-on-one interviews. It became clear
that unsuccessful efforts can generally be diagnosed with at least one of two
problems:

One Solution Syndrome - The one solution syndrome exists where companies
pursue a cureall,end up with short-term results and begin again to look for the
next new thing to improve attrition. An example of One Solution Syndrome is to
create a program to “hire better.” If the program is successful, the company hires
the right people but may lose many of them later because other factors
contributing to attrition such as coaching and training have not been
addressed.

Execution Disorder – This condition exists when a solution is selected to combat

attrition butfails in the execution because it does not correctly address the causal
factors. An example of Execution Disorder is purchasing an assessment tool to find
agents who are the best overall fit for the job. This approach may cause a poor fit
in a critical attrition risk area to be overlooked because the focus is on the overall
fit versus a focus on the areas that matter most.

A Lifecycle Approach
The key to long term results against attrition is a comprehensive approach that
attacks all of the root causes of attrition across the agent lifecycle. Attrition
occurs at all stages, often for different reasons.
Understanding attrition risk across the agent lifecycle is achieved by looking at a
combination of performance and fit of current agents. The following chart lays out
a method for assessing attrition risk. In this model job performance is based on
performance against key metrics and fit is based on personality traits and cognitive
abilities. Personality traits and cognitive abilities are “hard-wired” and have the
largest impact on long-term success and attrition.

Improving new hire training, increasing training and communications

and implementing coaching programs were most often rated as
“effective” or “very effective” against attrition.
Poor Performance, Poor Fit
Agents in this quadrant represent the highest attrition risk. Poor performance
combined withpoor job fit results in high early attrition rates during new hire
training, nesting and the first 90 days on the floor. This quadrant is typically filled
with new hires when a hiring process is not optimized for attrition. A typical
response to this risk is to add assessments to the hiring process. Knowlagent’s
survey illustrates this trend as centers addressing attrition use assessments twice
as often as those who have not yet dealt with the issue. But call centers
need to be diligent to avoid using assessments to automate an ineffective, manual
hiring process. To truly change the hiring process, they must first determine the
most critical areas impacting attrition and assess candidates against them. In this
way candidates with the least chance at success are eliminated from the process.
This is in contrast to using best overall fit as a gauge since it tends to mask critical
gaps in personality, cognitive ability and skills.

Additionally, since unclear job expectations was highly ranked as a causal factor by
respondents, a standardized way of setting realistic job expectations should be
integrated into the hiring process. Other actions that may be taken in this
quadrant are:
􀂃 Moving high risk agents to more suitable roles, if movement within the
organization is
possible.
Caution Fit Yes
Strong
Poor
Poor Performance, Poor Fit
High Attrition Risk
(early attrition)
Good Performance, Good
Fit
Low Attrition Risk
(mid to late attrition)
Good Performance, Poor Fit
Medium Attrition Risk
(mid to late attrition)
Poor Performance, Good Fit
Medium Attrition Risk
(early & mid to late attrition)
Agent Attrition Risk Quadrant
Job
Performance
􀂃 Where possible, building skills and mitigating fit gaps that may respond to
coaching and training among these existing agents. After this highest risk category
is addressed, a lifecycle approach to attrition would mean turning attention to the
quadrants with lower risks. The makeup of the agent population will change over
time as natural attrition occurs, but specific actions may be needed based on the
concentration of agents in the other quadrants.

Poor Performance, Good Fit

Agents in the lower right quadrant are typically a medium attrition risk. This
quadrant may be home to many new hires before adequate training and coaching
are provided if a hiring process is effective. Specific action items for new hires
are:
􀂃 Provide tailored new hire training plans based on agents’ existing skills
􀂃 Provide opportunities for safe practice before interacting with customers
􀂃 Provide tailored coaching and training plans for nesting and post-nesting
environments
Targeted training and coaching can also be used to improve existing agents’ skills
in this quadrant.

Good Performance, Poor Fit

Agents in the upper left quadrant are a medium attrition risk due to poor fit. The
majority of agents in this quadrant cannot be moved to the upper right quadrant
without a position change. It is not possible to change an agent’s underlying traits,
but training and coaching can be used to mitigate fit gaps in conjunction with
other incentives to reduce attrition risk.
The best chance for retention is to look for opportunities in other call center
positions that are a better fit.

Good Performance, Good Fit

Agents in this quadrant are a low attrition risk. Continue to train and positively
coach these agents since a good-fit agent who is not provided with appropriate
training and coaching can slip down into the lower right quadrant if the job
changes without adequate training. An agent in this upper right quadrant can move
to the upper left quadrant if job responsibilities substantially change and he/she
does not have the underlying traits to perform the job. This
situation is possible in many centers transitioning from a service only to service
and sales model.

Centers addressing attrition are twice as likely to use hiring

assessments as those who have yet to deal with the issue.
The Payoff of a Lifecycle Approach
Obviously, call centers do not improve attrition just for the sake of improving
attrition. The real incentive is to improve performance against other business
goals. In addition to minimizing the risk associated with high attrition, addressing
the causal factors impacts the business goals of the call center and the company.
Agents who are a better fit and receivethe right training and coaching to do their
job have more job satisfaction and produce higher customer satisfaction, leading
to increased customer loyalty. Additionally, by reducing attrition, the organization
will have minimized the business impact of attrition that previously reduced the
net effect of other improvement efforts. These and other improvement efforts will
benefit from the recouped attrition costs, and with a systematic approach in
place, the call center will be poised to deliver on those initiatives.

In Conclusion
With the increased focus on the call center as value center for the business,
centers are asked to juggle even more initiatives, often in direct conflict. Despite
the best efforts of leaders, sustained progress against these initiatives often proves
to be a struggle.
Contributing substantially to that struggle are the total costs of attrition. As other
cost-saving and improvement efforts have hit a plateau, effectively managing
attrition can become a “secret weapon” to attaining higher levels of performance
against the center’s business goals.
While the hard costs of recruiting and training agents to proficiency are significant,
hidden costs measure the impact of attrition on customer loyalty and revenue. To
manage the true, total costs of attrition, call center leaders should employ an
approach that addresses all of the causal factors. Essential to that process is
understanding the landscape of attrition across the agent lifecycle to design a
roadmap for improvement that provides the most value to the business.

About the Study

Knowlagent conducted an online survey in August 2007 solicited via email. There
were 251respondents. The size of centers by number of agents was reported as: 33
percent with less than 100 agents, 27 percent with 101-300 agents, 11 percent
with 301-500 agents, 12percent with 501-1000 agents, and 17 percent with more
than 1000 agents.Additionally, Knowlagent held some in-depth discussions with call
center or hiring executives to gather anecdotal information on attrition. There
were 11 of these discussions with leadersfrom the financial services, insurance,
and technology industries.
 Teacher Attrition: A Costly Loss to the Nation and to the States

Earlier this summer, bells rang in schools across the nation to mark the end of another
academic year. Students and teachers left to enjoy their summer vacations, but for too many
teachers, fall will not mark a return to the classrooms in which they taught last year. Every
school day, nearly a thousand teachers leave the field of teaching. Another thousand teachers
change schools, many in pursuit of better working conditions. The exit of teachers from the
profession and the movement of teachers to better schools are costly phenomena, both for the
students, who lose the value of being taught by an experienced teacher, and to the schools and
districts, which must recruit and train their replacements.

A conservative national estimate of the cost of replacing public school teachers who have
dropped out of the profession is $2.2 billion a year.2 If the cost of replacing public school
teachers who transfer schools is added, the total reaches $4.9 billion every year. For
individual states, cost estimates range from $8.5 million in North Dakota to a whopping half
a billion dollars for a large state like Texas.
Many analysts believe that the price tag is even higher; hiring costs vary by district and
sometimes include signing bonuses, subject matter stipends, and other recruiting costs
specific to hard-to-staff schools. Others believe that the cost of the loss in teacher quality and
student achievement should also be added to the bill.3
There is a growing consensus among researchers and educators that the single most important
factor in determining student performance is the quality of his or her teachers. Therefore, if
the national goal of providing an equitable education to children across the nation is to be
met, it is critical that efforts be concentrated on developing and retaining high-quality
teachers in every community and at every grade level.
Why is teacher turnover so high? Many assume that retirement is the primary reason for
teacher attrition, but when the facts are examined closely, it becomes clear that the number of
teachers retiring from the profession is not a leading cause.4 In an analysis of teacher
turnover, teachers reported retirement as a reason for leaving less often than because of job
dissatisfaction or to pursue another job.5
Among teachers who transferred schools, lack of planning time (65 percent), too heavy a
workload (60 percent), problematic student behavior (53 percent), and a lack of influence
over school policy (52 percent) were cited as common sources of dissatisfaction.6
Many teachers who see no hope for change leave the profession altogether. While it is true
that teachers of all ages and in all kinds of schools leave the profession each year, it is also
true that
• the rate of attrition is roughly 50 percent higher in poor schools than in wealthier ones;7
• teachers new to the profession are far more likely to leave than are their more experienced
counterparts.8

Some attrition is inevitable. Some teachers do retire, others leave for personal reasons such as
to care for family or children, and a relatively small number are dismissed from their jobs and
encouraged to leave the profession. But nearly half of all teachers who enter the field leave it
within a mere five years, and the best and brightest teachers are often the first to leave.9 Why
do teachers—particularly those who have taught for only a few years—leave the classrooms
they worked so hard to enter? Teachers cite a lack of support and poor working conditions
among the primary factors.
Beginning teachers are particularly vulnerable because they are more likely than their more
experienced colleagues to be assigned low-performing students. Despite the added
challenges that come with teaching children and adolescents with higher needs, most new
teachers are given little professional support, feedback, or demonstration of what it takes to
help their students succeed.
Nationally, more than six million middle and high school students are at significant risk of
dropping out of school. The reality is that a third of entering ninth-grade students will drop
out of high school before attaining a diploma, and another third will graduate unprepared
for college or a good job. In our cities, the situation is worse: about half of the high schools
in the nation’s thirty-five largest cities have severe dropout rates—often as high as 50
percent.10 Students in high-poverty or high-minority schools are in desperate need of
expert, high-quality teachers if their achievement and attainment levels are to improve, yet
they are almost twice as likely as other students to have novice teachers.11
According to the National Center for Education Statistics’ 1999–2000 “Public School
Teacher Survey,” 47 percent of public school teachers worked with a mentor teacher in the
same subject area.12 Sixty-six percent of teachers who were formally mentored by another
teacher reported that it “improved their classroom teaching a lot.”13
Mentors are an important factor in providing support for new teachers as they enter the real
world of the classroom, but mentoring alone is not enough. Comprehensive induction
proves most effective at keeping good teachers in the classroom. Studies demonstrate that
new teacher turnover rates can be cut in half through comprehensive induction—a
combination of high-
 Secondary School Students
Need Highly Qualified Teachers
All students, in all grades, need well-qualified, experienced teachers. But the need is
particularly acute in America’s middle and high schools.
Nationally, six million students are at high risk of dropping out of school or graduating
without the skills they need to succeed in college or the twenty-first-century workforce. In
fact, every year more than a million students do not graduate with their peers—with seven
thousand students dropping out every single school day.
Only about 30 percent of high school students read proficiently, and more than a quarter read
significantly below grade level.
These students need the best teachers possible to raise their achievement and attainment
levels—to graduate prepared for further training and education, and to become contributing
members of society.
quality mentoring, professional development and support, scheduled interaction with other
teachers in the school and in the larger community, and formal assessments for new teachers
during at least their first two years of teaching.14
More importantly, classes taught by new teachers working with teacher mentors (who are
released from their own teaching assignments in order to work with inductees for two years)
are more likely to result in positive academic gains for students.15 Inducted teachers use
teaching practices that improve learning.16 And the time it takes for new teachers to
perform at the same level as an experienced teacher—on average, from three to seven years
—can be shortened when the new teacher participates in a comprehensive induction
program. One study has shown that the classes of teachers who participated in this type of
induction saw comparable achievement gains to classes taught by more experienced
teachers.17
In the 2004–05 MetLife “Survey of the American Teacher,” new teachers reported being
greatly stressed by administrative duties, classroom management, and testing
responsibilities, as well as by their relationships (or lack thereof) with parents.18
Comprehensive induction programs are designed to address the roots of teacher
dissatisfaction by providing teachers with the supports and tools they need for success—by
guiding their work, further developing their skills to handle the full range of their
responsibilities, and evaluating their performance during the first few years of teaching.
Induction also improves the satisfaction and skills of veteran teachers. Experienced teachers
serving as mentors or evaluators improve their own teaching practices by observing and
coaching beginners. Often teacher coaches find that mentoring provides them new
opportunities for career growth and better pay. Through induction, both new and veteran
teachers regularly gather to plan instruction. This common planning creates a community of
educators committed to raising the performance of their school and district, allowing more
teachers input into their work and improving overall working conditions. The benefit of
induction to all teachers, new and seasoned alike, should not be underestimated.
Comprehensive induction has shown to more than pay for itself.19 And yet, across the
nation, states spend millions of dollars each year to replace teachers who leave the
classroom instead of investing in these programs, which simultaneously retain newer
teachers and help them become better, more effective teachers in a shorter time. The loss—
to taxpayers, schools, educators, students, and communities—is immense.