Defining the elements for the success of call center outsourcing

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1 1 Abstract Defining the elements for the success of call center outsourcing Second World Conference on POM and 15 Annual POM Conference, Cancun, Mexico, April 30- May Luis Ricardo de Carvalho Assad - irassad@uol.com.br Escola Politécnica da Universidade de São Paulo Av. Professor Almeida Prado 128 trav. 2 S.Paulo S.P. Brasil f fax Prof. Dr. Roberto Gilioli Rotondaro rotondar@cwaynet.com.br Escola Politécnica da Universidade de São Paulo Av. Professor Almeida Prado 128 trav. 2 S.Paulo S.P. Brasil Brasil f fax Abstract Market efficiency, defined as the acquisition of a higher level of information by the customers and the resulting increase in their demands, led call centers to a rapid growth and the establishment of companies specialized in providing the infrastructure and human and technological resources required for customer service activities. When customer service outsourcing is discussed, controversy on the subject arises, that is, considerations on the service quality (either at objective and subjective dimensions) as well as on relationship strategy are addressed. This paper aims to identify the elements of the outsourced service perceived by the contracting companies as critical for the success of call centers designed to build a closer relationship with the customers. For this purpose, it was used the Heys Critical Incident technique. The critical issues detected were compared to call center final-customer demands reported in literature.

2 2 Introduction The telephone has transformed the way companies communicate and trade, and radically altered the way people work. Effective use of the telephone for modern business purpose means reaching more people more often, at more places for more hours per day, all at a lower cost basis and with a higher and faster return per head employed (Reed, 1997) Globalization and the increased competition in different markets, besides leading companies to search for greater cost efficiency, quality and product development, have forced the development and improvement of communication channels with their customers, either to solve their problems related to the products and service, or to provide information and get suggestions. As part of this process, call centers grew very fast worldwide over the last decade. A call center may be defined as a physical operation within an organization, in which a managed group of people spend most of their time doing business with customers by telephone, usually in a computer automated environment. (The Merchants Group, 1998; The Call Center Association, 1999). Over the last years, due to the growth and popularization of Internet, call centers started to use, besides the telephone, the communication channels of Internet environment, the chat and , to serve the customers. Therefore, the term contact center has been frequently used to refer to these multi-channel call centers. Call centers are now an established feature of developed, postmodern World, a distribution means for a vast array of products and services (Arkin, 1997).

3 3 In Brazil, market maturing, defined as the acquisition of a higher level of information by the customers and the resulting increase in their demands, led call centers to the next stage: it is not enough only to offer a service; it has to be accessible, efficient and polite as well. From a corporate perspective, they must be low-priced and even help to reduce other costs and/or generate income. In this context, several companies specialized in providing infrastructure and human and technological resources required for customer service activities started offering their services to companies, including cost reduction, higher human and technological expertise, greater flexibility and greater know-how regarding customer relationship. These companies (from now on called outsourced companies) have succeeded in taking over the call center activities of companies from several segments. Nowadays, outsourced services account for about 30% of total current service positions in Brazil, which totalize about 200 thousands (Gazeta Mercantil, edition 5/6/03). When customer service outsourcing is discussed, a controversy arises on other aspects besides reduction of costs provided by this activity. Against the evidences mentioned above, the risk the contracting company is exposed may damage its image and even lose customers because the contractor is assigning to a third company the direct contact with the customers. That is, this risk includes considerations on service quality (either at objective and subjective dimensions) as well as on relationship strategy. This controversy has already arisen regarding outsourcing areas, such as, patrimonial safety, document keeping and even computer services, once considered susceptible and, for this reason, could not be outsourced. To day these areas are usually managed by subcontracted companies, without exposing the contracting companies to higher risks.

4 4 Therefore, the issue on whether a company s call center should be outsourced or not, apart from the economical aspects (that can be easily evaluated to make a decision), still involves many subjective components. Based on this scenario, it is interesting to determine how a company can outsource its services successfully. The objective of the present paper is to identify the elements of the outsourced service considered critical by the contracting companies for the success of call centers to improve their relationship with consumers, and compare these critical elements with the perspectives of the service final-user. Since call centers can have the most diverse configurations and aim rather different targets, the focus will be directed to those with the typical profile of Customer Service. The mission of call centers and their success Summarizing, the mission of call centers can be defined as rendering customers more satisfied with the products and services than they would be if this communication channel were not available (Feinberg et al., 2000). The market experience considers some points for the success of this mission, based in the business evidences shared by outsourced companies: massive use of technology (the basis of any professional call center), implementation flexibility, call center growth or change (including staff recruiting and selection), human resources expertise and sound knowledge on customer service processes. Nevertheless, Customer s perceptions of the service received are, the basis of the Call Center success. According to Parasuraman and Berry (1991), customers evaluate service quality by

5 5 comparing what they want or expect with the service they receive. Consequently, for call centers to earn a reputation for service quality, employee must consistently perform at levels which customers perceive as meeting or surpassing their expectations. (McColl- Kennedy and White), 1997 According to (Gilmore 2001), (Brown, G., Maxwell,G., 2002) two dimensions of customer service have been consistently considered as contributing factors for a high-quality service: First, friendliness and efficiency of the attendant, and second, product cost and call center convenience. However, in service-related literature usually contracting companies consider another factor as important in affecting the service quality perception by the final-user: the way the operation is managed. Considering the definition of the call center mission presented above, it is worth analyzing this point in more details.

6 6 Operation management Call center procedures usually focus in monitoring a series of operational indicators, which include telephone system (call volume, average waiting time, service average time, etc.), staff management (labor turnover, assessment of staff performance, etc.) and service efficiency (volume or percentage of problems solved at the first contact, volume or percentage of recurrence of claims/requests, etc.) metrics. The idea, deep-rooted in call center sector, is that keeping these indicators above the lower levels ensures the quality of the service rendered to the customer and, consequently, his/her satisfaction. Two main reasons justify the focus on these performance measurements. The first one is the relative simplicity and prompt availability of many of these indicators at the several call centers (Feinberg et al., 2000), due to the massive use of information technology. The second reason is that many of these metrics constitute parameters for the call center sizing (number of service positions, number of operators and work shifts, number of dial-in lines and waiting lines, etc.), which have a direct influence on the operational costs. In addition, many of these metrics are usually included as provisions in service agreements, establishing penalties and/or compensation for keeping the indicators above or below key-targets. It is not a surprise, therefore, that many call center managers focus their management efforts and actions on these metrics. In fact, some studies found that, at management level, meeting or surpassing these indicator goals is translated into a guarantee and synonym of service quality for the final-customer, leading them to adopt a production line approach for the call center (Gilmore, 2001; Brown and Maxwell, 2002).

7 7 However, there are evidences that the pure and simple control of these indicators contributes marginally to the customers satisfaction (Feinberg et al., 2000). In the case of call centers that handle more complex and susceptible demands (as is the case of CCSs that are the subject of this paper), the focus on these metrics, through the strict control and standardization of procedures and scripts, restricts the scope of action of service providers, leading to low levels of customer satisfaction (Gilmore, 2001). Therefore, other less tangible aspects of the service, not addressed by the indicators overprized in practice, offer a greater contribution for the final satisfaction. These less tangible aspects are related to the customer perception of the quality of the service rendered during the call. According to Brown and Maxwell (2002), a good service perception is the result of a prompt answer, courtesy, clear communication consistent with the customer character and personality, besides providing reliable and complete information. In other words, the final-customer evaluates the quality of the service mostly by the aspects that define the nature of the relationship between him/her and the attendant. The nature of the relationship is characterized by the attendant s communication skills, professional background (knowledge, training, etc), decision-making autonomy and ability to gather information or get other areas involved in the process to meet the final-customer demands (Gilmore, 2001; Brown and Maxwell, 2002). Compensation and recognition policies also play a significant role in the development of a positive relationship: an underpaid and unmotivated employee probably will not strive to perform positively the inherent tasks of a customer care service.

8 8 Considering the profile of a CCS, that handles complexes and, sometimes, susceptible demands, it seems reasonable to conclude that a management focused primarily on the qualification, recognition, participation and autonomy of attendants tends to result in final-customer greater satisfaction than a management focused on the control of operational metrics, similar to a production line (Gilmore, 2001; Brown and Maxwell, 2002). However, the latter is still predominant in market, due to the reasons mentioned previously. Contracting Companies research A qualitative research was conducted, following the critical incident technique, to detect which aspects of the outsourced service the contracting companies most value. The Critical Incident Technique (CIT) (Bitner et al., 1990) has been used to define the requirements related to customer s expectations and needs. An incident is defined as an observable human activity that is complete enough to allow inferences and predictions to be made about the person performing the act. A critical incident is one that contributes to or detracts from the general aim of the activity in a significant way. Critical Incident involves specific interactions between customers and service company employees that are especially satisfying or especially dissatisfying (Bitner et al., 1990). To deal with electronic business we need a somewhat broader definition that includes the interaction with all aspects of the service company with which the consumer may interact (Shostack 85).

9 9 An incident was required to meet the following four criteria: (1) involving employee-customer interaction, (2) being very satisfying or dissatisfying from the customer s perspective, (3) being a discrete episode, and (4) having sufficient details to be visualized by the interviewer. As an exploratory method, CIT shares the advantages and disadvantages of other exploratory inductive methods. However, when the purpose of the research is to increase knowledge on a poorly documented phenomenon, an approach such as CIT seems particularly well suited to the task. After the definition of CI, a judge will group the incidents into satisfaction items and then group the satisfaction items into customer requirement categories. It is necessary to have two judges to make all classifications. This procedure involves two steps: First, customers are asked to answer the following questions: (Hayes 1992) Describe 5 specific events that lead to satisfying moments of the service they received in the past. Describe 5 specific events that lead to dissatisfying moments of the service they received in the past. For this step, it is essential that you obtain the input of people who have received the service. These people must be actual customers who have had several interactions with the service

10 10 provider, since they will be providing specific examples of services. The recommended number of customers to be interviewed ranges from 10 to 20 people. Secondly, the information is classified into groups. The first judge will group the incidents into satisfaction items and then group the satisfaction items into customer requirement categories. It is necessary to have two judges o make all classifications. See Fig. 1 QUALITY DIMENSION SATISFACTION ITEM SATISFACTION ITEM CRITICAL INCIDENT CRITICAL INCIDENT CRITICAL INCIDENT Fig. 1. Hierarchical relationship among incidents, satisfaction items and customer requirements Results Four companies using outsourced call centers with the typical profile of Customer Service were selected for the search: automotive industry, a white-line appliance manufacturer, an electroelectronic appliance manufacturer and an automotive financing company. Forty critical incidents was obtained from the completed questionnaires and then grouped and related with the satisfaction items and the two quality criteria defined by the final-customer, as stated in the previous chapter. (1) Attendant friendliness and efficiency (2) Call center cost and convenience

11 11 Satisfaction items State-of-the art technology Flexibility to expand/reduce the call center Critical incident Outsourced company offers state-of-the-art technology Flexibility Rapid growth with infrastructure expansion Operator hiring according to the demand Demands rapidly handled Agility Competence Perception of customer needs Consulting Outsourced company has knowledge and expertise on customer care service Serves the customer so as to meet his/her needs Lack of knowledge of the customer business Process and people management Delay in problem solution

12 12 Infrastructure and location Service costs Pro-activity and innovation Human Resources Management Proper service rendering on the part of operator Inadequate physical area Infrastructure properly sized Proper external location Near the operations High service costs Outsourced companies offer new solutions aligned with my business Innovation and development of new products Flexibility in staffing Personnel abilities consistent with my type of service Excessive use of robotization High turnover Outsourced company ensures operator motivation and commitment Robotization of operators (lacks a more humanized service) Lack of training on service rendering for operators Treatment given to operators Lack of career plans for the operation Salary paid to operators Commitment of outsourced team with the contracting company

13 13 Proper management Lack of communication and interaction among the business, technological and operational teams of the outsourced company Burocracy Table I Critical incidents detected and their relationship with the satisfaction items Discussion The analysis of the incidents listed in the first column is not surprising. There are basically the values exhaustively promoted by outsourced companies (technology, flexibility, call service knowledge and human resources expertise), which the contracting companies agree with and value and, therefore, are critical for the selection of an outsourced company. The contracting companies are concerned about the way outsourced companies manage call center human resources and their own service processes. Based on the incidents listed, it can be observed that outsourced companies require from the operators greater care, preparation and appreciation. This is perceived as a critical point for a high-quality care service. The implied message is that contracting companies have already perceived that the management offered by production line call centers, does not offer the final quality of service the customers expect to receive. According to a search conducted in literature, this is one of the two most critical items for the final-customer. The customer tends to base his/her opinion of the company on the transactions with the agents. The voice, tone and kindness of the attendant becomes a direct extension of the Call centre brand. There must be a balance between efficiency and courtesy so that the caller does not feel hurried to get off the phone or stay too long.

14 14 When they list operational costs, the contracting companies convey the common expectation of any consumer: get the best for the lowest price. It can be observed that the contracting companies require the outsourced ones to have a less reactive attitude towards their demands, when listing the critical incident pro-activity/team participation in the process improvement. It can be concluded that contracting companies expect the outsourced companies anticipate their potential needs or those of their finalcustomers. Actually, this means that the promise made by outsourced companies, when presenting themselves as experts in customer care service has not been completely fulfilled. Finally, the remaining incidents, as stated in the previous item, probably reflect situations specific to the contracting companies that participated in the research, such as problems in business negotiations, physical location of the call center and delay in answering a specific request. Conclusions The success of an outsourced Call center depends not only on how the contracted company manages the items technology, flexibility, service care knowledge and human resource expertise, but mainly the items that are prioritized by the process final-customers, such as operator motivation, competence, pro-activity and innovation, recognized as the most critical points in the process. Such satisfaction items will define the success of the operation on a medium- and longterm basis and, therefore, play a critical role in the selection of an outsourced company.

15 15 Bibliography Arkin, A.,1997. Hold the production line. People Management 6 (3), Bitner, M. J., Booms, B. H. and Tetreault, M.S. (1990), The service encounter: diagnosing favorable and unfavorable incidents, Journal of Marketing, Vol. 54, pp Brown, G. e Maxwell, G., 2002, Customer Service in UK call centres: organizational perspectives and employee perceptions, Journal of Retailing and Consumer Services, Vol. 9, pp Call Centre Association Dean, A. M., 2002, Service quality in call centres: implications for customer loyalty, Managing Service Quality, Vol. 12, No. 6, pp Feinberg, R. A., Kim, I., Hokama, L., de Ruyter, K., Keen, C., 2000, Operational determinants of caller satisfaction in the call center, International Journal of Service Industry Management, Vol. 11, No. 2, págs Gilmore, A., 2001, Call center management: is service quality a priority?, Managing Service Quality, Vol, 11, No. 3, págs Hays, B Medindo a Satisfação do Cliente Qualitymark, S.P. Brasil The Merchants Group Parasuraman, A.; Zeithaml, V.A Berry, L.L. Delivering Quality Service. New York; The Free Press, 1991 Reed, D., 1997 In the line of fire. Marketing Week, November 13, pp McColl-Kennedy, H., J., R.,White, T., 1997 Service provider training program s at odds with the customer requirements in five star hotels. The journal of services and marketing 11 (4),

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