I was talking to Jay Minucci, a long-time industry veteran, consultant to the industry, and contributor on these pages. He was telling me about the trend he’s seeing with his large clients—that consolidation is preferred because it’s becoming too hard to manage too many contact center vendors.
Consolidation makes sense as a business priority—buyers are tired of too many suppliers. In some cases, corporate parents require that consolidation because it’s so hard to contract with too many third-party companies. There’s a lot of labor spent to get a new contract over the line, and overall switching costs are so high—all of which means that the value proposition of a new vendor has to be really compelling.
Not to mention the financial risk. It makes sense that the largest buyers in the BPO industry want familiar counterparties; the largest buyers know the balance sheet of the counterparty, know how they manage risk, and most importantly, know that if they have to sue, there’s actually something to sue.
Do we even need to be down this rabbit hole? Why are we worrying about counterparty risk and suing when we should be serving customers? As an industry, we’re worrying more about risk than we have to because we’re ignoring a basic principle of human anthropology—the rule of 150. I would argue that, right now, the industry is stuck in a downward spiral of high attrition, declining quality and minimum productivity. That’s why we’re seeing the “reshoring” movement within the industry.
Before we understand how to fix it, let’s first understand how consolidation naturally drives down quality within an industry.
Oligopolistic Effects Always Drive Down Quality
Depending on how long we have been in the workforce, we’ve all been through or witnessed the cycles of growth and consolidation in an industry. One of the best examples in history is the auto industry wherein, from the 1920s through the 1960s, the market composition evolved from lots of small providers to the “Big 3” that currently dominate the industry.
The Big 3 in the auto industry were supreme in the ’50s to the ’70s; they were oligopolies. Because they owned the market, they got lazy, quality declined, and when Japan was ready, they came into the market and pounced. Chrysler had to be rescued in 1979 as a result. Other industries have seen the same thing, such as the PC industry in the 1990s (dynamic with lots of providers) and 2010s (stagnant with few providers). We’re currently seeing the proliferation of offerings in the content streaming space with consolidation and stagnation coming soon.
Now, the same thing is happening in the contact center industry. Because of their size, the Top 20 outsourcing firms also have the largest number of BPO workers globally. If you’re a contact center manager in one of the large buyer firms in our industry, this makes a lot of sense, because it’s a lot easier to buy and manage fewer vendors.
If you’re from one of those largest BPO firms, this is good for you—more business from fewer customers. Fewer relationships to manage and more dollars from each of those relationships. Of course, this is also driving down the price (more on that in a future article).
But, what if this trend was naturally bringing poor quality into the service that’s being provided to customers? The more consolidated an industry is, the less competition there is for the business. Inherently, as Joseph Schumpeter told us more than a hundred years ago, this lack of competition drives down innovation in an industry. In the case of the contact center, this means declining quality.
By now this is probably old news—to the point where you may feel protected against it in your supplier contracts. If you look at the commercial relationship between BPO buyers and BPO suppliers, contracts have been enshrining bad quality in the commercial terms for a long time. Don’t agree? Ask yourself why attrition is simply accounted for by the supplier, training costs are borne by the supplier, and service debits/credits are the preferred economic equalization mechanism between the supplier and the buyer?
If there were trust between the buyer and supplier, none of these terms would be necessary. Other industries have experienced the same thing as consolidation takes hold—just ask Comcast, Verizon, AT&T or any of the big players in the U.S. or global telecom industry what customers think about their customer service. What about where they get new customers—from stealing them from the other oligopolies.
Oligopolies are coming to the contact center industry, and quality could decline further. But it’s not all bad, as long as we embrace a key feature of human biology.
The Rule of 150 Tells Us Otherwise
What is the rule of 150? The rule of 150 is an observed anthropological phenomenon coined by British anthropologist Robin Dunbar, and is based on research that 150 is “the suggested cognitive limit to the number of people with whom one can maintain stable social relationships.”
The evidence for this is in a lot of different places. Most preindustrial societies organize themselves into tribes of no more than 150 with one chief. Military planners have a rule of thumb stating that no more than 200 people should be in a unit. Hutterites (religious groups who live in self-sufficient communities) split into two groups once the community reaches 150. Gore Associations (creator of Gore-Tex) knows how to build new plants based on this: they put 150 parking spots attached to a factor, and “when people start parking on the grass, it’s time to build a new plant.”
When teams grow beyond 150, something changes in our brains. All of a sudden, instead of thinking about the goal, people start worrying about how to communicate, and they spend much more time thinking about their role and rank in the organization. Sometimes we call this “office politics.” Patty McCord, an early manager at Netflix says this, “I call it the stand-on-a-chair number. Once a startup leader gets up on a chair to address the staff and someone yells out, ‘We can’t hear you,’ it’s time to start thinking about how you’re communicating.”
What about in our industry? Have you ever seen this in a contact center with teams grouped into 100 people or so, with one operations manager at the head of that group? Does one team seem to consistently outperform the others? Do the agents in that team seem better motivated, more in tune with whatever the mission of the client and company is, and generally have better stats? I call this the “golden operations manager” effect. (Full disclosure: I try and hire them wherever I find them.) Chances are, if you interview the operations manager in charge of that team, you’ll find that their inclusive behavior, the constant communication of mission and quickness to praise means that they’re running their team much more like a “chief” than like the typical operations manager. And they’re delivering better performance.
This particular operations manager may be intuitively applying the rule of 150—and even in the large contact center environment is getting better results from his tribe than his peers.
It may seem trivial, but it’s not—why does it matter? It matters because the rule of 150 can improve quality and employee engagement in the large contact center environment. How do we know? Let’s look at ants.
Maybe It’s Time for Large Call Centers to Be Like Ant Colonies
Ants operate as cells fused within one larger being. They tackle issues as a group and are fully aware that their individual strength is dwarfed compared to the strength of their whole. They use their social behavior and constant, rapid communication to bring in resources. Continuous exchange ensures that every ant is fully aware of what’s going on and allows them to adjust direction constantly. (Likewise, businesses have the tools to facilitate communication, but cross-departmental contact is still a pressing issue.)
Biologists tell us that every ant within a colony has a unique and vital purpose even though the ants act as one unit. This directly applies to how we operate a call center: if the individual agent in a seat understands that they are one, but one of a larger group (the tribe) and the tribe is a part of the larger colony (account or company), they have a much better perspective on their role in the organization. More importantly, they’ll have a clearer view of how their individual actions contribute to the whole organization—their tribe, account, and company.
Most of us feel the opposite—that in large companies, individuals are not given a clear sense of purpose, and an agent’s understanding of their individual contribution gets fuzzy as the company (or account) grows. Without mechanisms for cooperating and a clear understanding of what everyone contributes, growth will be chaotic and the company will generate waste. That waste will eventually retard growth or trim margins.
Fair Trade Outsourcing is moving in the opposite direction of the industry when it comes to consolidation. While we’re still a small company, we’re larger than the rule of 150. When we have teams larger than 150 we actively work with clients to “divide the cell” when it gets too big for the managers to know what’s going on with all of their agents and team leads. We believe quite strongly in the rule of 150, and have seen positive results as reported by managers, team leads, and operations directors as a result of this organization.
So, if you’re frustrated by the difficulty of managing large teams, and searching for a new way to organize them, consider the rule of 150. The rule of 150 may not be a cure-all, but if nothing else, you’ll know that you’re managing your teams in line with human biology and neurology, instead of forcing it into your perceived organizational abstractions.
You may be surprised at the results!