Primary Matters


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Targeted Cost Cutting:

 

Getting Smart Quickly to Optimize the Performance of Customer Contact and Technical Support Centers

June 26, 2001

By Greg Borton

CEO

Primary Matters, Inc.

(902) 794-7095

 

Many customer contact and technical support centers have reasonable data about the number and average costs of calls and emails they handle.   They also know the cost of the personnel doing the work.   Some also have forecasts of the demand on their organizations, typically based on past history and rough corporate or divisional growth projections.

Although critical to have, relying solely on this information for managing hides many of the most important opportunities for understanding underlying costs and optimizing the work.   In addition, this information ignores the underlying business activities that are the real driving force in creating demand on the organization.

The term 'Management by Contacts' can be applied to those groups that know the number and average cost of contacts.   Typical management questions under this approach are "How can I reduce the number of calls or emails?" Or "How can I shorten the amount of time it takes to handle a contact?"   The answers to these questions most certainly can provide results, but they often do not strike at the heart of the issue or unearth the opportunity.

What is a Business Driver?

The demand on a center's resource is primarily driven by external events, such as new sales and sales forecasts, size of the installed customer base by product line, new product releases, marketing programs, forecasts of down-time, mergers and acquisitions, etc.   These external events are Business Drivers, since they determine the consequent work that needs to be supported by the contact center.

So, in order to focus on why a contact center 'does what it does', the question that actually needs to be asked by management is "What are the Business Drivers within the company that create demand on the contact center?    And what are the consequent Activities - the set of calls, emails, web interactions and back office work - that the contact center must perform to support each of these drivers?"

If a manager understands these Drivers and understands how these translate into work Activities for the contact center, good forecasts of resource requirements and budgets are easy to create. Particularly in the current economic environment, managers must have access to information that tells them where to focus attention in order to identify the best way to increase productivity and reduce cost.   Even once these areas are identified, the options that are available are as confusing and numerous as ever.   Managers also need to be able to easily and accurately understand the impact of the 'what if' alternatives that are available.

What is a Business Activity?

Business Activities are the work processes that must be accomplished in order to meet the demands placed on the Center by the Business Drivers.    For example, business activities could be:

  • The successful booking of an airline ticket.
  • Solving a Customer's technical problem with a product.
  • Setting up a new customer.
  • Handling a credit card fraud issue.
  • Supporting a customer with account information.
  • Upgrading a warrantee or up-selling to a current customer.

Note that the way these Activities are defined enables a manager to link the forecast of each Activity's monthly volume to major plans (Business Drivers) in the company.   For instance, 'Setting up a New Customer' can be directly linked to the product sales goals.   'Making an airline trip' can be tied to the corporate goals for total airline trips traveled per month.   Supporting technical issues can be tied to both the number of new customers and the size of the installed base for a product group and the frequency of trouble issues that arise from each of these different groups.

This type of linkage also makes it much easier for contact center managers to meet with their peers in other parts of the company.   These groups understand forecasts in terms of sales, new customers, product shipment and campaigns.   They do not understand the businesses in terms of telephone calls, emails and back office work.   It is the responsibility of the contact center manager to make the translation from 'call volume' into Business Drivers in order to communicate well with the other business functions in the company.

Management by Contacts' versus 'Management by Business Activities'

Managers in making the transition from 'Management by Contacts' to 'Management by Business Activities' will be surprised by how little effort it takes to collect the data and package the data into a business activity view of their organization.   It can be accomplished in a matter of days when the basic approach and methodology is understood.  

The benefit of expending this moderate amount of effort is in what it reveals.   The business activity view often reveals 'quick hit' opportunities that can lead to 15% to 20% productivity improvements.   This is because one is able to see where work improvements may improve cost and at the same time improve the quality of service.   

Needless to say, in the current economic climate, this is exactly what is in order for supporting overall corporate goals of cost management, cost reduction and service level improvement.    In the longer term, understanding the Business Drivers can lead to a complete re-engineering of the contact center, its role in the company and its relationship with the customer.   This can lead to even larger cost savings, higher customer satisfaction and greater corporate return on investment.

The Relationship of Business Drivers and Activities

Business Driver Chart 

 

'Management by Contacts' versus 'Management by Business Activities'

 

 

 

Understanding the Center

 

Management by Contacts:

Management by Activities:

Overall volume of contacts history, by major group, tends to be well understood, especially if there is a workforce scheduling solution.

 

The contact history is further understood by such things as the number and duration of contacts by product, customer, and business process.,

 

 

Understanding Business Drivers

 

Management by Contacts:

Management by Activities:

  • Business Drivers are viewed as anticipated calls or Emails.   An understanding of why these arrive is only peripheral to forecasting.
  • Marketing campaigns, new product shipments, mergers, etc., are often a surprise.
  • There is usually very little information provided from other corporate groups, such as sales, marketing and engineering.

 

The core of forecasting is Business Drivers, for instance:

  • Sales goals and new customer forecasts
  • Size and growth of installed base
  • New Product announcements
  • Marketing campaigns
  • Mergers

 

 

 

Reporting View of the Contact Center

 

Management by Contacts:

Management by Activities:

  • Number, Duration and average cost per contact.
  • Forecast are based on historic contact volume with an estimate of overall growth.
  • Number and cost of Agents.
  • Business Drivers and Forecasts are detailed.
  • Business Activities and their tasks are viewed.
  • Activity-based Costs are available
  • Forecasts are based on the behavior of each Business Driver
  • Total Budget and Headcount are projected based on Drivers and Activities.

 

 

Formal Meetings and Information Exchange with other Business Functions in the Company

 

Management by Contacts:

Management by Activities:

There are few, if any, formal business processes, forecasts and other information exchange between the contact center and other corporate functions

 

There are regular and formal business processes, forecasts and information exchange between the contact center and other groups in the Corporation

 

 

 


An Example Analysis of a Business Activity

 

Activity Name: Technical Support for Product X
   
Activity Description: Handling a Technical Support query about a Software or Hardware Product.   These queries are escalated from the first line of customer support.
   
Activity Volume: 1200 times per month, with a growth rate of 33% per year
   
Assumptions: The cost of a First Line Customer Support Agent is $40.00 per hour ($ 0.67 per minute).   The cost of a Technical Representative is $80.00 per hour ($ 1.33 per minute).   These costs include compensation, benefits, training, as well as office, telephone and computing resources.
   
Growth Rate: 33% in next twelve Months

Total Cost each time this Activity is Supported

$

63

Total Cost per Month (average for next 12 months)

$

76,032

Total Annual Cost over next twelve months (33% growth rate)

$

1,064,448

Full Time Equivalent Personnel supporting this Business Activity

8 FTE

 

Tasks to accomplish each time the Activity is done:

 

 

Task Description

Duration of this Task each time it is done

How many times is this Task done per Activity

Estimated Marginal Cost when Task is done 1 time

Marginal Task Cost Weighted by the number of times the Task is done

 

 

 

 

 

 

1

Agent takes call, determines there is a technical issue and opens up a new case

5 minutes

1 time

$ 3.30

$ 3.30

2

Agent creates case, and passes to Technical Support queue for handling

3 minutes

1 time

$ 2.00

$ 2.00

3

Tech Rep attempts to reach caller via callbacks in order to discuss case

2 minutes

2.5 call attempts & voice messages to get caller

$ 2.67

 

$ 6.67

4

Tech Rep & caller discuss issue, requests & searches for additional information

8 minutes

2 times

$10.67

$ 21.34

5

Tech Rep does research on Issue

20 minutes

1 time per 2 cases

$ 26.70

$ 13.35

6

Tech rep calls other vendors or experts in the company to determine where issue lies & to fix issue

15 minutes

1 time, for every 4 cases, tech rep needs to discuss issue with 2 other players

$ 20.00

$ 10.00

7

Tech rep resolves issue and contacts caller

2 minutes

2.5 call attempts & voice messages

$ 2.67

$ 6.67

8

Tech rep writes up resolution and goes through information with caller

10 minutes

1 time per case requiring research (1/2 of cases)

$ 10.67

$ 5.33


Substantial 'Quick Hit' Cost Savings are revealed with a Business Activity View

In examining the example technical support Business Activity, it shows that approximately 10 telephone calls and probably three or four Emails are required each time the technical support center handles a customer problem.   If a manager were simply viewing the calls and emails being handled by the contact center, and used this information for making management decisions, this would not be apparent.   Decision-making would focus on an average cost per call of about $7.60 and how to reduce this average instead of on some very interesting opportunities.   In the above example, the opportunities ripe for re-design include:

  • $ 5.30 is being spent each time a customer service representative learns that this caller needs to be transferred to technical support.   The Support Center is spending $ 89,040 a year on this conversation.

 

  • $ 13.33 is being spent simply playing telephone tag with the caller (2 times per case, the tech rep is making calls and leaving voice messages trying to reach the caller).   The Support Center is spending $223,444 a year simply having the technical rep reach to the caller!

 

  • $ 21.23 is being spent discussing the symptoms and issues with the caller.   $356,000 per year is being spent collecting data from the customer for this product alone.

 

What tactics could be employed to impact the costs being spent on the above activities?

 

Area of Focus for possible cost reduction

Annual Cost

Possible Tactics

Possible Cost Reduction

 

 

 

 

Customer Support Rep's taking Tech Support Calls

$ 89,000

  • VRU Auto-Attendant helping segment some of the basic queries into different queues
  • A Knowledge System offering FAQ to users via the Web, linked to Web Form & Call Me Button direct to Tech Support

50%, which is $45,000 per year

 

 

 

 

Tech Rep's trying to reach Callers

$ 223,000

  • Call Me resource that asks the caller to initiate a request into tech support multi-media queue.   This would become an outbound call to the caller
  • Have more than 1 tech rep able to handle call-me request and consequent issues with the caller if possible.

 

75%, which is $167,000 per year

 

 

 

 

Tech Rep's getting information from Callers

$ 356,000

  • FAQ & Web Form for having customer collect initial data

25%, which is $89,000 per year

 

 

 

 

TOTAL

$ 668,000

 

$ 301,000

 

The next question then becomes "What would be the total cost of implementing solutions that would achieve the benefits listed above, and can this be done with a reasonable near term Return on Investment?"

Possible solutions include:

  • An upgrade to the VRU auto-attendant script on the ACD.
  • A simple ACD-based inbound Call Me resource that can go into a queue and turn into an outbound call.
  • A Knowledge System that supports FAQ and Web forms to accelerate the data collection phase of the contact.

These products and upgrades are most certainly available on the market.   If we assume that it takes ½ of a full time technical support resource to run these upgrades, almost all of this for the Knowledge Management solution, $60,000 per year should be allocated to running and managing these systems.   This leaves $90,000 per year for acquiring and implementing the ACD upgrades and for acquiring or using an ASP for a 12 User Knowledge Management Solution.   Not an unreasonable challenge.   This will save the Support Center a minimum of $150,000 or more in the first year and enable a headcount reduction of ½ FTE within a few months of starting.  

The financial analysis of the results depends on whether a Cash or Capital budget process is used to allocate the capital investment costs within the business.   A 200% return on investment results from a Cash approach to the financial analysis.   Under the Capital budget approach, used by larger organizations, the return on investment will approach 300% or 400%, since the cost of acquiring the upgrades and the software licenses are spread over several years.

 

Conclusion

The effort to move from a 'Manage by Contacts' to a 'Manage by Business Drivers and Activities' is much more of a strategic shift than a reallocation of major resources.   Taking this step will redefine the role of a Contact Center inside of a service-oriented enterprise.   Understanding the Business Drivers and Activities enables better communication within the enterprise thus resulting in precise business analysis and targeted change to increase customer satisfaction while, at the same time, reducing costs.

A conservative 10% to 15% cost reduction, within a few months of focusing on Activity based costs and productivity opportunities, is well within reason and experience.

 


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