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The Total Value of a Home-Based Outsourcing Partnership
 CEO, Alpine Access
As a corporate executive or decision-maker within an organization, assessing the home-based contact center model and determining the potential value and financial impact it can deliver to your company can be a challenge.
Too often, driving down costs is the chief goal of a call center operation. For years, the industry has been in a race to the bottom, leading companies to push into areas like offshoring when such moves might not be the best solution for their needs. Successful executives and organizations recognize that there is a more comprehensive way to view the value of their call center operations than cost alone.
Many major organizations are recognizing that using home-based employees is the most effective way to deliver quality and results for their business and their customers. First and foremost, the home-based model should not be viewed as a cost-cutting tool, but a solution that can drive improvements in both the top and bottom lines.
Companies that are passionate about their brand and their customers know that if key metrics are being met or exceeded, customer satisfaction and loyalty increase, and financial results such as average order sizes, one-call resolution rates, and conversion rates increase, then a difference of pennies a minute in their production rate becomes inconsequential.
Partner Solution Versus In-House Customer Care
To outsource or not to outsource? That is the question, though certainly not a new one. The decision to utilize an external partner for customer care or to maintain this function in-house is one that every C-level executive is faced with. The most important element of this decision is determining which option delivers the best results for your organization and your customers.
Is providing customer care a core competency, or would establishing an outsourced partnership allow you to focus directly on the products and services that are the heart and soul of your business? In addition, could customer service metrics and revenue and profitability metrics for your organization actually increase in an outsourced relationship?
When assessing an outsourced, home-based model, be certain to consider all of the variables that make up your existing cost structure. Some examples of what is included in the standard outsourcing relationship, that must be paid for and managed when maintaining internal operations, are listed here:
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Agent labor
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Facilities/real estate/maintenance
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Local taxes
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Training
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PC/phone hardware
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Software/licenses
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Internet connectivity
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IT/telephony support
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Power
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Telecom service
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Agent performance incentives
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Benefits
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Coaches
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Team leads
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Supervisors
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Call center managers
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Network Operations Center
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Help desk
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Quality assurance team
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Sr. management – i.e. center director
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Recruiting team
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Background checks
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Scheduling/forecasting team
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Human resources
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Record retention and storage
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Redundancy/disaster recovery
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Data security
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Physical security at centers
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Other office support personnel– i.e. finance, reporting etc
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These are just some of the many areas that must be considered. To make the point a different way, think of the lobby of a typical call center facility. Most likely, it has a plant or tree there, one that had to be purchased. Keeping the plant alive requires food and water, which are also a call center cost. If water is spilled, a paper towel used to clean it up must be supplied, along with the trash bag and trash barrel to dispose of that paper towel. When the trash bag is full, a service must be used to haul that trash away. And there are, of course, people at each step performing the work being done. When reviewing an outsourced option, make sure you are allowing for a true apples-to-apples comparison by looking at the total cost of ownership  for your organization.
Driving Operational Efficiency
The first side of the coin is the ability for the home-based model to deliver greater efficiencies in your operations. Consider the financial impact of improving in the following areas:
Recruiting Access
Call center managers tend to agree that hiring high caliber call center agents within a radius around physical call center is becoming exceedingly difficult. Commute times, the cost of gas, and other factors are driving up wages and competition for these employees.
A recruiting story was shared with me recently by a prospect. After advertising and creating as much fanfare as possible, they had only 13 people show up to a recent recruiting open house in a major metropolitan area. Of those 13 applicants, only six were deemed worthy of hiring, and that was before background, credit and drug checks were completed. Is this something you face in your organization?
The home-based model frees organizations from the challenge of recruiting. While the implications for increasing recruiting efficiency are obvious, the most important benefit of using a home-based model is that it allows you to select the best employees possible from a large applicant pool – not just those people who can pass the background checks.
For example, Alpine Access received 117,000 applications for employment in 2006, and is on pace to double that number in 2007. We have the luxury of hiring only 2–3 percent of these applicants. Such selectivity means we can hire those agents who best match the profile needed to be successful, dedicated employees; agents who are product-savvy, educated, experienced and customer centric. Matching the right agents leads to higher customer satisfaction, greater customer loyalty, and improved one-call resolution. It also means agents who are more enthusiastic and passionate about their work, allowing us to meet or exceed attrition and adherence expectations, as well as quality scores.
Here is an outline of how our agents compare to those in traditional centers:
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Traditional Call Center
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Alpine Access
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% Agents with some college education
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Less than 20%
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80%
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# Agents’ average age
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23
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41
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# Agents’ years of work experience
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5–7
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15–20
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% Annual attrition rate
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100–200%
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Less than 30%
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Attrition
Attrition impacts every area of call center management – it intensifies recruiting and training costs dramatically, and harms agent quality because of lost learning. As seen in the chart above, attrition for in-house and outsourced centers can reach levels of 100–200 percent per year. Alpine Access and the home-based model consistently deliver attrition rates of 2–3 percent per month or less.
The change in the financial landscape for this level of attrition reduction is tremendous. If you have 100 agents with total cost of training at $2,000 per agent and attrition for your company is at 100 percent per year, you are paying an ongoing $200,000 per year for agent training. A home-based solution can reduce these numbers by two-thirds to three-quarters, while keeping staff longer and maintaining a group with a greater knowledge base and skill set.
Agent Ramp Time
Many organizations currently experience a long time to ramp for agents. It is estimated that a traditional bricks and mortar agent is only 50 percent productive when first answering calls. Further, it can take up to six months in production for a traditional call center agent to be 100 percent productive. Considering the average annual attrition rates of 100–200 percent in this environment, most agents are never able to achieve complete productivity.
With home-based employee agents, attrition is less than 30 percent, and agents start at 90 percent productivity or better because of their maturity and education levels coming into training and production. With this model, business will not suffer from the cycle of training and losing agents any longer. For example, Alpine Access has a client that estimates a new internal agent can take six to nine months to reach par with existing agents. Only two months after the launch of the entire program, Alpine Access’ first two agent groups were ranked #2 and #4 out of 27 total groups in customer service index scoring.
Overtime Pay
Many companies overcome volume fluctuation challenges through keeping more agents on the phone and paying overtime. This is done to provide flexibility using a fixed agent pool that is unable to ‘jump into work’ (or ‘jump off work’) for short periods when unexpected fluctuations in call volume occur. The home-based model brings the work to the employees, rather than the employees to the work, so it is easier to be flexible to meet call volumes 10–20 percent above (or below) forecast without using overtime pay as the driver for having people work a few extra hours.
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Overtime Pay Costs (example)
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Hourly Wage
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$12.00
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Overtime Hourly Wage
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$18.00
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Additonal Cost per Overtime Hour
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$6.00
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10% of total hours are paid as overtime hours
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Assuming 1,500 hours of overtime each month
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1,500 x 6.00
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= $90,000/month
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Driving Increased Financial Success
Alpine Access is driven by helping our clients achieve greater overall results by increasing the success of each individual call. Our higher one-call resolution, higher conversion rates and higher average order sizes than any other solution available, in-house or outsourced, enables our clients to leverage our capabilities for their business success. We have proven through interactions with all of our clients the ability to increase conversion rates, average order sizes, save rates, one call resolution rates and customer satisfaction rates by 15–30 percent over existing internal or external solutions.
When assessing whether the home-based employee model is for you, be certain to include each area of impact to determine the total benefit of the solution. Not only can the model improve the challenges your business faces in operations, but it can magnify the revenue and profit you realize through your call center operations. The result is the best total value possible for your organization.
Christopher M. Carrington is president & CEO of Alpine Access, Inc., a Golden, Colorado-based provider of contact center services using exclusively home-based customer service and sales employees. Alpine Access clients include J.Crew, 1-800-Flowers, Office Depot, Fortune 50 financial services organizations and the Internal Revenue Service. Carrington can be reached at 303-279-0585. Total Cost of Ownership (TCO) | X | | This is a case study of TCO issues. Each organization must decide for itself what values to assign to the TCO equation....more |
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