Today somewhere between 30-40% of sales, collections customer care, and technical support services are provided by third-party outsourcers, also called business process outsourcing or BPO providers. The largest of the BPO companies has over $4 billion in revenues, with as many as 300,000 agents spread around the world, while some are specialists in one or two markets or single functions such as collections. Many of the players have added analytical skills and products, offering a fairly complete “end to end” experience for clients’ customers, while others are able to work with their clients’ systems as a virtual extension of their in-house operations.
I’ve spent almost 30 years on the outsourcing side supporting demanding clients, on the client side selecting and managing outsourcers, and leading a consulting firm where we provide Sourcing Optimization services, starting when I started a BPO inside of MCI Telecommunications Company in the mid-90s and continuing when I was Amazon’s 1st WW VP of Customer Service and we added the first two BPOs for customer care, and the past 15+ years with my own firm. Today we see companies start with “What do we keep in house and what should we outsource?” followed by “Where in the world should we go (next)?”, with the key question “How on Earth can we make it all work?”
I’ll cover reasons why companies engage with outsourcers, and then address a variation on that third question: “How can you ensure that your outsourcers love your customers as much as you do?”
Among the reasons why companies use outsourcing partners are:
- Obtain skills that they lack, or would be too expensive to build and maintain or retain;
- Provide for round-the-clock support;
- Handle customer contacts that eventually will be automated, often short simple interactions;
- Help reduce demand for care or tech support;
- Reduce costs, often called “labor arbitrage”.
Note that I didn’t mention “Increase customer experience levels”, even though that ought to be No. 1 in any consideration. Unfortunately, costs tend to be a much bigger priority. While these objectives are laudable, all too often BPO companies are challenged to hire and hold onto the talent needed, keep their costs low, and deliver good customer experiences. Some of the reasons are on the client side (expectations, contract terms, distance from the front line), while some are on the BPO side (penchant to increase revenues which doesn’t square easily with reducing demand, very high attrition levels, and inconsistent service capabilities across locations as well as within sites).
Spreading the Love
So “how can you ensure that your outsourcers love your customers as much as you do?” Here are some specific ideas that work, some easy and some a bit harder:
1. Simplify the BPO contract
Companies often wrap up their outsourcing partners with fearfully long master service agreements (MSAs) and statements of work (SOWs), requiring their attorneys and their partners’ attorneys to wrestle to the ground issues ranging from liability to service levels (with operational inputs, of course). It sometimes takes as long to negotiate the contract as it does to find the best-fit partner in the first place! Instead, companies ought to follow a far simpler MSA and a shorter SOW that describes the services needed and overall requirements, reserving for an “Operations Manual” the myriad of day to day details best left to the respective operations managers on both sides.
This will reduce the time to go live, make it easier to make changes, and keep the procurement and legal teams at bay. In addition, BPO contracts that pay per contact or per customers (even per resolved issue or collection) are more productive than those that pay per employee or per paid hour.
2. Focus on the metrics that matter to your customers
Almost every outsourcing SOW contains so many KPIs that the definition of K (key) is lost, and the outsourcing partner is forced to figure out how to survive without penalties and which metrics to try to hit. Plus, many of these metrics are the all too easy to capture “speed” or efficiency metrics like average speed of answer (ASA) or average handle time (AHT) or sales conversion rate, none of which matters very much to customers who are seeking a solutions or information, not necessarily to buy something.
Instead, companies need to focus on fewer metrics, the ones that matter the most to your customers, effectiveness measures such as first contact resolution (FCR), time to resolve the issue, education about the issue to reduce the need for future support or collections, and how hard it was to get an answer. Companies can survey customers for their effort (Customer Effort Score) and perhaps intuit whether a positive recommendation intent indicates loyalty (Net Promoter Score), but survey results tend to complicate actual contact by contact data that companies already have (plus survey response rates are low). In our first book (The Best Service is No Service1) that came out almost 11 years ago, my co-author David Jaffe and I argued that the way to “Deliver Great Service Experiences” (the title of the final chapter) included getting outsourcing partners onboard with the overall objective to reduce demand for support or to increase revenues, rather than “quality” or the speed metrics.
3. Spend quality time with your outsourcing partners
All too often after initial site visits and kick-off meetings, companies spend very little time with their outsourcing partners, relying instead on cookie-cutter reports, recorded calls, conference calls, or going into a fire drill when something fails.
Instead, companies need to “show the flag” at the BPO sites, celebrate in person the best-performing employees, share developments and new releases in person, get direct feedback on the company’s knowledge base or other systems, and listen to customer contacts on a side-by-side basis. This quality time might mean 3-5 days per month per site, placing a manager on site all the time, or something in between, but it’s important that the company’s senior execs in sales or collections, customer care, and technical support treat the outsourcers as part of the fabric, not the other side of the table during contract negotiations.
4. Create spirited competition among the partners
Companies often engage a second outsourcing partner when volumes exceed thresholds like 300 agents’ worth, with some companies fielding more than 10 BPO partners. These multi-partner companies often treat each relationship separately from the others, perhaps worrying that the BPO companies will be uncomfortable sharing their practices with competitors, or learning about their relative performance.
Instead, the best results always come from spirited competition that can take many forms including: holding all-partner meetings every quarter to share new ideas, best practices, and wild ideas; issuing stack-rank performance scores on the metrics that matter that reveal each outsourcers’ position; and forming a Champion/Challenger model whereby the “leading” partner (Champion) might get 45% of the business and the newer or weaker partner (Challenger) might get 20% of the business, with the balance “up for grabs” to the best performer … the outsourcer with the best FCR or CES scores, for example.
5. Move on when needed
Outsourcing partner contract terms are typically 2-3 years with renewable provisions, as well as rewards and penalties, as well as “cure periods” for especially bad performances. Unfortunately, sometimes the relationships get strained but neither party is willing to go through the effort to undertake deep repairs.
Instead, it’s really important to have contact cancellation provisions that are clearly spelled out with teeth in them. My first BPO contract at Amazon called for cancellation if they failed to beat my worst in-house center for FCR. This led to lots of excellent behavior including over-staffing and spending extra time to resolve issues (we tracked AHT but it was not one of the “metrics that mattered”) and to competition between teams at the outsourcer and teams in my in-house contact centers. Often the company/outsourcer relationship hangs together because of key players at the outsourcer, notably site managers and project or program managers. If these key players move on, and performance declines, it’s probably a good idea to consider moving onto other BPO partners instead of “Wishin’ and hopin’ and thinkin’ and prayin’.”2
Just like finding one’s life partner, finding the right outsourcing partner(s) isn’t easy, and it’s even harder to make it work. However, by following these 5 ideas you will be on the way to ensure that your outsourcers love your customers as much as you do!
1The Best Service is No Service: How to Liberate Your Customers from Customer Service, Keep Them Happy, and Control Costs Bill Price & David Jaffe (Wiley 2008). Based partly on my years as Amazon’s 1st Worldwide VP of Customer Service, but also on “Best Service” providers around the world who have made it easier for their customers to do business with them, we proposed 7 Drivers that start with “Challenge demand for service”:
- “Eliminate dumb contacts”
- “Create engaging self-service”
- “Be proactive”
- “Make it really easy to contact your company”
- “Own the actions across the company”
- “Listen and act”
- “Deliver great service experiences”
2 From the classic Hal David, Burt Bacharach song that Dianne Warwick released in 1964. https://www.azlyrics.com/lyrics/dustyspringfield/wishingandhoping.html