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The Contact Center Costs You Can Control vs. the KPIs that Control You

Published: July 21, 2015 | By: Bob Fletcher

Metrics play an important role in every contact center. But when it comes to profitability, what are executives most concerned about on a daily basis?

When we talk about “profitability” in the contact center, the first consideration is revenue, which can be defined many ways depending on your business.

In-house contact centers revolve around customer revenue, for example, where outsourcers focus on metrics like calls per hour, minutes per call, or whatever was negotiated in the contract as “revenue.”

Once revenue has been defined, the second factor in profitability is expense, which generally falls into three categories. The largest category is direct expense, which includes salary and wages. In a well-run contact center (one that is profitable), direct expenses should be in the neighborhood of 55-60% of total revenue. Obviously, the lower the percentage, the better.

The next category is overhead, which includes things like rent, utilities, administrative costs, and sometimes benefits. This could also include any charges for executive overhead. As a best practice, overhead expenses should be 25-30%.

So, Revenue – Expense = Profit. This is sometimes called EBIT (Earnings Before Interest and Taxes) – and then there is EBITDA (Earnings Before Interest, Taxes, Deductions and Amortizations), but since those are more accounting terms, let’s just say “revenue minus expense equals profit.”

This is the simple mathematics of profitability in a contact center. The most controllable factor of a center’s profitability is overhead. Not only is it more controllable, it makes up a smaller percentage of overall revenue than direct expense, which is basically the cost of the people needed to run the center.

And since people produce revenue, at least in the outsourcer world, they have to show up, be on time, follow a schedule, be productive and efficient – and do all of this at a high level of quality. When you get in trouble is when they don’t show up, are not on time, not productive, not efficient, or even worse, they leave.

Turnover is by far the most expensive number in a contact center because while you are training replacements, you are not generating revenue.

Every day in a contact center, there are certain Key Performance Indicators (KPIs) that must be met or exceeded. Take service level, for example.

Service level depends on how accurately you forecasted incoming call volume. Did you schedule the right number of people at the right time, doing the right thing?

In a perfect world, if everything is correct and accurate, you will make a profit. But when things go haywire – there is more or less volume than forecasted, too many or not enough agents show up, or agents who show up are less productive – this is when management has to understand the impact on productivity and profitability to make the right decisions in real time.

It’s a balancing act – you have to balance the contact center costs you can control vs. the KPIs that control you.

By the way, if the KPI is 80% of calls answered in 20 seconds and you exceed that and answer 90% in 10 seconds, you can eat up all your profit because you have answered the same number of calls with more agents sitting idle, not doing anything.

Your cost went up, but revenue stayed the same. It’s not necessarily to your advantage to overachieve on certain KPIs. (Quality is not one of them. One of your objectives should always be to have high quality.)

How do you achieve this balancing act? In order to be successful, it must be micromanaged on an interval basis throughout the day. If you lose focus even for a few intervals, you may lose the day. And communication is critical. What’s happening has to be communicated with the people who forecast and schedule so that adjustments can be made quickly.

At the end of the day, you have to make a profit. And you have to serve the customer.

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