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Profit Centre vs. Cost Centre

Profit Centre vs. Cost Centre

By: Turaj Seyrafiann 

July 11th 2016, 

Traditionally, call centers were managed in order to minimize the costs. The reason for that seemed simple and obvious; taking the calls and providing service on the phone appeared to be of no additional value to the organizations. The call centre activities were concentrated around providing the after sale services and at best would be considered as revenue protection (a necessary evil!!). It was many years later that organizations started realizing the value of their contact centers in not only protecting revenue but also in generating revenue from both new and existing customers. This new realization brought a new operational concept to the contact centre environment: “invest more in the centre in order to generate more revenue”!

In today’s environment, contact centers operate in two distinct modes: Profit Centre vs. Cost Centers. In a profit centre environment, the centre is operated similar to an independent or self sustaining business unit. The budgetary and operational decisions are taken with focus on generating revenue for the organization. Although revenue generation may not be the sole purpose of the centre, its management is responsible to operate – and perhaps expand – using internal funds. In a cost centre environment, the budgetary focus continues to be on minimizing the costs. Majority of the operational decisions will be scrutinize in order to find the lowest cost approach with less regard for their value to the centre or the organization. In fact in most cases it would be very difficult to quantify the value of these decisions in a tangible manner.

Which one of these two approaches is right for your centre? Well, the answer depends on the role of the centre within the organization (for example “Technical Help Desk” vs. “Sales & Services”) and the overall mandate for the centre. There are advantages and disadvantages to both approaches. In a revenue centre, the management has broader control over its internal decisions, but with the control comes broader responsibilities and accountability in making the right decisions. On the other hand, in a cost centre environment, there is constant pressure in maximizing the efficiency of the operation (which is not entirely a bad thing) while the management may feel they have none to very little control over decisions that would impact their centre.

The dividing line between the two approaches is not always clear but it is extremely important for the contact centre management to decide on an approach since it will determine and establish the contact centre priorities.

Contact The Taylor Reach Group, Inc. to assess which is the right approach for you!  

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Turaj Seyrafiaan
is an experienced senior call center consultant working with The Taylor Reach Group, Inc. 

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