March 8, 2018

The Future of Call Center Outsourcing and the One Question that will Determine the Winners

I don't have a crystal ball, and I don't know who will be the largest and most wildly profitable Call Center outsourcer in the next five or ten years, but I do know the one question the winner will have answered to get there.

Before I tell you, I want to start with a story that captures the current dismal state of the Call Center Outsourcing industry. A Story: A friend of mine, Alan Madison, who used to run customer service for H&R Block, was outsourcing a huge chunk of call handling business. He conducted due diligence with some of the biggest brand names in the BPO industry. During each interview, he said:  "I have X million minutes of calls that I have been doing myself with these levels of performance metrics for AHT, C-Sat, Issue Resolution, etc." Then he asked a simple question, "If I give you this business, what are you going to do to make me (i.e., my metrics) better?"

While this is a completely reasonable question, can't you just see the salesperson fidgeting and staring down at his/her expensive shoes after it was asked? They were squirming because they had no answer. In fact, Alan told me each of these leading outsourcing firms - the best of the best - all gave the exact same answer: "We monitor and coach agents." Monitor and coach agents? Huh? Alan monitored and coached his agents too. Were they saying that their monitoring and coaching procedures were better than Alan's? Were they trying to argue that their monitoring and coaching process was better than the other outsourcers?  With a straight face?

If you have outsourced any of your business, as I have in the past, you know that there is nothing that differentiates the top tier outsourcers from each other. Tear the cover off their presentations and you wouldn't be able to tell one from the other.  They all have broad geographic footprints. They all hire agents using assessments designed by industrial psychologists. They all have the latest and greatest technology. Moreover, they all think they can improve on the results the client is currently getting by monitoring and coaching agents better than the client can.  If you have read any other posts on this blog, you know what low regard monitoring and coaching as an improvement strategy for agent output metrics is held in.  (See Call Center Coaching Remains a Labor in Vain for just one example.)

An Example Outside of Call Centers

Other industries are not so me-too. There are many companies that make cars, but no one makes cars with the efficiency and quality as Toyota (current quality problems notwithstanding). As good as Toyota is, they don't do it all by themselves. They rely heavily on outsourcers for automobile subcomponents who have achieved their own stunning levels of quality and productivity.  The performance of Toyota's suppliers is no accident. Toyota has completely changed the game for how manufacturers work with suppliers to ensure these kinds of results.

To better understand the dramatic shift that is coming, let me give you a little of the history on vendor-supplier relationships in manufacturing. As recently as thirty five or so years ago, manufacturing in the United States had a brass-knuckles approach to negotiating with suppliers. They would give pieces of the business to multiple vendors and pit them against each other to get the lowest possible price. They had contracts that spelled out every detail of the relationship. When their outsourcers were punch-drunk from the contract negotiation process, they sent procurement in to squeeze out the last drops of margin. Quality and other performance variables often suffered.

Then Toyota changed the game. They didn't spread their business out; they concentrated it at one or two suppliers. This was a huge windfall of revenue for these suppliers to spread their fixed cost over and to invest against. Moreover, Toyota didn't squeeze the last drops of profitability out of the vendors. They asked their suppliers to open their books because they wanted to ensure that they were allowing their vendors to make a fair profit. In some cases, they paid them more than they had in the past!But in exchange for this windfall of revenue and profitability, the bar went up dramatically on expected performance. Smaller, more frequent deliveries, billing changes, higher quality standards, and drastically improved cycle times were now required.  But Toyota didn't leave the suppliers twisting in the wind...they sent sent their own quality and production staff out to work with the suppliers to train them and help them improve their results.Not only did the bar go up on current period performance, but the expectation was set that quality and productivity would continuously improve: the vendors were expected to experiment and deliver Year-over-Year (YOY) improvements. The gains that the suppliers were required to achieve were shared: Toyota got lower costs; the supplier got higher margins.  (For more, see The Machine That Changed the World.)

This approach will eventually come to the call center industry and sooner than most outsourcers are prepared for.

The Payoff Pitch

Turning to our own industry, the typical client-outsourcer relationship is closer to the old U.S. manufacturing model than it is to the Toyota model. Clients today typically don't concentrate the business with one or two outsourcers; they don't ensure they are making a fair profit; they don't put people permanently on-site, teaching them better ways to improve results; and they don't hold them accountable to hit and continuously improve performance measures. (There is some accountability, but it basically just comes down to not being the worst of the client's outsourcers.  If you are the worst, you will probably be replaced.  If you are in the middle or at the top, you will likely maintain the contract.)

The way Toyota works with their suppliers has proved to be best a practice for achieving YOY improvements, and they are coming soon to a BPO near you. The firms that are going to win and make real money in the new BPO world will be the ones who can demonstrably and continuously improve their clients' output measures.

By this definition, no one is winning today. Outsourcers, unless they are starting from a terrible place, are not showing dramatic YOY improvements in quality, productivity, and customer satisfaction. No one is delivering YOY improvements, and I can say with absolute confidence that the current "we monitor and coach agents" approach will never deliver the level of improvements that will soon be required.

The way the winning BPOs are going to deliver YOY improvements is the same way the manufacturers did. They are going to move away from managing the worker and focus on managing the process by augmenting the agents with agent-assisted automation.This is not a theory. This technology ensures that increasingly larger portions of the call are 1) exactly correct, 2) every time, 3) without any monitoring and coaching. 

On many call types the technology can be used from the beginning to the end of the call, with little need for the agent to use their live voice.  I know, you are thinking, "Yeah, on what kinds of calls?  Change of address?"  No, this technology has been used on phone activation calls, on credit card phone calls, and yes, even on the holy grail, tech support phone calls. 

If you can define "correct," you can execute the call with agent-assisted automation.With a single process for the agents to execute, the primary improvement focus is on the process, not on the agent. Any changes that are made instantly improve the performance of all the agents. Through this approach, average handle time and after-call work can be lowered, along with not just improved, but perfect disclosure compliance and cross-sells, all while maintaining or increasing C-Sat. 

An outsourcer armed with a process-centric approach would easily be able to produce continuously improving client outputs on many measures, and the heretofore unthinkable, perfect performance on other key measures (disclosure compliance or cross-sells as examples). Further, because they would be absolutely kicking the asses of the other outsourcers they were pitted against on every single agent performance metric they would increase their share of wallet (what client would keep giving business to oursourcers that were so dramatically under performing?).  Performance like this would also enable them to increase their margins because the contract would be structured so that any gains the outsourcer achieved would be shared between the client and the outsourcer. This would result in a dramatic increase in both revenue and margins - and isn't that how we define winning from a shareholder perspective?

"What are you going to do to make me better?"  No outsourcer can answer this question today.  The ones who can in the future will take over the industry.

More posts

Get In Touch

Add your email below and we'll reach out as soon as possible. We look forward to working together!
Thank you for your inquiry - we'll be in touch shortly!
Oops! Something went wrong while submitting the form.