Executive Insight: Multi-Sourcing. By Rudy Vidal, incontact and Matt McConnell, Knowlagent

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1 Executive Insight: Multi-Sourcing By Rudy Vidal, incontact and Matt McConnell, Knowlagent

2 Although call center environments vary, most executives share two common goals for improving the frontline: to do things better, and to do them cheaper. In response to this overwhelming demand to do more with less, one of the most common solutions to cheaper has been to cut labor costs through labor arbitrage or multi-sourcing. But many executives have discovered after the fact that cheaper came at the expense of better, taking with it quality, and consequently, customer loyalty. To discover if it is possible to achieve the seemingly opposed goals of lower costs and consistent, quality service while multi-sourcing, we conducted a series of executive interviews. We asked what everyone wants to know, Can it really be done? And, if so, how? Although call center environments vary, most executives share two common goals for improving the frontline: to do things better, and to do them cheaper. Multi-Sourcing In the call center, multi-sourcing is the act of segmenting an agent population by a number of criteria, which can include: geography, the employer, employment status, hours worked, or work environment. For the purposes of this study, the segmentation of agents by title, tenure, and union status was not evaluated, although some qualitative feedback was provided. In the average call center, labor makes up almost 70 percent of overall costs. To reduce that cost, executives have several options. They can continue to in-source all calls and utilize a mix of full-time, part-time, and temporary agents, or they can outsource calls to at-home workers and contracted outsourcers based in the U.S. or offshore. Or, like most centers, they can multi-source, using some combination of labor sources. But multi-sourcing, though often cheaper, is not a silver bullet to all the call center s problems. While using different agent types may reduce costs upfront, it often results in inconsistent service as diverse agent populations have different strengths and weaknesses and vary in performance. For example, full-time, in-sourced agents usually provide the best customer service, but are also the most expensive, collecting benefits and higher pay and using company facilities every day. At-home workers are cheaper and allow growth without expanding physically, but managing them remotely to ensure consistent quality can be problematic. Outsourced, offshore agents are the cheapest, but mean additional complications such as communication and translation issues that can negatively impact customer service levels. So, what is the best solution for reducing costs while maintaining service

3 levels? How do you control performance variance to provide a consistent customer experience every time? Study Limitations Over the course of three months, we conducted a benchmarking study on multi-sourcing to uncover what leading organizations are doing to create a consistent level of service across all agent segments. This study is the result of multiple client requests for help with addressing performance variance between agent segments in multi-sourced operations, as well as the strong response to our first white paper on the topic, The Labor vs. Loyalty Dilemma, by Knowlagent co-founder, Matt McConnell. In all, executives at 22 leading companies were interviewed in a wide range of industries (three telecoms, two banks, three health insurers, four life insurers, two travel companies, four technology companies, two outsourcers, and two retailers). Agent populations in these targeted companies were diverse some with as few as 200 agents and others with as many as 31 centers and thousands of agents. The pool of respondents included C-level executives and senior vice presidents, as well as vice presidents in customer care and customer service-based positions who are currently exploring or using multisourcing strategies. We interviewed these executives to discuss oneon-one 1) what their agent population looks like, 2) which agents are high and low performers, and 3) proven best practices for producing service consistency in a multi-sourced call center environment. What the Executives Had to Say Service Level Inconsistencies Through these executive-level conversations, we discovered that service level inconsistencies are universal. As one executive commented, We saw some major variances in agent performance in the past several years. It created such a problem for our business, addressing this issue became a top priority for us. Most companies we spoke with already employ a mix of full-time and part-time agents and are either using outsourced and at-home agents now, have used them in the past, or are considering doing so in the near future. Across the board, executives in all industries listed performance variance affecting service levels as an issue with current or proposed multi-sourcing strategies. They drew a direct parallel between service inconsistency and customer churn, and all of the executives were looking for ways to provide a better overall customer experience to preserve loyalty. The following is a high-level analysis of the general performance levels of different agent segments used by the organizations we interviewed, including full and part-time agents, at-home agents, temps, and outsourced agents -- both onshore and offshore. It also includes some of the practices currently in use for addressing the performance challenges of each of these agent labor sources. In-House, On-Site Agents The executives we talked to overwhelmingly agreed that full-time agents working in the physical call center are typically the best performers providing the highest levels of service. They cited that the primary drivers of these agents success are more training, more experience, and company benefits, which means they have more to lose if they under-perform. Furthermore, among these full-time agents, those with six to 24 months of service were among the highest quality performers, according to executives. According to those executives interviewed, the primary drawback to these high quality, full-time agents is that they are also the most expensive to employ. Additionally, they cited that with on-site fulltime and part-time agents, center expansion requires an increase in physical facility size, which is also expensive. Part-time agents, though much less utilized in the centers we evaluated (usually less than 10 percent), were reported as being similar in quality to full-time employees and less expensive overall because they do not typically have benefits. Though most of the executives we spoke with plan to expand the use of part-time agents, they listed scheduling challenges as the primary limitation with this segment. At-Home Agents Many executives we talked to are already utilizing at-home agents in some capacity or are currently exploring an at-home program. Executives agreed that most of these agents earned the privilege of working from home because of their exemplary work in the center and are therefore among the highest performing agents overall even above fulltime, in-house agents. For example, one executive commented that their at- home agent population consistently received better customer courtesy ratings than other agent populations. In addition to their high performance level, athome agents are desirable because they allow an organization to grow when it is already operating at capacity in its current facility without costly physical expansions.

4 On the other hand, executives said that ensuring consistent service through training at-home agents can be challenging logistically. Though many of these agents are required by the organization to live in a certain proximity to the center so that they are readily available for on-site training sessions, scheduling these sessions can be difficult. Providing consistent, high quality coaching and management for these employees can be challenging and frustrates supervisors. Some centers deal with these issues by requiring a mix of at-home and in-center shifts. Or, they require at-home workers to have already worked in the center s culture before transitioning to the home environment. Temporary Agents While many of the executives we spoke with had employed temporary agents in their centers in the past, most had either eliminated these temporary positions or only used them during seasonal peaks. Reasons cited included costs, as well as limited product or industry knowledge and high turnover risks. However, some of the better performing companies we evaluated successfully use temporary staffing as a try-before-you-buy mechanism. Onshore/Offshore Outsourced Agents The majority of the executives we interviewed use outsourcers in some capacity whether in day-to-day operations or during peaks in call volume. In some operations, less than 5 percent of the agent population is made up of outsourcers. In other operations, outsourced agents make up 100 percent of the company s frontline agents. Most of the outsourced agents are offshore, where labor is generally cheaper. Immediacy and frequency of training and coaching were reported as being essential for outsourcing success, and as one executive commented coaching is critical in the outsourcing model. Though using offshore outsourcers is often cost efficient, executives reported a number of challenges with these employees. The difficulties ranged from a lack of domain expertise to inconsistent sales techniques and communication difficulties due to language barriers and cultural differences in addition to the lack of integration between outsourced and in-house centers in general. Because of the significant variance in performance, customer service can suffer and the resulting customer churn can negate the cost savings of utilizing the outsourcer in the first place, executives said. For this reason, some companies choose to limit their exposure by only working with U.S. based outsourcers. Immediacy and frequency of training and coaching were reported as being essential for outsourcing success, and as one executive commented coaching is critical in the outsourcing model. Common Success Characteristics It is clear through these executive conversations that multi-sourcing is here to stay as a viable labor option. Yet performance variance continues to be an issue across all industries, in all different call center environments, and has proven to have an even bigger impact on those businesses with a multisourcing model. Based on the findings of this study, companies that experienced lower performance variance tended to have the following themes in common: They Partner. There are two ways to manage outsourced agents: with a stick or with a carrot. With the stick model, organizations partner with an outsourcer and lay out specific performance standards. If they aren t met

5 they fire them. This us vs. them approach leads to very high churn and is rarely effective. Those centers that have been most successful with outsourced agents are those that integrate outsourcers into their business and treat them as part of the company. One executive commented that his success with outsourcers is based on his view that their relationship is a true partnership and he treats them the same as any other internal call center in the organization. Outsourced agents are given the same tools and resources as full-time employees, including full access to internal Web sites and training opportunities. Those centers that view outsourcers as they view their own employees, taking care to manage them closely and provide them with the tools they need to be successful, experience a lower variance in performance. One executive cited the importance of being completely transparent when dealing with a diverse agent population. In his organization, Everyone can see where everyone stands every week. They Professionalize. Agents must be treated as professionals and provided the appropriate tools and opportunities to improve their own performance while achieving company goals. Many executives we spoke with discussed the importance of short-term and long-term planning for all resources including outsourcers and a defined associate development plan that includes the active management of agent development. We found that the most successful organizations are those that have formal hiring, training, coaching, and recognition practices in place that set clear performance expectations for agents when they are hired and provide the tools and processes that enable them to meet those expectations. Some suggestions we heard from executives included investing in cross-training programs to gain efficiencies and increase revenue, and the creation of an advisory board to take advantage of different departments expertise. Other organizations set aside up to one hour per agent per week for communications and training, and they match new agents with mentors following initial training. They are Proactive. For decades, call centers have followed a reactive business model. Agents react to ringing phones supervisors react to call volumes executives react to customer churn. To compound this problem, most supervisors and other leadership positions in the call center do not typically have strong, proactive, infrastructure management experience. World class call centers are proactive and put the customer first. The most successful centers have a defined structure in place to support that mission which includes enterprise-wide talent management processes which align corporate, center, and individual agent goals, no matter where they sit. One executive reported that silos among their multiple operations caused them to miss up-selling and cross-selling opportunities, leading them to create an advisory group to combat the silo effect and help further integration between centers. Part of this initiative included additional cross-training to provide a more efficient way of handling calls. They Use Common Tools and Processes Across the Agent Lifecycle, Across All Agent Segments. Over and over again, we heard executives call for a consistent hiring and training platform and process across all agent segments. Without it, they said, reaching a consistent level of service is almost impossible, inevitably leading to customer churn. Hiring: The most successful call centers, we found, are those that have defined, detailed agent qualifications and do not deviate from them when hiring new agents. Agents have defined qualifications, management expectations are set early on, and there is inspection at key intervals with financial incentives tied to performance to ensure that agents are being held accountable to those expectations. Training & Performance Management: Then, once key metrics and expectations have been set, agents whether full-time in the center, at home, or across the ocean must be provided with the initial training, ongoing coaching, and performance management they need to be effective. One executive commented that the cornerstone to their success in addressing performance variance in 2007 centered on improving cross-training for all agent populations and improving their use of workforce management. Ongoing coaching is especially critical when dealing with such a diverse agent population. Goals and Accountability: Based on the findings of this study, the most successful organizations are those that set clear expectations and hold agents, supervisors, managers, and partners accountable to them. They inspect what they expect at known intervals and ensure that everyone knows what is expected and is on the same page. Financial incentives are often tied directly to results, and there is an overarching theme of helping us as opposed to blaming them. In Closing The drive to create a consistent service experience is viewed by most call center executives as the next great performance initiative impacting the ultimate contribution of the call center. Multi-sourcing is a

6 viable option for providing labor strategies that can positively impact cost efficiencies, but performance variance is a significant hurdle to creating consistent service and long-term profitability. Leading organizations are working to address this variability so that all agents can provide the best customer experience through a combination of tools, processes and specific management models. About the Authors Rodolfo Vidal, EVP and Chief Customer Officer, InContact. Mr. Vidal oversees the strategy, product, marketing and service for the incontact product suite and is characterized by his ability to formulate winning strategies and implementations across the enterprise. Previously, during a 25-year career at Panasonic Corporation of America, Mr. Vidal served as director of extreme customer service (XCS), where he developed a corporate-wide initiative to address the challenge of differentiation in a commoditized market. Matt McConnell is co-founder and co-chairman of Knowlagent, an innovative strategic call center solution company. McConnell also co-authored a book with Dr. Jon Anton, Customer Service at a Crossroads: What You Do Next to Improve Performance Will Determine Your Company s Destiny. About InContact incontact is the leading provider of Software as a Service (SaaS) applications for multi-site contact centers and distributed workforces. The incontact platform intelligently routes multi-media contacts to agents anywhere while improving management visibility, agent productivity and agent retention. InContact s patented software includes an enterprisegrade ACD with skills-based routing, IVR, speech recognition and CTI. Workforce optimization features include customer experience surveys and agent scoring analysis, call monitoring, call recording, workforce scheduling and forecasting, hiring tools to reduce attrition, and targeted training delivered to the agent desktop. InContact s all-in-one on-demand platform delivers rapid application development tools for IT control, no capex, Fortune 500-compliant security, and a 24/7/365 managed network with carrier-grade redundancy. About Knowlagent Knowlagent provides frontline solutions that turn business strategy into measurable results. Knowlagent solutions reduce service variance by providing the methodology and framework needed to address all aspects of the agent lifecycle, from candidate to seasoned professional. incontact 7730 S. Union Park Ave. Suite 500 Salt Lake City, UT Satisfaction as a Service

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