If the call center industry is rich with nothing else, it is its abundance of “you-can’t-make-this-stuff-up” stories: there are fun human relations stories, stories of fascinating math puzzles, how they are solved and their effect on the contact center, stories of the frustrating need to educate “non-call center folks” about how they influence call center performance, and, far too often, stories of call center failures that, with hindsight, point to a truth in the industry that brings new concepts and ideas to light.
One of the more memorable stories I’ve heard about call centers was told to me by a workforce management VP of a very large company. Referring to his own company, he told me how corporate politics and misguided corporate strategy led to a significant business problem. In a nutshell, because the economy seemed soft, the decision makers decided to stop hiring across the company, including personnel for its large sales call centers, to free up marketing dollars. They implemented this cost-saving plan without doing any real risk analysis.
At first, two pleasantly unexpected things occurred following this decision. The economy, it turned out, was not soft at all, so an expected deep recession did not materialize. Second, the marketing department was surprisingly effective at marketing the company’s product. Within a few months it appeared that business was doing quite well.
Unfortunately, that didn’t last and the workforce management vice president suddenly found his operation in the infamous “call center death spiral,” where, due to agent attrition, as is typical in the contact center industry, the operation became severely understaffed. A scramble for staff ensued. The company immediately turned to outsourcers to provide emergency resources (which helped somewhat) and started hiring like crazy internally.
The new resource needs necessitated a cut back on new-hire training (to shorten the lead time for getting agents on the floor) and management became less selective than normal with their choice of new employees. Of course, these actions brought down their customer satisfaction scores. Agent occupancy zoomed to the mid-90s, which led to higher handle times as agents gave themselves mini-breaks while on call. Attrition began to increase as burnout set in.
As most call center veterans know, it takes a long time to get out of the “death spiral.” During the death-spiral period for this company, service quality was very poor, management was in finger-pointing mode and senior management wanted to know why their call center executives were performing so inadequately.
The real kicker was these were sales call centers and, therefore, company revenues were highly impacted. Sales volumes dropped significantly below their potential as prospective customers defected to competitors. The hiring-freeze decision cost the company a ton of money. A ton.
How Can This Happen? They’ve Optimized Their Workforce!
So what could the contact center vice president have done differently? This company was very technically sound. It had an effective workforce management organization and had purchased a workforce management system with all the bells and whistles. It had a performance-management tool and a historical-performance data warehouse. Also in place were sophisticated call routing, a budgeting system and a good supervisory and management team. This organization had spent millions of dollars on the purchase, implementation and management of the right tools, so in theory, it would appear it had “optimized” its workforce.
But we all know it hadn’t really optimized its workforce. Its center network performance demonstrated was not anywhere near optimal.
So what was missing?
Clearly, this organization was missing a solid strategic planning process. It did not have the ability to perform the complex what-if analysis that would have predicted the “death spiral” before it made the decision to roll out the hiring freeze. The great truth that follows from this and other similar contact center disaster stories is:
It is impossible to optimize your workforce without first optimizing your strategic center network plan.
Stories of “call center death spirals,” likely the worst service mistake possible, are quite common. Because “death spirals” cannot be fixed easily, quickly or inexpensively, they impact customers far more than normal short-term, service-outage types of mistakes. And they are always a result of strategic planning failures.
Similarly, strategic planning mistakes in the other direction – overstaffing — are also quite common and costly, but less painfully obvious. Recently, one well-known technology company spent many millions of dollars building additional call center infrastructure to improve customer satisfaction, only to find afterward that higher service levels barely moved the customer satisfaction needle. The extra cost was wasted because customers did not notice the improvement. Significant overstaffing is also a strategic planning failure; a mega-dollar mistake.
A Focus on Strategic Planning
An area of workforce management and operational analysis that has traditionally been left unexamined, the area of strategic planning, has recently sparked widespread interest.
There are several reasons for this. First, contact centers have become more and more a strategic asset, viewed as a primary channel not just for answering customer questions, but also as a valued sales or relationship channel. There have been many notable strategic successes (and failures) associated with leveraging the contact center channel as a true customer relationship device.
Second, the decisions associated with managing a contact center network are more complicated, as each center is more entwined with the next. Specialization of the workforce has made management decision making more complex and more important.
Third, the idea of the contact center network is being pushed to the extreme: your network may include centers far from your home shores. Global decisions on when and where to hire employees are difficult ones and your effectiveness in answering these questions will have significant impact on your company’s financial and operational success.
Finally, strategic planning is becoming noted as the next big problem to be solved. In analysts’ circles, people are wondering if we have the horse before the cart. Focusing on improving schedules may be less important today than ensuring that the correct number of employees are on the payroll to answer the calls in the first place.
Increases in computing power and development of new mathematical modeling (simulation) technologies have enabled improvements in strategic planning that 10 years ago would be considered magic. We can now answer critical business questions accurately in near real-time.
What is Strategic Planning?
First, let’s discuss what strategic planning is not. Strategic planning is not tactical, “day-of” planning. A great amount of resources are currently spent to plan in a reactive manner. We take care to help our businesses develop work schedules, manage daily shrinkage, track adherence, plan team meetings and react quickly to unforeseen events. None of this is strategic planning. Even though strategic planning may involve many of the same workforce analysts, strategic planning is not a traditional workforce management function.
To most folks, contact center strategic planning means developing a budget. And while strategic planning does involve the budget planning process, it also includes much more than that.
Strategic planning is big picture. Strategic planning involves regularly setting resource levels over time and allocating your business dollars according to your strategic priorities. It involves asking and answering tough questions about resources, expected performance and company goals. It involves testing and implementation of new management ideas and, by extension, experimental design, control and tracking. It involves regularly developing and evaluating the performance of plans, understanding variance and, most of all, using this process to make the most important decisions.
The heart of strategic planning is just that —- making decisions and answering questions. Some important strategic planning questions include:
- How many contact centers should we have?
- What types of contacts will we support?
- What contact channels should we support?
- What service goals should we achieve?
- What cost are we willing to bear to achieve these goals?
- When and in which centers should we hire our employees?
- What is our hiring versus overtime/leave policy?
- Should we outsource these functions?
Strategic planning is the exercise of answering these and other critical questions.
On my first day in a call center, over 16 years ago, I was floored by one particularly interesting observation: our company’s call center director needed to hit his service level goal — and he wasn’t!
When I spoke with the workforce management director, it was clear he was worried about this. He patiently explained how they defined the service level metric, and that their company goal was 80 percent in 20 seconds. But he couldn’t explain how they determined that goal in the first place. They simply chose a number they thought sounded right.
Think about that for a second. If there ever was an important number to understand and study for call centers, it would be the service goal. It drives all of your variable costs, your technologies, your overtime policies, your boss’ bonus, your quarterly evaluation, and those nasty 8:30 a.m. conversations with the boss.
For my former employer, the service goal was truly a semi-random number. And like other disaster stories, this was probably a strategic failure. However, at this company, nobody ever knew whether we were truly overstaffed or understaffed…scary.
The Typical Planning Process
- There is a standard approach to putting together a strategic plan with five major analytic elements. These elements are: Forecast the Future: Almost every plan starts with a forecast of contact volumes and handle times. Some planning teams spend time forecasting vacation, sick time, employee attrition, wage rates and other seasonal and site-specific values that influence the budget (but most don’t). Note that all of these types of forecasts are important and forecasting the differences among centers and staff groups is critical to developing a good plan.
- Develop a Capacity/Hiring Plan: These forecasts are used to develop hiring, termination, overtime and undertime plans given all of the real-world constraints (like training times and learning curves by center and staff groups, classroom and center capacity, service goals, etc.). Optimization technologies, like integer programming, can determine the “just-in-time” plan that meets the goals for the least cost. Most companies eyeball the hiring plan using an analyst’s intuition.
- Develop a Budget: The capacity plan includes the most important cost variable in your organization: your agents. In most organizations, the capacity plan is “thrown over the fence” to the finance team to cost out the call center plan. The finance team spends time forecasting financial metrics, such as wage rates, percent of vacation that is typically paid, and, say, telecom costs. These forecasted cost items are applied to the capacity plan to create a financial plan.
- Answer “What-If” Questions: At any or all steps in the planning process, the planning analysts can be asked to perform what-if analysis. The iteration on determining the costs and benefits of various ideas and initiatives is key to developing great final plans.
- Use Variance Analysis to See What’s Changed: It always makes sense to have a good feedback mechanism to let you know whether or not you are hitting your plan goals and doing what you wanted to do with your operation. Simply knowing the difference between what you had planned to do and what is actually happening is critical to the process.
But We Do All of These Things. So Why Are We Not Optimal?
There are two critical differentiators between organizations that make good strategic decisions and those that fly blind. Strategically successful organizations have invested heavily in both their organizational planning process and in their planning technologies.
The five strategic planning process elements are fairly standard across most contact center organizations. Many organizations have a strategic planning spreadsheet tool to help them walk through the budget process and many have purchased call center strategic planning systems. However, there are significant differences in how these tools are used. As my Dad told me about golf (and golf clubs), “it is not the tool, it’s the craftsman.” And to be honest, even my Dad, who spent a lot of money on cool golf clubs, knew that having better tools certainly improved the likelihood of success.
But before we discuss the tools and processes that make strategic planning successful, let’s discuss common technology and process pitfalls.
- Budgeting is a “One-and-Done” Process. Many organizations spend tremendous amounts of energy putting together a budget and spend little time tracking and re-evaluating the initial budget assumptions. Further, many of the business assumptions include items like stretch goals and pet projects, the benefits of which may or may not materialize (and where accountability is nearly nil). For many organizations, strategic planning ceases on January 1 each year, only to be started again in September. Your business and business environment can change tremendously between January and September. Failure to track important trends could lead to being blindsided by a service breakdown that would have been obvious with a little bit of attention.
- Budget Reviews are About Dollars Only. Too often, companies that do have monthly reviews use this time to simply check that everyone is still operating within budget. Items that are out of budget get scrutinized and line items that are within budget are ignored. This process is often the precursor to a “death spiral”. Important business drivers may change (like call center handle time) that do not necessarily show up as a big dollar item in the budget. The strategic planning process should be about making decisions around costs, performance and also business risk.
- Forecast Error is Measured for Error. When forecasts (e.g., forecasts of handle times, contact volumes, employee attrition, sick time) are scrutinized, the first point of discussion should not be about the forecasting methodology and its flaws. The focus of the discussion should be around whether or not something significant has changed in the business or in call center management. By using the forecasting process as a benchmark to track your business assumptions, you can efficiently react to strategic changes in your environment quickly and almost casually.
- Planning Technologies are Inaccurate or Based on Best Guesses. Historically, strategic planning has involved hiring plans developed from an analyst’s interpretation of the company’s Erlang-based spreadsheet data. This method and technology is flawed in so many ways. First, the Erlang calculation is inherently inaccurate for strategic planning. It tends to overstaff, and is horrible at providing what-if analysis. Second, developing manual hiring plans is a slow process and is only as good as the analyst’s ability to solve extremely complex math problems. Couple these problems together and the old standard technology cripples the ability to perform quick, accurate, consistent and optimal strategic plans.
A Strategic Planning Victory!
On the flip side, an organization I’ve spent a fair amount of time with drastically improved its strategic planning process in one fell swoop. This company, a well-known financial services provider, found itself in the “death spiral” one too many times, so its management decided to overhaul the company’s strategic planning process. They did some very smart things.
First, they hired a senior-level planning vice president who possessed vision as well as contact center and mathematical expertise. This person was responsible for changing the planning process, choosing new planning technologies, implementing this process and then living with the result. The company wanted this completed quickly.
Second, these folks surveyed their current planning technologies, those they could build in-house and those available in the marketplace. They chose to scrap their current, slow and inaccurate Erlang spreadsheets for newer and more accurate simulation and optimization modeling technologies. By purchasing a third-party solution, they cut the implementation time to just a few months.
Third, once this new simulation-based technology was implemented, they published to their executive team the accuracy of the tool and the terrific speed by which they could provide analysis. By getting senior management comfortable with the technology, they gained immediate credibility. They quickly became partners in strategic planning and were asked to come to the boardroom to answer questions on the fly.
Fourth, and most important, they turned the strategic planning process from a budget maintenance process to a regular strategic decision-making process. Variance to plan is examined for real-world reasons (not simply forecast error), and used to force real-world solutions. When variance is detected, the business — as a matter of course — determines whether the variance is due to internal changes (e.g., a change in the operation or a marketing-driven change), external factors, a developing trend or whether it is a known or unknown “blip.”
At this point, the company makes decisions to fix its internal changes (or not, and staff accordingly), to ignore the blip or to watch and react to the trend. But always, this step involves making a committed decision to action. The speed at which important decisions are made and brought to market is the beauty in their process. It is impressive.
Since implementing new technologies for their strategic planning process, this company’s management has avoided many of the pitfalls to which they had previously fallen prey. They regularly provide sophisticated analysis of alternatives, they build more accurate budgets and plans in a fraction of the time it used to take and, most important, they make better strategic decisions faster. They’ve avoided “death spiral” types of mistakes and have operated at a significantly lower baseline cost.
This is becoming more and more the norm in our industry as companies begin to invest in improving their forecasting, capacity planning and budget planning infrastructure and processes. As the industry focuses more on real optimization, they will begin to notice that many of their most serious missteps occurred, not because they had an unanticipated disaster, but because they failed to pay attention to the runaway bus on which they were traveling. Sometimes making sure you have a roadmap and a clear view straight ahead is all it takes.
Call center disaster stories can have a fairy-tale ending after all!
By: Ric Kosiba Ph.D.
