Focus Your Agent Compensation Programs on the Customer


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As a former CEO of a call center firm with more than 5,000 agents in more than 35 call centers, I have experienced the impact, both positive and negative, that an agent compensation program (ACP) can have on a campaign. Motivated agents working toward a common goal are often the most critical component in determining the success or failure of a program. Although the agent compensation structure is just one component, it can have a significant impact on a program’s success.

Start with the customer

The first step in developing an ACP is to align the methodology with your customer’s needs; no one ACP is right for all campaigns. For these purposes, it is often necessary to work closely with clients to understand the reasoning behind the performance metrics given. For instance, one of our clients, a major telecommunications provider, initially set performance goals based upon sales per hour. However, after working with company leaders to understand their costs and profit metrics, we helped them understand that certain agents who had high sales per hour were not necessarily generating the same proportionate amount of profit. Indeed, many of the so-called high-performing agents were actually costing our client money because of high churn percentages. As a result, we modified the agent compensation to tie into our client’s cost structure and generated an ACP based upon the expected customer lifetime value (CLV). We then used these calculations to provide financial and non-financial compensation to our agents. As a result, the client changed its method of evaluating the performance of all of its vendors, and our firm ranked first out of 11 vendors.

In addition to meeting external customers’ needs, a call center must satisfy internal customers, namely its employees, partners and suppliers. For example, we assigned agents within our call centers based upon their ACP preference. We found that certain agents thrived with pay-for-performance programs, while others preferred hourly compensation. Some employees valued salary and benefits, while others wanted the highest hourly rate. Understanding and fulfilling their needs helped us keep agents motivated and reduced employee turnover.

We also communicated these different compensation plans to our agents in an open and fair way. Agents were encouraged to seek higher pay by either working on pay-for-performance programs or remaining employed with the firm. Our managers selected individual agents for campaigns based upon their performance history and the time of service.

Monitoring an agent’s time of service and rewarding an agent for it is critical for retention. It is important to investigate the reasons for agent turnover and develop strategies to retain employees. Some successful strategies include employee loyalty programs, team building exercises and deferred compensation. Remember that no one solution is right for every call center. The key is to ask and listen to your customers—in this case, the employees—and then respond appropriately.

Customer lifetime value

Although difficult to measure, the most effective ACP is tied to customer lifetime value (CLV). Many firms look at their call center as a cost center and develop compensation programs designed to minimize the amount of talk time. For example, a major wireless telephone provider evaluates its agents on only one criterion: average call duration. The result is that agents are penalized for doing things that would increase CLV. For example, agents who take more time to sell additional services are compensated less than agents who fail to take advantage of this opportunity. Fortunately for this provider, company executives have recognized the problem and are now testing several different ways to reward their agents, all of which are tied to CLV.

An effective ACP will reward agents for treating different customers differently. It will reward agents for taking more time with high-value customers, those with the greatest CLV and less time with low-value customers. It will also reward agents who promote more profitable products or service over less profitable ones.

Inform the agents

Whatever ACP used, it is imperative that agents clearly understand how to do the calculation. Nothing can be more frustrating or counterproductive than agents who do not understand how they are compensated. We originally feared that an ACP more complicated than calls per hour was beyond the comprehension of our agents. How wrong we were! Not only did agents understand the calculations, they often understood them too well and found ways to beat the system. Our audit procedures could identify these problems within a few days—but not until agents were able to make double or triple the anticipated range of compensation.

Provide real-time results

The prior example illustrates the importance of real-time results of any ACP. Agents do not want to wait until the end of the campaign, week or even day to know how they are doing. The best ACP is one that can give instant real-time results to the agents, managers and customers.

Non-monetary compensation

A call center should use ACP not only to calculate wages but also for calculating all non-monetary compensation programs. Plaques, awards, contests and company newsletters that acknowledge and promote an agent’s stellar performance are often more valuable and provide a better ROI than increased wages.

End with the customer

The success or failure of any ACP will ultimately be decided by customers. If you have identified all of the key stakeholders in a campaign; understood their needs; solicited their feedback and input; and then customized the compensation program for each of them, you have ensured your greatest chance of success.


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