The Taylor Reach Group - Call Center Consultants » Purchasing Decisions

Operational Indicators: Financial Metrics

colin — Fri, 29 Oct 2010 13:15:28 +0000

Operational Indicators: Financial MetricsCost per Call / Cost perMinute
Operating & Capital Expenditure / FTE – In the last three posts we discussed various operating indicators. Those indicators were measuring and representing the efficiency of the operation. In this post, we step beyond the pure operation point of view and will look at some of the financial indicators and metrics that are a part of call and contact center operations.
As more and more contact centres are treated as a separate business unit, it becomes necessary for contact centre management to deliver expected services while improving their bottom line financial results. Failing to provide services within a given budgets or financial targets puts pressure on the management team to reduce services, offer lower quality service or both! Even without such financial pressure, providing services at a high cost creates opportunities for other centres (outsourcers) to offer better financial results (i.e. profit) to the organization and as a result, make the internal contact centre redundant. As contact centres evolve, it is the responsibility of the contact centre management to understand their financial results (cost of providing services) and continuously improve it.
While overall financial requirements and results are indicated and discussed as either Capital or Operating Expenditure, a more granular, detailed and specific indicators are required to understand and measure the improvement in the efficiency of the contact centre. The most common indicators are Cost per Call and Cost per Minute.
Cost per Call
This is an overall indicator representing an average cost for each call (this indicator can be expanded to Cost per Contact to include all types of contacts including emails and chat). This indicator can be calculated based on historical data or for the current year. What is included in the cost varies from centre to centre depending on what items have been included in the Operating Expenditures (We will talk more about Operating vs. Capital Expenditure later in this article). In majority of cases, the costs include salaries (Agents, Supervisory, Management and support staff), technology (software licensing and maintenance) and telecommunications. Other organizations may include less evident costs such as benefits, Real Estate/rent and utilities to provide the total (and more complete) cost of delivering / receiving a contact.
Cost per Call provides a valuable piece of information as well as providing a reality check about the operation. As this indicator provides the average cost for each and every call, it brings the focus not only to how that money is spent and how to improve the service delivered (combination of AHT and service level), but also how many contacts are being made and if they can be reduced. Analyzing the numbers could also point to a less costly method or channel that can provide the same (or similar) level of service with the same customer satisfaction. As an example it is widely accepted that Self Serve contacts (automated) are less costly than a live contact and hence typical push to provide more and more automated services. (When doing such comparisons, one must consider the potential negative impact on customer satisfaction and eventually on customer loyalty).
Cost per Minute
As mentioned before, Cost per Call provides an average cost for each and every call or contact. This number can be broken down for different channels (if present) to provide a more accurate data, but what about different types of contacts within the same channel? For example one call might be a simple update of address while the next call has to do with obtaining a mortgage or car insurance! In these cases, calculating and presenting the average cost may not offer meaningful data as average handle time for each call will be greatly different. In these situations Cost per Minute would be a much better indicator as it provides a common base for comparison and operational improvement. By definition, Cost per Minute is not dependant on AHT and only provides data with regard to cost structure of the centre (people, technology and telecommunication) and the impact of the occupancy rate (the higher the rate, the lower the cost per minute).
Which one of these two indicators should be calculated, reported and used? The answer depends on the variety of the calls at the centre and the desired details and accuracy. If AHT is consistent across different call types (minimum variance), then Cost per Call can provide complete information while easier to calculate. On the other hand, for centres with a full range of call types (simple to complex) and call lengths (short to long) it is better to use Cost per Minute. (One can always calculate costs for each specific type of calls based on its AHT).
The issue of the Cost per Call vs. Cost per Minute becomes more important when dealing with outsourcers as it may become the main cost parameter in the contract. It has been said that Outsourcers typically prefer Cost per Call, as this framework allows them to concentrate their improvements on AHT, and as a result increase their profit margin. Cost per minute (along with an agreed Service Level) does not provide the same framework for outsourcers to improve on the profit margins by reducing the AHT. However a Cost per Minute model could encourage the unscrupulous outsourcers to increase Handle time to increase profit margins.
Operating vs. Capital Expenditures
Traditionally, in any organization, a business unit must handle two different set of expenses. The larger and infrequent items such as purchase of Real Estate, furniture, desktop computers and major software are treated differently both in terms of P&L (Profit and Loss) reporting and for taxation purposes. These expenses are considered and reported as Capital Expenditure. The ongoing and recurring expenses such as salary and benefits, utilities and smaller infrequent items are categorized and reported as Operating Expenses. What is the difference between the two? Well, the answer lies at how each of these is treated. By default, majority of the larger items are one time or perhaps infrequent expenses and are for physical items that have an expected life longer than a year (such as a desktop computer). In effect, even though an organization may have incurred the total cost at the beginning (incurring the cost should not be mistaken with payment options), the benefit from the item lasts much longer. For that reason, such costs are amortized or spread over the expected life of the item and only certain portion of the cost (depreciation) is included in the Profit and Loss statement.
Operating Expenditures, on the other hand are those expenses that occur on a regular basis (on-going) for the services (and products) that are consumed regularly (such as agents salary). These types of expenses do not have an expected life and are directly related to the operation of the business unit.
In simple term, Capital Expenditures, are the money that is invested in creating a business entity (be it a contact centre or a manufacturing unit), while Operating Expenditures are the cost of operating that entity day in and day out. The overall cost used in calculating the Cost per Call or Cost per Minute is usually based on the Operating Expenditures and does not include the Capital Expenditures, the exception to this treatment would be where outsourcing or a ‘carve out’ where assets would be purchased by the outsourcer.
In today’s call center environment there is less clarity between Capital and Operating Expenses due to the rise of cloud computing, SaaS and hosted solutions. All of these developments allow companies and call centers to forgo capital expenditures to secure and employ a vendor’s solution and instead pay a fixed monthly rate per user. Heretofore these costs would have been Capital purchases, but today become Operating Expenses.

Full Time Equivalent (FTE)
One last operational indicator, although not specifically financial, is the Full Time Equivalent or FTE for short. As discussed in previous issues, many contact centres hire part time employees to complement their full time work force. Although having part time employees provides flexibility in work force management, counting the number of agents directly as a head count does not provide an accurate picture (especially in terms of salary). For this reason, and for the purpose of planning and financial reporting, majority of centres use the working hours to convert the number of part-time staff into equivalent of a full-time employee (for example if two agents each work half the time, for the year, they would be considered as one Full Time Equivalent or FTE). In these cases, the operating budget is based on the total FTE for the year and the contact centre management can decide how and when to utilize the total budget. It should be noted that typically in a contact centre, staffing (salary, payroll expenses and benefits) can account for up to 75% of total operating expenses.
The Bottom Line
The overall operation of any business is dependant on its ability to successfully manage its limited financial resources. The above indicators are used to assist contact centre management to understand and improve the final financial results. It is important to understand the costs the center incurs and what choices and options the center and organization have in relation to reducing these costs. Poor service isn’t always less expensive than superior service. A best-in-class organization can provide excellent customer service while operating within reasonable and sustainable financial results.

The Do’s and Don’ts to Achieve Customer satisfaction in your contact center

colin — Thu, 16 Sep 2010 17:14:36 +0000

We recently were asked this question by Call Center Life, a magazine serving the Turkish call center industry and wanted to share this content here…

Question: Can you briefly describe the “to do’s” and “not to do’s” when managing a contact center as a part of the customer satisfaction?

Answers: One of my matras has always been to make new mistakes, if we are always learning we will always make new mistakes. The person who never makes a mistake is the person who never takes a risk or achieves anything.

There are a lot of smart, very smart individuals managing and directing call and contact centers today. Yet, these bright, bright people still manage from time to time to do things that defy understanding. This is my ‘top ten list’ of really dumb things that smart call and contact center executives do. Each and every one of these ‘mistakes’ can undermine all of the good work a center has done to provide superior customer service and satisfaction. The following list of ‘mistakes’ highlights actual experiences we have witnessed and the corollary or ‘to do’ can be seen once you have reviewed the ‘mistake’.

1- Don’t invest in training or professional development.
We spent enough money to train them when they were hired, why would we want to keep them current on changes in the company our processes our customers or technology. They’ll figure it out. Besides we can always use the dollars allocated to training for other areas like executive retreats.

2- Don’t stay current on new technologies impacting on the call and contact center operations.
After all why would we want home agents, speech recognition, higher quality or better staff morale and management?

3-Don’t read trade press, blogs and newsletters.
We already know everything, and besides who has time to read when I an constantly in meetings.

4-Don’t include remote staff in your operational budget.
There aren’t very many of them out there…is there?

5-Don’t share new technologies and their capabilities with senior management.
They will just say no, so what is the point.

6-Don’t share ideas concepts and results with Marketing.
After all they never share with you.

7-Don’t consider the agents point of view when you examine new technologies.
Its just one extra open window on their desktop…they have done fine with the current 14 so what’s one more window?

8- Don’t give agents authority to make any decisions.
It is important that managers make all decisions…I know it is only a $.49 credit, but it’s the principal of the thing.

9- Don’t take a long term view of your incentive program.
Incentive programs are designed to generate short term results. I just don’t understand that while our incentive to reduce average handle time was so successful our call volume increased substantially.

10- Don’t share with HR the staff and skills/competencies work best in the center.
Turnover is a part of life in a contact center so we shouldn’t try to address it.

Each one of the above list reflects comments (or a paraphrased version) that I have heard from contact center executives. Each of the above points reflects a narrow and/or short term view of the center. Now as I said above these are clever people, so how can such ‘tunnel vision’ exist within a group of specialists? The can be many causes that can create situations of ‘tunnel vision’, these can include:

Lack of time: The old saw that “meetings are a nice alternative to work” rings true in many organizations and contact center are not exempt. Days filled with meetings, limits interaction with direct reports, free time to review news stories, white papers, technology articles etc. it also reduces time to speak with industry peers, to attend conferences or seminars. All of this leads the manager little option but to continue to rely on the status quo in operations as this is the only environment the manager is comfortable and knowledgeable about.

Conflicting objectives: Often contact centers are asked to deliver multiple objectives simultaneously: improve customer satisfaction and reduce costs, or increase first call resolution, but don’t spend anything on additional training. These examples of conflicted objectives are frequent occurrences in contact centers today. Mission Statements focus on “providing world class customer service”, but the contact center receives no budget to deliver this.

Unclear objectives: Centers are often charged with broad mandates to “deliver excellent customer care” but benchmarks and standards are not defined to allow the contact center to know how success will be measured.

Each of the above three examples leads the contact center management to revert to what they are most comfortable and those things that they can quantify without ambiguity. Further they tend to focus on the short term as there is no clear long term vision or plan. In short this is what they have done before and what they are doing now. This approach is not conducive to looking forward or acting proactively. To the contrary this approach ensures that the management focuses on the past. The end result is bright contact center executives, then make dumb decisions.

ICCM Canada Cancelled

colin — Mon, 05 Oct 2009 16:46:18 +0000

Questex Media Group has made the decision not to hold ICCM Canada in 2009. This decision was based not only on current marketplace conditions, but also on the changing needs of our exhibitor and audience base. As always, Questex strives to meet the education, training and networking needs of our event attendees, and to maximize their ROI and time away from the office with unique, timely and relevant event experiences. Please note that this is not a permanent cancellation, and that we will continue to evaluate the opportunity for holding ICCM Canada in the future.
Questex Media

The Challenges in Employing Research Reports to Make Purchase Decisions

Alka — Tue, 01 Jan 2008 19:23:57 +0000

There are a number of sources where call and contact center operators can gain insight into the offerings of contact center telephony vendors. The majority of these are provided or sponsored by the vendors and as such are suspect to greater or lesser degrees. There are a few research organizations that research and provide assessments of the vendors. Even these though are not perfect as many are based upon vendor submissions and interviews and can only be as good as the research analysts’ questions and depth of research completed.

In reality each call or contact center is unique and has unique requirements. Whitepapers and research studies can be helpful in assessing which vendors may be able to deliver possible solutions for your center. There is however no substitute for conducting a detailed assessment and analysis of your own requirements.

Selecting and purchasing call/contact center telephony is a significant decision. For organizations that rely upon their center as a primary customer interface, and who doesn’t today, a bad purchase decision has significant financial and career limiting impact. So perhaps it shouldn’t be a surprise to see people and organizations relying on ‘research’ from big name firms to validate their own findings and in some cases as the primary basis of a purchase decision.

Before committing to a business decision based upon a research study, it is important to understand the methodology and objectives of the study. For example Gartner in describing their methodology for their ‘Magic Quadrant’ research studies, state that their study provides “snapshots of markets and their participants1”. Further Gartner also states in explaining their methodology, “is not intended to be an exhaustive analysis of every vendor in a market”.

A look at the methodology employed by Gartner maybe cause to examine more closely the suitability of their study as a basis for a business decision. The Magic Quadrant scoring is broken down into two components “Completeness of vision” and “Ability to execute”. On the surface few would argue about the value of these two assessment criteria in an assessment; but a deeper dive surfaces more than a few questions.

The research is heavily weighted to information provided by the vendors through briefings, product documentation, and client provided references. This approach increases the likelihood that the vendors are able to secure a superior review due to the effort they devote to disclosing and managing information provided to Gartner. This is likely more often the case in “completeness of Vision” which deals to a large degree with the product roadmap and future development. The “Ability to Execute” by nature is focused on the information and references provided by the vendor. Every vendor has clients who love them and will provide a positive and flattering point of view.

While the results reflect the data generated by the process, it is not without challenges. All potential purchasers would be wise to keep a few relevant points in mind:

1. The vendors assessed are not all inclusive. Some organizations do not participate in the process. The vendor may be too small or simply not focused on the contact center market space.

2. Magic Quadrant results may not be representative of the real world customer experience. For example, Cisco ranks very high in the Gartner assessment, below.

Figure 1. Magic Quadrant for Contact Center Infrastructure, North America, 2007 Source: Gartner (August 2007)

(Insert Magic Quadrant chart)

Yet Cisco implemented in spring 2007 their new ‘A2Q’ (Assessment to Quality) process. This requires all resellers and integrators (this includes their top tier ‘Gold Certified Partners’) to allow Cisco two weeks to review all code before it is deployed. This is certainly a positive step given the inherent complexity in the Cisco solution. It is designed to provide a superior end result. It can also be seen as a response to significant stability issues that Cisco has had with their contact center product.

In one case that TRG is familiar with a client was unable to complete call routing and reporting for almost six months following a change to their auto attendant messaging. Yet in the 2007 Magic Quadrant Cisco received the highest marks for ‘Ability to execute’. Cisco is not the only example:

Oracle touts their Oracle Seibel hosted CRM as being recognized as a leading platform. Yet this too has been plagued by stability issues, unresolved help desk tickets and an ineffective offshore help desk. In this case Gartner identified Oracle as a ‘visionary’. A less flattering label may well be that of vaporware, because the solution doesn’t deliver what it promises.

The Magic Quadrant assessment does not include all vendors in the market. Some are too new, some are too small and some simply elect not to participate in the process. One example of an omitted vendor is ShoreTel. ShoreTel is a publically traded IP telephony vendor (SHOR) which was a late entrant into the call and contact center market space. The company deployed their first IP PBX solution in 1998 and did not have a fully featured call/contact center offering until 2004.

ShoreTel however has an advantage over many of their competitors in both the IP PBX and Contact Center markets. They developed their solution from a blank page. ShoreTel is not encumbered by legacy equipment and a desire to ensure compatibility and future migrations from a legacy base. Nor have they assembled their code based upon acquisition and the inherent integration of thousand of lines of code to complete specific or discrete tasks and activities. Freedom from these restrictions has allowed ShoreTel to develop and deploy a good call/contact center platform. While the ShoreTel solution may be somewhat less robust than other solutions on the market today, depending upon the user requirements it may well be the best alternative for a significant percentage of contact center operators.

The following chart outlines the results of TRG call/contact center vendor selection engagement that was completed for a Fortune 500 company with more than 650 agents in numerous centers across the country.
(insert contact center telephony assessment)

Figure2- TRG- Commissioned Assessment
Specific user requirements were developed (41 mandatory and 14 future requirements). Bids were solicited from 14 firms including all of the major players in this sector including: Cisco, Avaya, Nortel, NEC, and Interactive Intelligence, as well as Mitel, ShoreTel and others. Cisco, NEC and ShoreTel were short listed. At the end of the process it was ShoreTel was number 1 in the rankings ahead of Cisco as #2.

The results above are not to suggest that ShoreTel is the best solution for every company. Nor that ShoreTel has the best functionality for every application. It doesn’t. It does suggest that when companies examine their needs and look for the vendor that best meets those needs they may be surprised, with the result. ShoreTel for example offers a competent call center solution, with many of the enhancements organizations are seeking today.

Clearly while the Gartner Magic Quadrant is very informative and does provide an insight into the vendors selected, it is, at the end of the day a “snapshot”. A snapshot that is skewed based upon Gartner’s vendor selection and assessment model. This research is a good starting point of reference for understanding the vendors. But by its very design it is skewed to those vendors who invest the greatest amount of time and resources to manage this process. This should be a point of caution for any organization that bases their purchase decision on this or any other similar reports; and thinking that “nobody gets fired for buying IBM” (or basing their purchasing decision on a well regarded research report).

So what is the preferred method for making a purchase decision? As stated previously, each call or contact center is unique. So should be the solution to meet those needs. There is no ‘one size fits all’ solution. The best solution will be one that meets the company’s’ needs today and expected future requirements. Employing an independent consultant can assist an organization is clarifying and weighting the functional requirements for today, the ‘nice to have’ and functionality expected to required in the future. This may also be completed internally if the resources and competencies exist. Developing a Request for Proposal (RFP) that sets out clear requirements is a logical next step in the process. Scoring the responses against the predetermined criteria ensures that the best vendor to meet your current and future needs is identified. Lastly, complete due diligence to prove the ability of the vendor to deliver the desired functionality in the manner required completes the assessment process.

Follow the above steps ensure that you and your organization end up with the solution you need and not just one that has received research accolades. You will own this decision for a long time. Make sure it is the right one for you.

For more information about The Taylor Reach Group, Inc. please visit our website at thetaylorreachgroup.com.

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