Myth: That Offshoring is the Only Way to Cut Costs Quickly
Offshoring is growing in Australia as the economy cools. There has been a dramatic increase in the number of customer processes sent offshore in the back office. However, a more recent trend has also seen the shift of front of ce customer interactions such as calls. Many companies seem to believe that the only way they can meet market expectations for bottom line improvement is to exploit the labour arbitrage opportunity with India for processing and the Philippines for calls. They believe it is the quickest and easiest way to cut costs and are willing to risk degradation of the customer experience as a result. Many are rushing the offshoring process and then suffer the consequences as re-work, complaints and management complexity offset the expected savings. However, there are alternatives. Many times our rapid diagnostic has shown that there are better, quicker and lower risk ways to cut costs that also improve the customer experience.
We’ve shown in the last five years that companies can achieve 20-30% improvements in costs and deliver better customer experiences at the same time. In fact, done the right way, better experiences by definition deliver lower cost. We’ve achieved these bene ts in less time than it takes to establish an effective offshore operation. These alternatives don’t incur the risks of reduced control, brand damage and cultural cringe that can result from offshoring. Not that we are against offshoring if done the right way and for the right reason. In our next Myth Buster, we will explore the right time and way to do offshoring but we’ll concentrate here on five alternatives that deliver rapid cost savings.
In our deep dive diagnostics we find potential cost savings of up to 50% in only four or five weeks. Better still we find that 20-30% of these savings can be achieved within 3-4 months. Senior Executives and Boards are rightly cynical about these kinds of numbers before we get started so we often refer them to the companies where we have already achieved those kinds of benefits.
The first savings area comes from the elimination of unnecessary interactions. Lean methodologies call this “waste”. Our diagnostics measure the amount and causes of waste in the interactions across one or multiple channels. This then shows which waste can be quickly addressed. Eliminating contacts is better than anything offshoring can achieve for both the customer and company. It removes the cost completely and removes unwanted effort for the customer. We once found an insurance operation with 80% waste because 80% of calls were “chasing the claim”. We cut that in half quickly by doing things like better expectation setting, SMS updates on progress and on call execution of low cost claims.
Our second source of rapid cost reduction is based on redesign of the contact handling process. Our diagnostics find the process overheads that have become ‘baked into’ the process. These range from badly designed and often unneeded identification processes to excessive compliance scripting. There’s nothing customers hate more than being put through identification hell or being asked for lots of information the company already knows. Our diagnostic shows the way processes have decayed. The process we use to design “Best Practice Procedures” creates smarter ways to achieve even better outcomes. Of course customers love it too as we reduce their effort on the interaction. Our best result recently was taking a set of processes that averaged 16 minutes down to 7 minutes. That’s nearly 60% saving for the company and nine minutes less effort for the customer per contact.
Our third trick is to exploit new forms of interaction. These are often choices customers want like receiving something by email but they also save time and costs for the company. We’ve also found that companies can quickly and easily use SMS as a cheap and effective tool without needing to invest heavily in IT. We use these kinds of mechanisms in two ways. First as a cheap form of proactive contact that in turn reduces inbound contacts. Secondly, as a way to get customers information in real time to enable a better dialogue with a customer and reduce the cost of old fashioned order fulfilment or statement production.
Our diagnostics also highlight a fourth area of opportunity linked to what we call “structure”. This is the opportunity to reduce the staff overheads that are linked to the way work and teams have been organised. As we observe the work in our diagnostic, we measure things like the amount of work escalated, the overheads in allocating work, the volume of transfers and hand offs and the number of times staff look for help and support. It’s not uncommon for the work and team structures to be adding a 20-30% overhead to the work. We have fixed these issues many times by organising the work around complexity. In a recent example, we found that 25% of contacts were handed off after a wasted investment of four minutes per contact and there was an overhead of floorwalking seniors supporting the structure of one senior per team. The model we created within three months removed both of those problems and the savings were measured at over 25%.
Another area of benefit that we uncover is through “resourcing” but in particular the benefits of hybrid teams (see our Resource Flexibility white papers). Here we look “across channels” at the benefits of creating hybrid teams to service different types of work. There are often savings if we can blend work in some way, for example, calls and correspondence. Setting up effective hybrid models exploits the different service levels that exist across channels. A call may need to be answered in 30 seconds but an email may only need a 24 hour response. So the hybrid teams create more scale to handle peaks of workload and “ fill in” the troughs of over resourcing with other useful work. Through mechanisms like this we can also help the customer by providing better service level consistency. We’ve created these teams within weeks and therefore benefits can flow rapidly.
So it is possible to get cost savings quickly (if that is what the market is looking for) without going offshore and the customer also benefits. We’ve found that this approach works across industry.
Our recent successes include:
saving 28% in a utility which now has the lowest complaint rate of its peer group (a knock on effect that also saves money);
35% workload reduction in a health fund; and
creating capacity of over 30% in a bank.
But in all cases, the key customer measures also improved (NPS scores, customer satisfaction ratings etc.). These companies are also now in a better position to offshore if they want to because processes are well defined and there is less waste. So, in our next paper, we’ll talk more about the right ways to offshore. If you are interested in a rapid diagnostic, please drop us a line or give us a call.