Call Centres: All Businesses Have costs but Waste is Optional

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Call Centres: All Businesses Have costs but Waste is Optional

By Stephen Parry
At the risk of being accused of stating the obvious, a well-known research company has demonstrated that call centres resolving customer issues at the first point of contact will increase customer satisfaction.

This influential report has fuelled the drive by many companies to increase their first-contact resolution performance through the introduction of call eradication or call avoidance schemes. All well and good, you might say. But hang on a moment. The research results may seem obvious but everybody appears to have missed a very important point. Does anybody truly know whether these first-time resolutions are actually creating value for the customer or are we unintentionally creating cheaper, faster, neater forms of waste?

The research is fundamentally flawed, because it fails to consider the customers’ perspective of value, and the company actions are quite literally the wrong solution to the wrong problem. Why? Because our own findings have demonstrated that in many call centre operations, as much as 90% of the demand made for the service is actually waste that has inadvertently been created by the organisation itself. Fixing things which should not have gone wrong in the first place is not creating value for the customer. And to add insult to injury many companies are calling customers to let them know in advance that they will fail to meet their commitments. Again this seems reasonable until you dig a little deeper. We all accept things can occasionally come off the rails so calling customers in advance to let them know may be thought of as proactive and ‘good-service’. However when you look at the army of people many call centres employ on this task, it reveals these ‘occasional’ incidents for what they are, predictable failures of a badly designed and unorganised service. A service where incidents are allowed to proliferate leaves front-line staff with but one option, to try and tone down the situation and pacify the customer. This is anything but proactive, it’s institutionalised waste.

There is also a human cost to these strategies. Research has demonstrated that the biggest source of call centre staff turnover/attrition is created when staff are expected to continually calm down irate customers, it is a cost paid for by emotional stress. If companies design call centres around the problems of their own products and services, these operations end up as a mere corporate waste disposal units.

The Modern Call Centre is not designed to meet the needs of the modern customer.

Take a closer look at the costs associated with this type of approach. A conservative cost estimate of a call centre with 1,000 staff will be around £30m per annum, and anywhere between 40-90% of the calls handled by a typical call centre, add no value to customers. This means that businesses incur unnecessary costs of between £12m-£27m. It’s no wonder there is a drive to reduce costs through the use of automation or ‘off-shoring’ to low-cost labour markets, but again, this is the wrong solution to the wrong problem.

All businesses have costs, but waste is optional.
So, let me pose a few important questions: Do you have any idea how much value you create for your customers today? Even if you think you do, can you quantify it? And can you identify how much waste presently resides in your processes and how you could create value at no additional cost?

If you answered ‘no’ to any of the above, the likelihood is that you’re generating unnecessary waste with associated negative cost implications. The answer is to create a framework for defining what is and is not value from the customer’s perspective. To understand this we must examine the customers’ purpose, for it is the customer’s purpose which provides the one true definition of value, not the organisation’s belief. Once the customer’s purpose has been identified it becomes obvious what types of calls are valuable and must be resolved first time, and those which are waste to be eradicated.

This change of emphasis has a significant impact for the role of the contact centre. It is no longer about simply understanding the transaction, but is about seeking out a thorough understanding of the customer’s purpose within the context of the whole value stream. It really is a different type of organisation with a different purpose.

CORE Profile: A Purpose Framework
Most companies genuinely want to create value for their customers and sincerely believe that their customer-service operations are indeed doing that, but often they are simply restoring lost value caused by a failure to do something right the first time. Customer demand can therefore be classified into two types: demand that is essentially driven by the customers’ positive needs, and demand that is negative or remedial in its origins.

CORE Profile: Value definitions

Creation demand
Creation demand comes into a service organisation because customers want to understand how to optimise the functionality of their service or product, or how to obtain more of what they already have. Creation demand is not the result of something being wrong, therefore, such that customers have lost the value of a service or product, but rather the result of customers’ questions such as: ‘Which product is best?’ or ‘How can I get more out of my product or service?’ For efficient delivery, creation demand must be optimised (Womack and Jones, 1996). This is the type of demand that the organisation wants to keep, so the organisation needs to make it simple and easy for the customer to ‘pull’ service. Identification and analysis of how the end-to-end processes deliver against this demand type will indicate clearly which elements of the support structure could be improved, for example using tools for automation or web based assistance.

Creation demand is seen in many service sectors. Customers of a bank, for example, may wish to gain more information from their bank statements and transactional details, to understand how they could better invest their existing savings, or to find out in which countries they could use their bank cards.

Similarly, customers enquiring about their utilities may wish to set up a direct debit for payment or to ascertain how much the amount of their next bill.

Opportunity demand
Opportunity demand occurs when the customer wants something that is not currently offered. Most organisations will merely apologise to customers, saying that they can’t fulfil the demand, and will then terminate the transaction. In a customer-centric organisation, in contrast, it is critical to capture this type of enquiry: these can provide a rich source of ideas and data for new services or product lines. Opportunity demand needs innovation to create new services and
potential revenues need to be examined.

Consider as a simple illustration an independent burger bar. If enough demand is created for a specific burger topping, then the business can adapt very quickly and just add this topping to the menu so that it can now meet demand. If, however, several people request not burgers but pizzas, these customers present an opportunity. The outlet may not sell pizza currently, but over a period of time, in a completely unscientific way, the owner will recognise the
sustained demand for pizza. The owner may have ‘drilled down’ and even identified that these requests arise on a particular day of the week. When the demand reaches a significant proportion, the burger bar owner will offer pizzas

for a limited trial period. It may happen that there is little take-up, and pizza will then be withdrawn again. Or it may happen that the demand for pizza grows and eventually outstrips the demand for burgers. Having made an informed decision, the business may then swing around to become a pizza outlet rather than a burger outlet.

Restorative or Remdial demand
Restorative demand occurs when the organisation delivers unfit products or services, generating unwanted demand as a consequence. This causes customer dissatisfaction, resulting in loss of money, time, reputation and loyalty.

The work involved in correcting this situation is deemed to be restoring lost value. In the eyes of the customer, restoring value is seen thus: ‘You broke it, you fix it!’ Restorative demand needs to be removed by identifying and rectifying the originating cause, which may reside in other parts of the organisation.

Only in poorly run or unethical companies would you find revenue being generated against demand of this type. Restorative demand becomes a drain on resources, and ineffective organisations inadvertently generate between 40 and 90 per cent of the total customer demand in this negative way.

Here’s a golden rule: never automate this restorative demand. Automation locks in frustration for the customer as well as for the frontline staff whom the customer has to call repeatedly about the organisation. Support staff also feel disenfranchised because existing constraints prevent them from making any difference in this situation. The spiral
continues, with the customer becoming more and more disillusioned, which generates additional negative demand, and all the while the frontline staff feel powerless to change things.


External demand

External demand is failure generated externally by other agencies, institutions or companies. Organisations can generate revenue against this type of demand as long as it continues to present itself – that is, until a competitor (to return to the earlier example) fixes the road and removes the need to fix tyres.

External demand should be addressed by rethinking the environment that allows it to exist and by developing new solutions. In this context it is perfectly respectable to restore value, because the other things that are not working are

business is and whether or not it is totally dependent on restoring value as a the responsibility of other people. In fact, some businesses are set up specifically to handle this type of demand. However, organisations with this business model have to question the basis of their future: are the revenues that they are generating largely dependent on other companies failing to perform their duties? If so, what happens if those companies start performing well? This business model can be fundamentally flawed, depending on how exposed the revenue stream.

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©Stephen Parry 2010 All rights reserved.

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