Lately, it seems that call center leaders have been thoroughly absorbed with artificial intelligence and the marketing hype that promises to replace human call center agents with robots. However, there is a more pressing concern facing the call center industry today—agent attrition.
“What is your agent turnover rate?” This is the one question that causes heartburn among call center vendors because, for most of them, there is no “good” answer. High turnover is a palpable threat to both internal and outsourced call center organizations. It is causing recruiting and training costs to skyrocket, as well as a host of ripple effects associated with lower productivity, understaffing, missed service levels, subpar customer experiences and ultimately, financial impacts.
Fierce Competition to Fill Call Center Seats
Call centers have always struggled to retain frontline agents, so why is attrition a red-hot topic right now? In short, record-low unemployment is the primary cause.
The national unemployment rate is at 3.9%, up from 3.7% just a month ago, the lowest it has been since 1969. It’s a job-seeker’s market, and a growing number of workers are “job hopping.” According to the U.S. Bureau of Labor Statistics (BLS), 3.6 million American workers voluntarily quit their jobs in September 2018. The employee “quit rate” currently stands at 2.4%, the highest it has been since 2001. A high quit rate signals strong confidence among workers that they can find a better job elsewhere.
For call centers, this means that already high turnover rates are likely to continue. Research firm Compdata recently reported that the total employee turnover across industries was 18.5% in 2017, and voluntary turnover was 13.5%. In comparison, multiple industry studies have estimated frontline agent attrition rates, especially among outsourcers, to be double or triple that of other industries.
There is no real mystery about the wide disparity of turnover rates between call center workers and employees in other industries. Call centers have been plagued with high turnover due to the repetitive nature of the work, low pay, inflexible schedules, lack of training, stressful environment, high burnout factor, uninspiring management, abusive customers… I can list all the reasons why agents walk out the door, and drone on ad nauseum about the top ways to keep agents happy, but I’m sure that you’ve heard it all before.
Suffice it to say that, in a tight labor market, agents are less likely to stay long term, thus, the competition to fill seats is fierce. Fewer viable candidates mean that positions take longer to fill and hiring managers often end up settling for candidates who don’t meet all the job requirements, leading to unfilled training classes and a revolving door of recruiting and turnover.
Why Agent Turnover Is an Even Bigger Challenge Now
While a certain amount of call center agent churn always occurs when there is low unemployment, I don’t recall when it has ever been this bad. We’re seeing higher than normal agent and management attrition even at the best-run in-house and outsourced U.S. call center sites.
Why now? There are several factors at play. For example, baby boomers are retiring and leaving the workforce, and there are fewer candidates who are ready and willing to step into the jobs that older generations are vacating. As employees, millennials are not exactly flocking to call center jobs. They also are more willing than previous generations to change jobs for better opportunities. According to the BLS, the median tenure of workers ages 55 to 64 (10.1 years) was more than three times that of workers ages 25 to 34 (2.8 years).
Then there is the expanding “gig economy,” which is siphoning off candidates who seek more flexibility, autonomy and advancement opportunities in their work. It used to be that call centers would poach other call centers but now, call centers are being poached by other industries that offer better compensation packages and benefits—something that is very hard for the call center industry to compete with.
Turnover in Lower Cost Nearshore and Offshore Markets
And what about turnover in nearshore and offshore call centers? Global outsourcing is attractive primarily for labor arbitrage, which is a fancy way of saying lower costs. Some would argue that global call centers have lower attrition because the workforce has a greater appreciation and need for the call center position.
To combat rising costs within domestic in-house and outsourced call centers, U.S companies are starting to move work nearshore and offshore that they previously never had intended to because the economics of outsourcing certain lines of business within the U.S have become cost-prohibitive. Rising labor costs translate into higher vendor contract rates, which makes outsourcing outside of the USA a more attractive option—assuming the right global vendors are selected and there is no degradation in quality. And just to be clear, for as many clients of ours that want more nearshore and offshore, there seems to be an equal number that want more onshore or U.S.-based outsourcing.
Due to rising demand for global call center operations, it would be imprudent to think that Latin America or the Asia Pacific region, for example, are immune to attrition issues. In fact, it is widely known that in certain offshore markets like Manila, turnover is high due to market saturation and labor costs are increasing. As nearshore and offshore outsourcing continues to grow, global outsourcers and captive operations will have to face the music when it comes to dealing with the rising costs of employee retention.
Time to Rethink Outsourcing Budgets?
Many in the industry are fully aware of the factors contributing to higher than normal call center attrition. That brings up a few questions, which won’t be popular among client-side outsourcing buyers, but will be with outsourcing vendors:
- Should clients and vendors accept high attrition as the new normal?
- Is agent turnover so commonplace that clients and vendors should view it as a baked-in operating expense?
- Should vendors bill clients for attrition training as a result of high turnover?
- And how about this: Should clients and vendors agree on X% agent turnover and incorporate a reward/penalty structure for deviation?
I realize that clients may read this and react viscerally, and I don’t blame you. But at the same time, I think the subject is worthy of discussion and both sides of the argument deserve an audience. I understand the client’s perspective that vendors are responsible for managing the workforce, and high agent turnover could be considered a performance issue for which vendors should be held accountable.
I also see the vendor’s point of view: Unemployment is low, the economy is booming and there is increased competition for labor. While low unemployment typically signals a growing economy, it is a double-edged sword for call centers. On the one hand, consumers are spending more on products and services that require sales and service call center support, which increases outsourcing demand. On the other, a strong economy and record low unemployment make it much more difficult for call centers to attract and retain skilled workers.
High Turnover’s Impact on Vendor Pricing
The economics of outsourcing are relatively straightforward. And yet it may be time to rethink outsourcing budgets—particularly contract rates paid to vendors. As call center work continues to evolve and become more complex, rates are understandably increasing. More complex call types that require agents with higher skill sets means more comprehensive training programs and better incentives to make them stay—all of which increases the cost of the operation.
Years ago, a Tier 1 (best-in-class) call center vendor in the U.S. could charge $26 per productive hour to provide a client with basic customer service work. This is a now a stretch and nearly impossible if the client expects high quality service delivery. Rates have since climbed into the high $20s and even beyond that for more complex call types.
And for telesales programs, which have a very high burnout factor, and require more incentive based compensation, most Tier 1 vendors won’t touch the business unless the contract rate is in the high $20s to low $30s. Even with simpler engagements for transactional call types, high turnover is draining operating budgets. According to the Quality Assurance & Training Connection (QATC), it costs more than $6,000 to replace an agent making $12 per hour—and that does not include costs associated with missed opportunities, reduced service levels and the overall impact to customers while new agents get up to speed.
Low-Ball and Below-Market Vendor Pricing = High Turnover
Every outsourcing client wants competitive rates—but if you drive down pricing too far, then expect a commensurate return on investment. Let’s face it, based on contract rates with clients, if vendors can only afford to pay their agents $10-$12 an hour in competitive labor markets, then clients should expect high turnover. But if the vendor puts forth a plan to pay agents more and asks the client to participate by increasing the vendor’s contracted hourly rate, then the client and vendor should both benefit from gain-sharing. Assuming that the client and vendor agree upfront that, by paying the vendor more, the client will see a measurable improvement in agent retention, performance metrics, and the vendor’s ability to recruit the right type of agent.
What Outsourcers Can Do to Reduce Turnover
Frontline agent jobs tend to get a bad rap due to a prevailing perception of the call center as an undesirable place to work. For many job-seekers, a call center is usually a last resort or a temporary position. Of course, there are high-end contact centers in which agent positions require a college degree, but these operations are currently just a small subset of the industry.
Therefore, to attract quality job candidates, outsourcers must first overcome the negative image associated with the call center. Positive industry advocacy is needed by all call center operations that wish to attract and retain the best agents. Creative recruiting on social media channels and online forums can help to attract millennial job candidates. Providing the right culture and client branding can also help to connect agents to the companies that they will be representing—often a huge selling point for job-seekers. Don’t merely focus on putting warm bodies in seats—use personality and emotional intelligence testing to identify the right talent for your clients.
Once agents are onboard, what can call center vendors do to reduce turnover? Offer more competitive pay rates with client participation. Just as important are amenities and perks, like an onsite daycare or gym, social responsibility programs, attractive facilities and break areas with modern amenities.
A positive workplace culture has a considerable impact on agent retention. Plan activities to build camaraderie in the workplace, as well as volunteer opportunities within the local community where agents live. Provide a clear path to advancement and make sure that supervisors and management are 100% focused on motivating agents to perform well and continuously improve.
These are just a few ideas that can help to separate your call center from the churn-and-burn workplaces. Most important is a long-term strategy—partner with clients to tackle rising attrition and labor costs in a way that delivers a strong ROI in agent retention, stronger performance and more lucrative business outcomes.