Don’t Ignore the Economics of Your Contact Center

FROM THE OCTOBER 2018 ISSUE

The Economics of Your Contact Center
Illustration by Nick Slater for Contact Center Pipeline
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Fair warning: Reading this article could be painful for you. Not dentist-root-canal painful, more like exercising-again-after-taking-a-longer-break-than-you-should-have painful. But it may also give you a punch in the stomach, because I’m going to say things to you that may make you feel foolish for not seeing them before now.

If you’re in call center management, you’re probably working hard to keep your employees productive, producing at quality and constantly pursuing that elusive “employee engagement.” You’re doing what you should be doing, going out there and looking for ideas, and trying to bring them into your call center. You’re reading this publication monthly, along with a few others, and maybe attending some conferences, as well. Most importantly, you’re working hard, not seeing your kids enough and probably not taking enough time for yourself.

But no matter what you try or new ideas you bring in, do you always feel that it’s taking more energy to sustain the same results? Attrition hasn’t budged, absenteeism still happens—and at the end of every month, are you still holding your breath wondering if you’re going to hit your KPIs? Basically, you’re not getting ahead or fixing the problems, you’re just keeping it all going. Is this your life? Why does it have to be this way?

It’s because you’re ignoring the economics at work in your call center.

I’m grateful to the editor and publisher of Contact Center Pipeline for giving me the opportunity to share some of my ideas for how the next generation of call centers should be managed. Before we began, I made clear to them that, as an outsider to this industry, I am strong critic of what I see, and that in my own call centers, our starting point for how we do something is often to ask the question, “Should we be doing the opposite of the way it’s currently done?” I applaud them for having the courage to say, “I think this question is something that’s good for the industry and should be in this publication.”

To solve the problems you are facing in your call center, in this article series, I will plunge you into ideas by such disparate thinkers as Robert Owen (the early English industrialist and philosopher behind social Utopianism), and Muhammad Yunus (Bangladeshi Nobel Peace Prize winning economist and founder of Microcredit).

I will introduce you to Soichiro Honda (builder of the world’s most powerful, efficient and small engines in post-WWII Japan; founder of Honda Motor company), and help you understand how a mercurial 15th century Spanish polymath named Antonio de Nebrija, if not for being in the right place at the right time, would have prevented the language colonialism, on which all of our offshore centers rely, from ever existing.

And at all times, we will have an 18th century Scottish philosopher and professor at our backs (or nipping at our heels) named Adam Smith.

Right now, you may be wondering what all of these people have to do with your call center. I assure you that if you continue to read this article, and those that follow, you will soon come to see how much influence all of these people are having on your call center today, and every day, without you knowing it.

Success in your call center is just around the corner, as long as you don’t ignore the economics. Smith’s hand may be invisible but trust me, but it’s not ignoring you and your agents.

If you come on this Journey with me, it could be scary and it could be career-threatening. But these ideas can help you.

The application of economic thinking to your call center is happening whether or not it’s your economic thinking and working to support your goals. It’s already there, it’s just time to understand it, so you can sculpt it and change those economics to achieve your goals.

The Importance of Agents’ Wages

Let’s start at the beginning, by discussing the importance of wages to the average call center agent—because if you get that right, so much more is possible.

Staff wages is the toughest issue we all face. Right now are you saying to yourself, “I would pay my agents more, but I’m limited by corporate on what I can pay”? This is, of course, true. It’s why globalization overtook our industry in the last 25 years. But the problem with what has happened over the last 25 years is that the creation of all of those call centers in far-flung places began with asking the wrong economic question: “Where can I get my calls answered for the lowest cost?”

Let’s consider this question for a second. From whose perspective is this question being asked? It’s certainly not the agent’s perspective—the person actually serving your customers. Instead, it’s being asked from the finance department’s perspective. In some cases, maybe call center management as well, but I doubt that because, as a call center manager, you’d happily pay an agent a million dollars a year if it worked for your company’s cost structure and it got you the quality and production you needed.

What is the solution here? It’s quite simple really. When you evaluate your agent’s salaries, you need to change the denominator of your comparison. Instead of comparing agent salaries to what finance tells you that you can pay (or what your competitors pay), you need to benchmark your agents’ salaries as they relate to the local economy they’re actually in—where they are living their daily lives, trying to survive.

I cannot state strongly enough how paying agents compared to what your competitors are paying or the minimum amount you can pay is the WRONG way to look at your agents’ salaries. Instead, you need to benchmark your agents’ salaries against local economic conditions because that’s where they are actually living.

At Rethink Staffing, whenever we’re evaluating a job offer relating to a new account, if we don’t already have the data, we always benchmark against three broad measures of wages:

  1. The government-defined poverty line for the city we’re operating in.
  2. The government-defined minimum wage for the city we’re operating in.
  3. The government-defined middle-class wage for the city we’re operating in.

All three of these measures interplay with one another and affect the psychology of your agents, and subsequently, the work they’re able to do and at what quality and level of production. Let’s understand what each of these mean , and more importantly, what it feels like to be an agent earning at each of these three critical levels.

First, the Poverty Line

National numbers are bunk and not something you should use. You have to get hold of local economic data (the Bureau of Labor Statistics website has a lot of this) and evaluate your salaries this way. The general rule for Rethink Staffing is that no employee makes at or below the poverty line. (In our centers in the developing world, we actually require every employee to make at least three times the poverty rate, but the developing world is different than the U.S. and Canada.) I have met many good people in this industry, and I know that none of us wants to employ someone at a wage that keeps them in poverty.

Let’s talk briefly about what is abject poverty. For the official definition, read “Ending Extreme Poverty,” by Amy Frykholm, but it’s really all about insecurity: food insecurity, health insecurity, personal safety issues (at times) and, more than likely, limited access to clean water, electricity and communication networks.

You will see higher absenteeism if you’re paying at the poverty line, because someone in poverty lives most of their life in “crisis.” One thing or another always crops up that is more urgent than getting to work on that day, and they are sick more often.

Second, the Minimum Wage

This is a hotly contested issue in the United States right now, and generally a policy disaster, with many states and municipalities enacting their own rules because the U.S. federal minimum wage has not been raised in nine years even though inflation has risen 17.5% in the same amount of time. This means that, on a compounded basis, the purchasing power the minimum wage has lost in that time is $1.27 an hour. Someone earning the minimum wage today is really earning $5.98 an hour in purchasing power vs. the last time the minimum wage was raised. Could you live on $5.98 an hour?

In economic terms, the minimum wage should never be below the poverty line, otherwise it’s a failed policy. In the U.S. and Canada, most of you are not paying the minimum wage because, frankly, you can’t get anyone to walk in the door if you do. In this case, the market, not the minimum wage policy, is performing its function and pushing wages up.

In the U.S., the minimum wage is below the poverty rate, and thus, is a failed policy. In the developing world, the minimum wage is always several times above the poverty rate, which means that the minimum wage policy is functioning as it should and is pushing wages up to sustainable levels for those earning at that wage.

Unlike in the U.S., someone earning the minimum wage in the developing world is actually on their way up the economic ladder and can sustain themselves. If they are frugal, they have extra resources with which to improve their economic station in life. They’re still riding public transport and are probably living in communal housing of some sort, but they have money to attend school, go to the movies, and food, safety and income insecurity are not really a part of their daily lives.

At Rethink Staffing, by compensation policy, no agent earns less than 1.35 times the minimum wage in our Philippines call centers. In our coming Philly call center, entry-level salaries are set at 1.68 times the minimum wage (USD $12.20 an hour is what the city’s labor department considers a “living wage”).

Third, the Middle-class Wage

You should consider this the “promised land” of wages for agents as we do—so much so that we incorporated it into our mission and vision for the company. The life that a middle-class person leads is vastly different from someone in poverty. First, they most likely have their own transportation so they begin their day with greater control of their time. Second, they have much more disposable income, which they can spend on the things in life that can give them joy outside of the workplace.

But third, and most importantly, they earn enough to be an economic anchor for their immediate family and possibly for their extended family. At our service centers in the Philippines, 73% of our agents earn greater than the middle-class wage. While this is a great statistic, this is a better one: 91% of our agents are supporting three dependents on average, and 66% are the main breadwinners in their families.

This is where it gets good for you. You see, if your business’ microeconomics allow you to pay middle-class wages, you are now not just a local employer but a pillar of your local community. You are someone that is helping the community around you by returning middle-class wages into the community beyond just your individual agent.

Prove the Value of Better Paid Employees

In conclusion, while this article has given you a high-level handbook on how to look at various economic factors in setting wages, the author admits that it ignores the many business realities and internal politics you may face when trying to set wages. I recognize that, as a 100% owner of my business, I have no policy committee, no investors and no bosses on whose approval I must rely.

Except I do have clients, and their approval is easy to judge — they either stay with me or they leave for my competitor. I either earn revenue or I don’t. Thus, whether or not I can feed my dependents (I have three growing boys and they eat a lot!), I rely on benchmarked wages and the witness of economic progress of agents by agents as the surest production of performance that keeps my clients with me, instead of going to you.

I submit that you have all the powers within your control to surmount these obstacles and make your call centers outperforming. You need do nothing different when dealing with your finance department: Prove it to them. Prove to them how employee engagement can be a value driver to your business, and as my friend Bruce Belfiore reminds me all the time, show them how better paid employees leave less often, show up for work more often and are easier to manage. Prove how all of the money that your call center is spending on managing attrition and absenteeism can be put back into wages.

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FROMContact Center Pipeline October 2018
Mike Dershowitz
Mike Dershowitz is the CEO of Rethink Staffing, a fair trade call center that aims to make a measurable impact on the lives of people in developing populations. His idea is to put as many people as possible into impact sourcing work, that pays people up to 3 times the poverty rate of the country they live in and provides them skills in a context that makes them more productive and happy. This will eventually help them become capital owners and contribute to the economic development of their respective communities. Mike believes he can achieve this goal through fair trade outsourcing, a business philosophy that he developed based on the principles of social economics and fair trade entrepreneurship. You can read more of his thought-provoking articles on Medium.