Labor: the Recurring Call Center Cost
A new automobile plant can cost upwards of $1 billion dollars to build. The cost of labor for the same plant can cost between $100-$150 million dollars per year. This means that the labor cost of the automobile plant is about 10-15% of the total cost of the operation.
This makes this business a capital-intensive industry since the majority of the money used to produce the automobile is in the form of physical capital such as land, building and machine tools. Labor costs are only a small part of the overall costs and it would take 10 years of labor costs to meet the same costs as the building and tools.
Now let’s look at a call center. To build a new call center it can cost upwards of $5 million dollars for a new 100 seat call center. If you pay $15 an hour for 100 persons at 40 hours a week for 50 weeks a year your labor costs are $3 million dollars a year. This means that within a year and a half the cost of building a new call center has been overshadowed by the cost of employees. This type of business is called labor-intensive, rather than the automobile plant which was capital-intensive.
So, what does this matter? It matters in that if your labor costs are your number one cost it becomes your most expensive asset.
With this knowledge, what do you do? You can choose to reduce your labor costs as much as possible so that your margins (i.e. profit) are the strongest possible. That is a common business approach.
Another sound business approach is to understand that you are part of a labor-intensive business and to know that the focus of your attention needs to be on the maximum use of this cost as possible. This means hiring the best people possible for your center, training them well to get the most productivity out of your folks and being sure they have the best tools available to be successful.
Just as an automobile plant manager would not let his/her production tools get rusty or break, a call center manager needs to keep their agents in top form for maximum production. This requires a constant focus on the labor force, the employees and what can be done to keep them happy, productive and in place.
Machine tools from an automobile plant do not get up and walk away, but call center agents do, taking all of your investment in them out the door. So knowing that a call center is a labor-intensive industry means being aware that investment in a labor pool is necessary for a successful operation.