Maximize Profit and Minimize Risk

---

Two industry experts offer some tips and advice for those companies that are looking to locate, staff, and operate a new call center.

By Jeffery L. Furst, President and CEO, FurstPerston; and
King R. White, Call Center Site Selection Group, Trammell Crow Co.

TODAY MORE and more organizations are insisting that their call centers become profit centers, responsible for creating rather than draining revenues. In order to add value to the corporation, call centers are expected to create new ways to use the customer relationships that they manage to cross-sell and up-sell products and services, or to increase retention rates through innovative programming. Their goal is to create programs that maximize customer satisfaction and therefore revenue, while minimizing marketing and sales costs. Because of this new focus, many organizations are evaluating how, when, and where to locate new call centers.

Our belief is that the success of the call center is determined by the site location decision and labor-pool quality analysis. If the wrong location is chosen, the new call center site will struggle to maintain an acceptable number of agents with the basic minimum job requirements.

We examine the site selection question and the labor-pool quality analysis process in this article by discussing how to maximize profits and minimize risk as you prepare to open a new call center.

SITE SELECTION

Finding the Right Location

Considering that more than 70 percent of a call center's annual expense goes toward labor costs, while less than 5 percent is spent on real estate, the answer is clear - Locate call centers in locations with less-expensive labor and minimal competition in order to maximize savings and minimize risks. These factors are critical in achieving the savings every corporation wants. However, there are significant risks if the wrong site selection strategy is implemented. The available labor pool is by far the most critical element for achieving cost savings in a new call center, but if the wrong site is selected, regardless of the labor pool, there will be significant risks.

Maximizing Profits

Trammell Crow Co.'s research concludes that corporations can expect approximately 10 to 50 percent in labor cost reductions by relocating away from high-cost metropolitan areas or saturated call center environments in the United States and Canada, and by focusing on Tier II and Tier III communities.

Some firms have achieved additional labor cost savings of 10 to 40 percent by relocating to international locations such as Mexico, South America, the Caribbean, the Philippines, and India. These alternative locations may also provide for other savings such as lower training costs (via lower turnover rates of usually 5 to 25 percent annually), economic incentives, lower real estate costs, improved productivity, and improved customer service. The total savings from labor costs, training, and real estate may range from $2,500 to $15,000 per employee per year in North America, and from $15,000 to $25,000 in international locations.

In a 2001 study of global call center site selection trends, Trammell Crow studied global openings and closings of call centers across the world. It found that more than 44 percent of new call centers opened in communities with a population of fewer than 500,000 people in tertiary communities during 2001. These new call centers created almost 30,000 new jobs.

The same study found that there was a significant shift to international destinations like India and Canada. In 2001, almost 17,000 new call center jobs were created in India, while Canada saw almost 11,000 new jobs. These two countries alone are estimated to have absorbed approximately 40 percent of the new call center jobs created in 2001 throughout the world.

Initial investment and savings potential will vary according to the goal of the project - relocation or expansion. Items such as the amount of furniture and equipment reused, severance packages, relocation packages, telecommunication differentials, facility improvement costs, facility disposition costs, and retraining costs will need to be considered before relocating. Many of these initial investments can be offset by economic incentives or by locating in one of the more than eight-million square feet of vacated call centers currently on the market across North America. Overall, implementing a strategic site selection methodology in this changing economy can prove to be a very valuable component of a business plan when analysis proves that the return on investment can be achieved in one year or less in most situations.

Minimizing Risks

Some corporations conduct site selection studies internally. Others outsource the function to various advisors, including site selection consultants, real estate companies, or a combination of these resources. Bottom line, the biggest risk is taking the advice of an inexperienced team - it does not matter if they are internal or external. A corporation must carefully consider how to conduct the appropriate analysis and whom to use to conduct it, because one mistake can cause significant short- and long-term problems. The decision should always be based on labor, not real estate, so be wary of real estate brokers who are strictly motivated by real estate commissions or consultants without significant experience in this arena.

Inconsistent demographic statistics gathered from economic development agencies will not provide the right answer either. The utilization of multiple "apples to apples" comparative analyses and models of various data and research information from reliable, consistent sources will yield accurate results. Furthermore, discovering the best call center communities requires going beyond the traditional 300 MSA (metropolitan statistical areas) search, from which most companies derive their data. You must go beyond the obvious to find the more than 3,500 other locations throughout the United States and Canada that are ready to be capitalized for the benefit of their communities and, most notably, your company.

The research conducted to find these locations should allow you to:

• Understand employees' psychographic profile - A profile of typical call center employees must be identified in order to evaluate their availability in a community. What type of skills and attitudes must they have to be successful in the available job? How will you find them?
  
• Ensure reliable, consistent data - Consistent, reliable information is critical to the success of the project and can be very difficult to discover. There are 25 to 30 sources that must be explored in order to retrieve the critical information needed to understand a community. Examples of these sources include the Bureau of Labor and Statistics, Federation of Tax Assessors, Economic Research Institute, the United Nations, and the U.S. Census Bureau. Inconsistent data can cause an entire analysis to become skewed. Therefore, the analysis must be set up based on an "apples to apples" comparison.
  
• Compare data utilizing analytical models - Comparative analytical models need to be set up in order to truly compare and contrast statistics. By establishing weighted modeling analyses, a corporation is able to interpret the data, ratherthan glossing over the actual statistics themselves without gaining any real insight.
  
• Understand the competition and labor base - A true understanding of the real costs of labor and the presence of competition is critical in choosing the right location. It requires saturation analyses, employer interviews, community visits, labor-pool test campaigns, and job fairs to draw final conclusions. This process can be very time consuming and requires significant resources.
  
• Find the right real estate - Even though real estate is not the primary driver in this decision, in the end it may dictate how a decision is made. Retail conversions and build-to-suits may be the only alternative in some of the best communities, while the "needle in the haystack" vacant call center opportunity may be out there due to the recent economic conditions. The availability of qualified brokers, contractors, and real estate experts is usually nonexistent in many of the most suitable communities. Seek out people with call center experience to assist in negotiations and construction. Never narrow your decision down to one building in one city - Always have multiple backup options.
  
• Negotiate the best economic incentives - Economic incentives can bring significant value to a project. Let economic incentives be the "icing on the cake" for a location with the right labor force. Many of the smaller communities provide pretty substantial packages and incentives for call center users, from free land to cash grants. However, negotiating incentives and actually getting them will require external tax advice. Be prepared to seek the help of a specialist.
  

Following the process outlined above ensures that your corporation will make a knowledgeable decision and minimize risks. Locating in a nonsaturated call center marketbased on keen community research and market information promotes efficiency, value, and savings for your call center.

EMPLOYEE RECRUITING, SELECTION, AND STAFFING

As discussed in the real estate section, a call center's site selection decision will ultimately come down to the question of labor. Locating in a market that will provide a labor pool that meets your hiring needs will drive the success or failure of your call center.

During the call center startup phase, the hiring process can be sub-divided into two phases: (1) logistics, recruiting, and sourcing; and (2) screening and selection.

Logistics, Interviewing, and Recruiting

Project managers in charge of a call center startup project face a daunting task: how to find and hire a significant employee base for a new call center.

Answering a few common-sense questions goes a long way toward building the logistics infrastructure that is required to support the hiring process. These questions can be grouped to form the building blocks of a successful logistics structure as follows: the training process, the interviewing process, and the recruiting process. If you think that these processes are listed backward, you are right. It is easier to work backward from your call center launch goal to establish the milestones that must be reached to achieve that date.

• When is the new center expected to be taking and making calls?
  
• How many employees are required and at what points in time?
  
• How long is the training program?
  
• How many people can a training class hold?
  
• How many training classes can be simultaneously conducted?
  

In addition, answering the following five questions will help the project manager establish the targets for the interviewing and recruiting processes:

• Does the call center organization have metrics available that show how many contacts to interviews to hires are needed?
  
• If so, what resources will be needed to have enough "throughput" during the interview process to meet the training class goals?
  
• If not, who within the call center organization, or outside the call center organization, is available to provide some "best guess" information to provide a throughput framework?
  
• What steps need to be involved to ensure that a qualified employee is hired?
  
• Will the call center organization manage this process internally or turn to an outside firm?
  

Understanding how many job candidates must contact your organization and then apply will help the project manager understand what recruiting and sourcing processes must be implemented to drive enough candidate contacts, which will drive the interviewing process, which will drive the training classes.

• What is the recruiting budget? How is it determined?
  
• How is the budget broken down by impersonal contacts (print ads), personal contacts (referrals, recruiting team), and the internet (job boards, website)?
  
• What is the recruiting strategy and what tactics drive the strategy?
  
• How far in advance must the tactics be implemented to achieve results?
  
• How will results be tracked and analyzed?
  
  

Maximize Profits Through Hiring

Now that you have organized your hiring system to minimize risk, you need to add profit into your hiring process. Basically, you must answer the question, "Will our new location provide us with job candidates that meet our requirements of successful job performance?"

Getting Started

In order to add profit into the staffing system, you need to understand what factors drive job performance. These factors are more than a job description or list of duties. Factors, or competencies, can be grouped into three areas:

• The ability to learn, solve problems, and make decisions
  
• The ability to get things done through people
  
• Specific attitudes, interests, and motivations to do the job
  

So, for example, a call center that continually adds new services or products will require that employees are constantly learning. During the screening and selection process, the ability to quickly learn and apply information should be measured. If call center job success depends on being able to resolve customer problems, measuring the ability to empathize and probe for information would be important. But, the ability to quickly assess problems and recommend solutions is also important. You should measure each of these competencies when interviewing a potential employee.

What about motivation or the desire to perform the job well? Many call centers lose people because the repetitive nature of the job bores them. So, measuring candidates' primacy of work, or general attitude toward work, is important. What about all of those people you have hired that are smart, but just do not do much on the job? In this case, we want to understand their willingness to apply what they have learned. Therefore, measuring their attitude towards learning is important.

After identifying factors that drive job performance, you need to measure those competencies. Then, you must make sure the tools you have picked for the selection process are assessing these competencies.

Screening and Selection Tools

Using assessment tools allows you to measure a job applicant's skill or ability in key job success factors. The accompanying chart on page 38 identifies some common assessment tools used to evaluate call center job seekers.

Better selection decisions can build more profitable call centers by:

• Increasing agent productivity by 5 to 15 percent
  
• Reducing agent turnover and increasing retention by 5 to 50 percent
  
• Improving the effectiveness of training programs
  
• Increasing operational efficiency through reduced staffing cycle time
  

What kind of impact would you have on your call center organization if you could increase worker productivity by 5 percent? Or reduce turnover by 15 to 25 percent? Predictably, your return on investment would be well into the six, if not seven, figures.

Opening a call center is not a simple task and takes much preparation. But focusing on the site location decision and the subsequent labor pool analysis that is required will allow you to maximize your profit and reduce your risk.

Jeffery L. Furst is the founder, president, and CEO of FurstPerson (www.furstperson.com), a firm specializing in finding, hiring, and keeping top customer contact professionals. FurstPerson employee selection tools include AutoScreen™, CC HIRE™, and CC Audition™. Furst can be reached at 877-292-8805 or at jeff@furstperson.com.

King R. White is a founding member of the Call Center Site Selection Group of Trammell Crow Co., one of the largest global corporate real estate service providers (www.trammellcrow.com). This division is an independent site selection consulting group exclusively providing call center users with high-level site selection consulting, economic incentive negotiations, and real estate services. White has completed more than 50 call center site selection studies in the last four years.He can be reached at 214-979-6193 or kwhite@trammellcrow.com.