Carefully Consider Attrition When Choosing an Outsourcer
This post was originally published on the FCR blog on May 3, 2016. Click here to read the original.
In a recent conversation, I compared the onboarding of customer service agents and the process of entrusting them with the customer experience to a parent handing a teenager the keys to a car for the very first time. It’s best not to cut them loose until you are confident that they will take really, really good care of the car. If you subscribe to the philosophy that your business can’t survive without customers, it’s safe to say that your customer experience is the equivalent of a really, really nice car.
The decision to outsource your customer service is like an added layer on this whole car analogy. In a lot of ways, the outsourcer is like your mechanic, handling a lot of the maintenance around your customer experience. They hire, train, monitor and manage the agents driving the car. If that outsourcer can’t hire and retain enough agents to drive the car, it’s going to be awfully difficult to take care of customers.
If you’ve determined that it’s time to partner with an outsourcer (Click here for some things to consider) or switch outsourcers, you will most certainly want to consider attrition as a factor in your selection process.
Good vs Bad Attrition
As you speak to various vendors you’ll likely see a wide range of attrition statistics. It’s important to acknowledge that there’s both good and bad attrition. Good attrition includes instances where an employee is promoted within the organization to another role. Bad attrition occurs when employees either quit or are terminated. For this article, I’m going to focus on bad attrition.
Attrition or turnover is a hot topic in contact centers. In a recent post on Ten Ways to Fix Contact Center Turnover, Jeff Toister noted that “Attrition is the biggest contact center challenge in 2016.” In his article, Toister goes on to share how to calculate your attrition rate. The simple formula is:
(Employee Terminations + Employee Quits) / Active Employee Count = Bad Attrition Rate
Hypothetically, I’m going to profile three different outsourcers. We’ll call them Outsourcers A, B and C. All three outsourcers are vying for your business and guarantee that they can hire, train, maintain, and manage a team of 100 agents for you. They each share their annual attrition rates with Outsourcer A’s being 50%, B’s is 100%, and C’s is 150%. The rates for B and C seem high but are not unheard of for a large outsourcer. Let’s take a moment to calculate the annual attrition rate for each of these outsourcers:
Outsourcer A – (10 Terminations + 40 Quits) / 100 Active Employees = 50% Attrition
Outsourcer B – (20 Terminations + 80 Quits) / 100 Active Employees = 100% Attrition
Outsourcer C – (50 Terminations + 100 Quits) / 100 Active Employees = 150% Attrition
Cost of Attrition
When thinking through the cost of attrition, there are a number of factors to consider but the goal is to understand approximately the cost of losing one agent due to bad attrition. In a post on the ICMI blog about the Costs and Causes of Contact Center Attrition, Jim Rembach highlights some of the direct and indirect costs. To summarize his list:
While the indirect costs can be significant, they are difficult to accurately quantify. Jeff Toister suggests that to determine the cost of attrition, take into account the direct costs per employee. When doing so, first calculate your cost for one employee and when factoring recruiting, hiring, and training costs, be sure to consider both what you paid that employee during those activities and the cost of the time for the rest of your staff to recruit, hire, and train.
Without spending significant time on the calculation, let’s assume that your cost of attrition per employee is $5,000. To arrive at the annual cost of attrition, multiply the cost per employee by the number of agents who quit or are terminated. Here’s how the cost looks for each outsourcer:
The Staffing Challenge
Now let’s further consider our decision on which outsourcer to hire. You are hiring them to build a team of 100 agents. Given their attrition rates, let’s look at how many agents they will need to hire in the first year in order to maintain that team size of 100 agents.
When you consider the time it takes for a good customer service agent to become proficient, the aforementioned indirect costs become more concerning.
Let’s also look at this from a slightly different angle. Rather than hiring 100 agents all at once you are planning on ramping up to that number over five months. In this case, let’s apply the attrition rate for each outsourcer and assume that with each hiring class you have to backfill to maintain team size.
At 150% annual attrition, Outsourcer C would have to hire 34 more agents in the first year than Outsourcer B and 66 more agents than Outsourcer A. At $5,000 per employee, the difference in annual attrition cost between Outsourcer A and C is a whopping $330,000. In each subsequent year, Outsourcer A will have to hire 50 agents, Outsourcer B 100 agents, and Outsource C 150 agents to maintain a team of 100 agents.
While some attrition is normal and even healthy, the inability to retain talent is an expensive problem, and the higher the percentage climbs the greater the feeling of treading water. It’s important to consider the size of the labor pool where the outsourcer is located. Oftentimes, a high attrition rate is indicative of a “churn and burn” approach to staffing. This approach can both burn through the labor pool in the community and create a bad reputation, making it all the more difficult for the outsourcer to find high quality candidates to maintain the desired team size.
It’s important to consider the agents and the way they are treated and valued among the various root causes of attrition. Outsourcers like FCR understand the importance of keeping employees engaged by building a fun, dynamic culture and maintaining a steadfast focus on coaching and leadership development.
When entrusting your customer service to an outsourcer, choose one that has the proven the ability to hire, train, and retain top talent and keep them engaged. When the result of not being properly staffed means longer wait times and inexperienced agents, your customers can most certainly tell the difference.