Executive Insight: Multi-Sourcing

By Matt McConnell

Although call center environments vary, most executives share two common goals for
improving the frontline: to do things better, and to do them cheaper. In response to
this overwhelming demand to do more with less, one of the most common solutions to
“cheaper” has been to cut labor costs through labor arbitrage or multi-sourcing. But
many executives have discovered after the fact that “cheaper” came at the expense of
“better,” taking with it quality, and consequently, customer loyalty.

To discover if it is possible to achieve the seemingly opposed goals of lower costs and
consistent, quality service while multi-sourcing, Knowlagent conducted a series of
executive interviews. We asked what everyone wants to know, “Can it really be done?
And if so, how?”

Multi-Sourcing
In the call center, multi-sourcing is the act of segmenting an agent population by a
number of criteria, which can include: geography, the employer, employment status,
hours worked, or work environment. For the purposes of this study, the segmentation
of agents by title, tenure, and union status was not evaluated, although some
qualitative feedback was provided.

In the average call center, labor makes up almost 70 percent of overall costs. To
reduce that cost, executives have several options. They can continue to in-source all
calls and utilize a mix of full-time, part-time, and temporary agents, or they can
outsource calls to at-home workers and contracted outsourcers based in the U.S. or
offshore. Or, like most centers, they can “multi-source,” using some combination of
labor sources.

But multi-sourcing, though often cheaper, is not a silver bullet to all the call center’s
problems. While using different agent types may reduce costs upfront, it often results
in inconsistent service as diverse agent populations have different strengths and
weaknesses and vary in performance.

For example, full-time, in-sourced agents usually provide the best customer service,
but are also the most expensive, collecting benefits and higher pay and using company
facilities every day. At-home workers are cheaper and allow growth without expanding
physically, but managing them remotely to ensure consistent quality can be
problematic. Outsourced, offshore agents are the cheapest, but mean additional
complications such as communication and translation issues that can negatively impact
customer service levels.

So, what is the best solution for reducing costs while maintaining service levels? How
do you control performance variance to provide a consistent customer experience
every time?
 Study Limitations
Over the course of three months, Knowlagent conducted a benchmarking study on
multi-sourcing to uncover what leading organizations are doing to create a consistent
level of service across all agent segments. This study is the result of multiple client
requests for help with addressing performance variance between agent segments in
multi-sourced operations, as well as the strong response to our first white paper on the
topic, The Labor vs. Loyalty Dilemma, by Knowlagent co-founder, Matt McConnell.

In all, executives at 22 leading companies were interviewed in a wide range of

industries (three telecoms, two banks, three health insurers, four life insurers, two
travel companies, four technology companies, two outsourcers, and two retailers).
Agent populations in these targeted companies were diverse – some with as few as
200 agents and others with as many as 31 centers and thousands of agents.

The pool of respondents included C-level executives and senior vice presidents, as well
as vice presidents in customer care and customer service-based positions who are
currently exploring or using multi-sourcing strategies.

We interviewed these executives to discuss one-on-one 1) what their agent population

looks like, 2) which agents are high and low performers, and 3) proven best practices
for producing service consistency in a multi-sourced call center environment.

What the Executives Had to Say

Service Level Inconsistencies
Through these executive-level conversations, we discovered that service level
inconsistencies are universal. As one executive commented, “We saw some major
variances in agent performance in the past several years. It created such a problem for
our business, addressing this issue became a top priority for us.”

Most companies we spoke with already employ a mix of full-time and part-time agents
and are either using outsourced and at-home agents now, have used them in the past,
or are considering doing so in the near future. Across the board, executives in all
industries listed performance variance affecting service levels as an issue with current
or proposed multi-sourcing strategies. They drew a direct parallel between service
inconsistency and customer churn, and all of the executives were looking for ways to
provide a better overall customer experience to preserve loyalty.

The following is a high-level analysis of the general performance levels of different

agent segments used by the organizations we interviewed, including full and part-time
agents, at-home agents, temps and outsourced agents – both onshore and offshore.
It also includes some of the practices currently in use for addressing the performance
challenges of each of these agent labor sources.

In-House, On-Site Agents

The executives we talked to overwhelmingly agreed that full-time agents working in
the physical call center are typically the best performers providing the highest levels of
service. They cited that the primary drivers of these agents’ success are more training,
more experience, and company benefits, which means they have more to lose if they

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 under-perform. Furthermore, among these full-time agents, those with six to 24
months of service were among the highest quality performers, according to executives.

According to those executives interviewed, the primary drawback to these high quality,
full-time agents is that they are also the most expensive to employ. Additionally, they
cited that with on-site full-time and part-time agents, center expansion requires an
increase in physical facility size, which is also expensive.

Part-time agents, though much less utilized in the centers we evaluated (usually less
than 10 percent), were reported as being similar in quality to full-time employees and
less expensive overall because they do not typically have benefits. Though most of the
executives we spoke with plan to expand the use of part-time agents, they listed
scheduling challenges as the primary limitation with this segment.

At-Home Agents
Many executives we talked to are already utilizing at-home agents in some capacity or
are currently exploring an at-home program. Executives agreed that most of these
agents earned the privilege of working from home because of their exemplary work in
the center and are therefore among the highest performing agents overall – even
above full-time, in-house agents. For example, one executive commented that their at-
home agent population consistently received better customer courtesy ratings than
other agent populations.

In addition to their high performance level, at-home agents are desirable because they
allow an organization to grow when it is already operating at capacity in its current
facility without costly physical expansions.

On the other hand, executives said that ensuring consistent service through training
at-home agents can be challenging logistically. Though many of these agents are
required by the organization to live in a certain proximity to the center so that they are
readily available for on-site training sessions, scheduling these sessions can be
difficult.

Providing consistent, high quality coaching and management for these employees can
be challenging and frustrates supervisors. Some centers deal with these issues by
requiring a mix of at-home and in-center shifts. Or, they require at-home workers to
have already worked in the center’s culture before transitioning to the home
environment.

Temporary Agents
While many of the executives we spoke with had employed temporary agents in their
centers in the past, most had either eliminated these temporary positions or only used
them during seasonal peaks. Reasons cited included costs, as well as limited product or
industry knowledge and high turnover risks.

However, some of the better performing companies we evaluated successfully use

temporary staffing as a “try-before-you-buy” mechanism.

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 Onshore/Offshore Outsourced Agents
The majority of the executives we interviewed use outsourcers in some capacity
whether in day-to-day operations or during peaks in call volume. In some operations,
less than 5 percent of the agent population is made up of outsourcers. In other
operations, outsourced agents make up 100 percent of the company’s frontline agents.
Most of the outsourced agents are offshore, where labor is generally cheaper.

Though using offshore outsourcers is often cost efficient, executives reported a number
of challenges with these employees. The difficulties ranged from a lack of domain
expertise to inconsistent sales techniques and communication difficulties due to
language barriers and cultural differences in addition to the lack of integration between
outsourced and in-house centers in general. Because of the significant variance in
performance, customer service can suffer and the resulting customer churn can negate
the cost savings of utilizing the outsourcer in the first place, executives said. For this
reason, some companies choose to limit their exposure by only working with U.S.–
based outsourcers.

Immediacy and frequency of training and coaching were reported as being essential for
outsourcing success, and as one executive commented coaching is critical in the
outsourcing model.

Common Success Characteristics

It is clear through these executive conversations that multi-sourcing is here to stay as
a viable labor option. Yet performance variance continues to be an issue across all
industries, in all different call center environments, and has proven to have an even
bigger impact on those businesses with a multi-sourcing model.

Based on the findings of this study, companies that experienced lower performance
variance tended to have the following themes in common:

They Partner. There are two ways to manage outsourced agents: with a stick or with a
carrot. With the “stick” model, organizations partner with an outsourcer and lay out
specific performance standards. If they aren’t met – they fire them. This “us vs. them”
approach leads to very high churn and is rarely effective.

Those centers that have been most successful with outsourced agents are those that
integrate outsourcers into their business and treat them as part of the company. One
executive commented that his success with outsourcers is based on his view that their
relationship is a true partnership and he treats them the same as any other internal
call center in the organization. Outsourced agents are given the same tools and
resources as full-time employees, including full access to internal Websites and training
opportunities. Those centers that view outsourcers as they view their own employees,
taking care to manage them closely and provide them with the tools they need to be
successful, experience a lower variance in performance. One executive cited the
importance of being “completely transparent” when dealing with a diverse agent
population. In his organization, “Everyone can see where everyone stands every
week.”

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 They Professionalize. Agents must be treated as professionals and provided the
appropriate tools and opportunities to improve their own performance while achieving
company goals. Many executives we spoke with discussed the importance of short-
term and long-term planning for all resources – including outsourcers – and a defined
associate development plan that includes the active management of agent
development. We found that the most successful organizations are those that have
formal hiring, training, coaching, and recognition practices in place that set clear
performance expectations for agents when they are hired and provide the tools and
processes that enable them to meet those expectations.

Some suggestions we heard from executives included investing in cross-training

programs to gain efficiencies and increase revenue, and the creation of an advisory
board to take advantage of different departments’ expertise. Other organizations set
aside up to one hour per agent per week for communications and training, and they
match new agents with mentors following initial training.

They are Proactive. For decades, call centers have followed a reactive business model.
Agents react to ringing phones – supervisors react to call volumes – executives react
to customer churn. To compound this problem, most supervisors and other leadership
positions in the call center do not typically have strong, proactive, infrastructure
management experience.

World class call centers are proactive and put the customer first. The most successful
centers have a defined structure in place to support that mission which includes
enterprise-wide talent management processes which align corporate, center, and
individual agent goals, no matter where they sit.

One executive reported that silos among their multiple operations caused them to miss
up-selling and cross-selling opportunities, leading them to create an advisory group to
combat the silo effect and help further integration between centers. Part of this
initiative included additional cross-training to provide a more efficient way of handling
calls.

They Use Common Tools and Processes – Across the Agent Lifecycle, Across All
Agent Segments. Over and over again, we heard executives call for a consistent hiring
and training platform and process across all agent segments. Without it, they said,
reaching a consistent level of service is almost impossible, inevitably leading to
customer churn.

Hiring: The most successful call centers, we found, are those that have defined,
detailed agent qualifications and do not deviate from them when hiring new agents.
Agents have defined qualifications, management expectations are set early on, and
there is inspection at key intervals – with financial incentives tied to performance – to
ensure that agents are being held accountable to those expectations.

Training & Performance Management: Then, once key metrics and expectations have
been set, agents – whether full-time in the center, at home, or across the ocean –
must be provided with the initial training, ongoing coaching, and performance
management they need to be effective. One executive commented that the
cornerstone to their success in addressing performance variance in 2007 centered on

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 improving cross-training for all agent populations and improving their use of workforce
management. Ongoing coaching is especially critical when dealing with such a diverse
agent population.

Goals and Accountability: Based on the findings of this study, the most successful
organizations are those that set clear expectations and hold agents, supervisors,
managers, and partners accountable to them. They “inspect what they expect” at
known intervals and ensure that everyone knows what is expected and is on the same
page. Financial incentives are often tied directly to results, and there is an overarching
theme of “helping us” as opposed to “blaming them.”

In Closing
The drive to create a consistent service experience is viewed by most call center
executives as the next great performance initiative impacting the ultimate contribution
of the call center. Multi-sourcing is a viable option for providing labor strategies that
can positively impact cost efficiencies, but performance variance is a significant hurdle
to creating consistent service and long-term profitability. Leading organizations are
working to address this variability so that all agents can provide the best customer
experience through a combination of tools, processes and specific management
models.

About Knowlagent
Over 200,000 users around the world reduce labor costs with Knowlagent’s agent
management software every day. By automating traditional call center management
processes, Knowlagent’s on-demand solutions for training, coaching and hiring reduce
spending attributed to off-phone activities while improving the key metrics that matter
most to you. With Knowlagent, you can optimize frontline performance faster and more
affordably than ever before. For more information on how you can spend less and get
better with Knowlagent, call 888-566-9457 or visit us online at www.knowlagent.com.