making the call Why customers and staff will embrace the next outsourcing wave Jim Bradley

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1 making the call Why customers and staff will embrace the next outsourcing wave Jim Bradley

2 2 making the call Introduction Contact centers have been at the forefront of new and innovative employment models for over a decade. They are often subjected to cost cutting and outsourcing, and they continue to suffer among the highest voluntary attrition rates in the service sector. But, this is nothing compared to what s on its way. There are a number of unstoppable demographic and social changes that are rocking the worldwide workforce. Employers of all shapes and sizes will have to get to grips with these changes, and contact centers are among them. Traditional forms of outsourcing will no longer suffice as a winning strategy on their own. Instead, the next breed of global contact centers will have to figure out how to keep costs low while raising quality and demonstrating increased customer benefit. They ll need to do this for the following reasons: 1. High quality is the only way to justify the cost: Contact centers are expensive and cumbersome. If they re not building customer loyalty, they re eroding it, and businesses just won t be able to justify the costs in increasingly competitive markets if the return isn t there. 2. It s your reputation on the line: Many brands already know the damage that poorly delivered, outsourced service can wreak. Contact centers are requiring increasingly complex training and product knowledge to deliver great service, and there is a limit to the number of markets that can provide great service with low cost. Traditional outsourcing won t work for every product and every brand. The future contact center has to be smarter, more diverse and more flexible. It s not about innovation it will be about survival. With attrition rates higher than virtually any other job category in the service sector, contact centers are ripe for innovation and the way forward is going to critically challenge many organizations and their management styles.

3 3 making the call We re getting older. Today s global workforce is undergoing an unprecedented transition companies everywhere are faced with the need to recruit and retain talent from an aging workforce. In all countries, people are living longer and working longer. People over the age of 50 constitute a larger part of the overall population, and a larger part of the global workforce. Since 1980, the percentage of workers aged 50 and above in the U.S. has risen from 26% of the population to 37%. And by 2050, the share of workers aged 55 and older is expected to reach 19%, up from just over 14% in In the European Union, the number of people over the age of 60 will climb by nearly 50% by From a demographic standpoint, primeaged workers are 25 to 54 years old. This group has grown significantly over the past two decades, but in recent years, has flattened and is now declining. Since December 2007, the number of prime-aged workers in the U.S. labor force has declined by 0.7%, while the number of workers over the age of 55 has increased by 7.6%. In fact, the number of workers aged 55 and older is higher now than any time since 1948 and they are expected to comprise 24% of the workforce by More than 78 million Baby Boomers are being followed by a far smaller cohort of only 45 million Gen X workers, so there will be a shrinking pool of prime-aged workers to fill the gaps. For the contact center environment, this means three things: 1. The fresh-faced candidate who saw contact center jobs as a step into the workforce and a way to support their studies is becoming more scarce; 2. Contact center management will need to attract and retain a more diverse mix of generations in their workforce and this will mean some big changes in operating style; and 3. As the broader workforce struggles to fill increasing talent gaps for all industries and role types, less desirable work will become, well, even less desirable. Filling the seats in contact centers is going to get harder and new strategies to attract workers will be needed.

4 4 making the call There are 7 billion of us, but not enough skilled workers. As populations age, they also decline, and this compounds recruitment difficulties. As Figure 1 shows on the following page, there are simply too few children being born in developed countries to supply the skilled labor that employers need. The replacement fertility rate is around 2.1 children per woman, and most countries in the developed world are well below this. Instead, across much of the world we now face an imbalance between the supply and demand of skilled labor, which employers will have to change tact to confront. South Korea s fertility rate is less than half the replacement rate, 1.08; Japan s is slightly higher at It s only in developing countries where fertility rates are at abundant levels for instance, Nigeria at 4.91, and Guatemala at For contact centers, which already have a long history of outsourcing to places like India, it may appear that they have nothing to worry about. Yet, higher fertility rates in developing countries do not balance out the shortage in developed countries, because developing countries simply do not have the educational infrastructure to convert these newborns into skilled workers. Even if there were a sudden, miraculous rise in fertility rates, the effects wouldn t be felt for decades. Babies born today will take a minimum of 22 years before they enter the workforce. Increasing populations in developing nations will instead have their own equally perverse outcomes. Southeast Asia will likely see its workforce grow by 58% within the next 30 years. The developing world will likely have a growing surplus of unskilled labor at a point in time when the demand for unskilled labor is actually declining. Contact center workers require a unique and growing set of skills to deliver the kind of service that customers expect and demand. Turning to unskilled labor pools in other parts of the world simply will not solve these problems, and instead may compound them and create new problems as well.

5 5 making the call Figure 1: Global demographic and social trends The current European Union (EU) nations face shrinking labor pools:* The number of people aged years will decrease from 208.7M in 2000 to 151.2M in During the same period, the number of people over the age of 60 will climb from 82.1M to 125.1M. Russia: simultaneous high unemployment and skills shortage. Baltic Region: skills shortage and simultaneous high unemployment. China: rapid labor force growth and a skills shortage. Southeast Asia will see its workforce grow by 58% within the next 30 years. Japan: predicted to be hit hard by labor shortages, and is expected to experience the squeeze first, of all developed nations. Central and South America: high fertility rates and high levels of unemployment, in addition to northern migration. South Africa: skilled labor shortage; unskilled labor surplus. East Africa (i.e., Eritrea): skilled workers shortage. Sub-Saharan Africa: labor shortage predominantly in agriculture. India: the number of working-age people will increase to 335 million by 2030, a number almost as large as the total working-age population of the EU and the U.S. combined in 2000.* Australia: expects a shortage of 500,000 workers by New Zealand: already has shortages of skilled workers in local building and manufacturing industries. (Local PR). * Source: EU Information Demographic and Social Trends Issue Paper. Europe s Changing Demography Constraints and Bottlenecks. Fact Sheet: Living Happily Ever After. The Economic Implications of Aging Societies. Watson Wyatt Worldwide & World Economic Forum. No data provided.

6 6 making the call We re more generationally diverse. For the first time, employers are challenged by the phenomenon of four distinct generations coming together in the workplace simultaneously. Each generation has its own unique attitude towards work, and those diverse approaches often result in intergenerational conflict. For contact center environments, this generational mix provides distinct challenges and requires transgenerational solutions. A quick snapshot of some of the key, defining features of the generations demonstrates this: 1. Older generations are retiring later and looking for flexible work to improve their lifestyle. Most Baby Boomers (80%) will continue to work as contractors or free agents part-time, or for part of the year. They are typically loyal, strong performers and have higher retention rates than younger employees. 2. Generation X are the best-educated generation in the workforce today (40% have a college or university degree) and are willing to jump from job to job to pursue growth and opportunity. They can be cynical of, and frustrated by, tradition and hierarchy. One-third of Gen X comprises working parents looking for balance. 3. Generation Y and Z (or Millennials) show a high tolerance to diversity and difference. Ambitious and demanding, they question everything and need constant feedback at work because they get it in every other aspect of their lives. If they don t see a good reason for working late or making a long commute, they usually won t do it. Loyalty to one company is not their strong suit, although they are generally very loyal to their profession and the people they work with. The four generations in today s workforce 33% Generation X % Generation Y 7% Silent generation 44% baby boomers 33% Generation X 37% Generation Y % Silent generation 27% baby boomers Source: Bureau of Labor Statistics

7 7 making the call We re more generationally diverse. continued Generational differences may pose challenges for employers who want optimal performance from their entire workforce. Yet the diversity of experience and knowledge offered by four distinct generational mindsets can provide tangible benefits, if managed well. With four generations in the one workplace, all working on one (similar) hierarchical level, and completing the same tasks but perhaps in very different ways contact centers have a unique challenge on a large scale. With Gen X workers often looking for shortterm payoffs with immediate feedback and rewards, Millennials looking for meaning in their work and older generations looking for flexible ways to stay in the workforce, the contact center will no longer be an environment that lends itself to a one-sizefits-all approach. Generations will have to work together to solve problems and deliver consistency in service and management will have to help them find ways to do this. Through our own research, when we look across the generations we see a picture emerging of a workforce that is more dynamic and flexible. We see people seeking greater engagement with work and wanting to reach new levels of skill. They have a more global approach to work; where certain jobs can be performed in many different parts of the world. And there s another generation waiting in the wings to make its debut and they re likely to make the biggest impression in the largest numbers in workplaces like contact centers. So, now is the time to get to grips with managing the generations differently and to get the best results. This type of diversity isn t going to go away, it s only going to increase.

8 8 making the call We want to be free agents. Throughout the past decade, a strong trend has emerged towards building more flexible, project-based workforces. Beginning long before the current recession, this is a trend that was made possible by modern technology allowing people to connect and work together from wherever they are. One of the most important workforce trends The Kelly Services Employment Trends Growth of free agents in U.S. population of the past two decades has been the rise of the new breed of free agents consultants, freelancers and contractors. Free agents are not traditional 9 to 5 employees working for one employer. They are untethered, independent professionals or consultants, temporary or contract employees, and they move from project to project, location to location. They span all ages, professions, incomes, and educational levels, and they are interested in working for themselves. Free agents prioritize freedom and flexibility over the security of traditional employment models, and they are always keeping an eye out for more interesting or rewarding assignments that afford the best Survey undertaken in early 2011 shows that the percentage of the U.S. population that describes themselves as free agents has virtually doubled from 26% in 2008 to 44% in Free agents are a growing part of the workforce and they offer benefits to employers that traditional workforces do not. They allow employers to expand and contract their workforce quickly according to changing needs. So, contact centers that adopt technology solutions, which enable them to tap into at-home and distribtuted workers (free agents) can significantly reduce their labor costs. FREE AGENTS 44% 26% DIRECTLY EMPLOYED 56% 74% Source: Kelly Employment Trends Survey, 2011 Free agents are generally better educated and more highly skilled than the general population, so attracting them to contact center roles requires removal of the strict time-and-place barriers that currently exist around workforce planning models EIGHT 2011ELEVE work life balance.

9 About the Author JIM BRADLEY is Senior Vice President, Centers of Excellence (CoE), Project Practices for Kelly Services, Inc. He joined Kelly Services in 1996 as vice president of the Service department and later added IT Field Development to his role. In 1999, he was promoted to senior vice president, Administration, until 2008 when he became head of Kelly Outsourcing and Consulting (KellyOCG) global operations. Prior to joining Kelly Services, Jim served as director of financial services for Automatic Data Processing in Roseland, New Jersey. He also worked as a product manager for Software Plus in Rutherford, New Jersey. He holds a bachelor s degree in Finance from Fordham University in New York. About Kellyconnect KellyConnect is a global service line of Kelly Services, a U.S.-based Fortune 500 company and a global industry leader in workforce solutions. KellyConnect is an innovative, comprehensive approach to contact center workforce solutions. The KellyConnect program provides full service staffing and management solutions for a variety of contact center environments including customer service, sales, market research, collections, and help desks. About Kelly Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a leader in providing workforce solutions. Kelly offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire and direct-hire basis. Serving clients around the globe, Kelly provides employment to more than 550,000 employees annually. Revenue in 2011 was $5.6 billion. Visit and connect with us on Facebook, LinkedIn, & Twitter. This information may not be published, broadcast, sold, or otherwise distributed without prior written permission from the authorized party. All trademarks are property of their respective owners. An Equal Opportunity Employer Kelly Services, Inc. EXIT

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