In fact, a Q1 2011 survey of business executives reports that 66.4% of executives believe cost pressure will be higher in 2011 than it was in 2010.

This focus on efficiency is nothing new for service and support—we have seen a strong focus on cost containment and reduction over the past four years.  Yet because many organizations already have taken advantage of “low-hanging fruit” cost-reduction opportunities, we now are seeing a focus on initiatives that require more effort.

In fact, we find that many service and support organizations are now rethinking their global footprints, and  renewing emphasis on site consolidation, whether due to cost savings or merger and acquisition activity.

Yet as companies embark on consolidation, we are receiving many questions about the process and outcomes: What should our consolidated footprint look like?  How can we minimize the impact on customers?  How do we know if our consolidation efforts are on track?

Given these questions, included below are some key considerations (and solutions) we have learned from organizations who have previously dealt with this: 

1. Assess suitability of consolidation—Consolidation does not always necessitate the creation of a single site; some organizations determine that maintaining two or three sites serves the best interests of the business and the customer.

To determine what contact volume to transfer where, best-in-class companies use a scoring tool to analyze the suitability and risk of consolidation, incorporating the perspective of high-performing process managers.  A scoring methodology creates greater discipline during the assessment process, enabling organizations to act faster.

2. Prepare customers—Any consolidation efforts have the potential to negatively impact customer relationships and revenue.  In particular, consolidation risks losing personalized service and support based on knowledge captured by individuals working closely with customers, especially in business-to-business environments.

To mitigate this risk, best-in-class companies proactively communicate changes to customers, alerting them of the change and demonstrating the benefit to the customer.  They also make an effort to capture existing customer knowledge, whether in CRM systems or by asking staff to complete customer profile templates.

3. Standardize processes and policies—While consolidation creates an opportunity to eliminate outdated and inefficient processes, selecting the correct process can be very difficult.  Even if companies can settle on a single process, many companies struggle to drive the change within the organization.

Best-in-class companies conduct employee interviews and use these to determine standard processes for the consolidated sites as well as gain buy in for the changes.  To ensure the adoption of these standard processes, these companies identify knowledgeable employees at consolidated sites to champion and enforce the changes.

4. Set progress milestones—With so many different stakeholders and processes at stake, consolidation efforts can easily derail, risking revenue and relationships, as well as internal efficiencies and staff.

Best-in-class companies advise soliciting customer feedback during the transition (typically through surveys), monitoring KPIs throughout, and conducting regular checkpoints to formally evaluate progress and pace.

Is there any other consolidation advice that you can share?

For additional research and tools on consolidation, including addressing the talent implications of consolidation, please refer here.

CCC Related Resources:

• Contact Center Consolidation: Managing the Early Transition of a Customer-Friendly Consolidation Plan
• Service Consolidation Suitability Tool

This post was originally written for our sister program, the CFO Executive Board, a membership serving CFO leaders and their initiatives.

Editor’s Note: In light of the serious situation in Egypt, the Corporate Executive Board asked our Leader for Emerging Markets, Zlatica Kraljevic, to share advice for companies with operations in Egypt and beyond. In the article that follows Zlatica will address:

1.     Dealing with Unrest in Foreign Lands

2.     While Unrest is Certain, Arab Markets Cannot Be Ignored

3.     What Should Multi-National Corporations (MNCs) Do Now?

Additional information on the crisis and notes about the drivers of the unrest can be found in Zlatica’s blog entitled Background on The Egypt Crisis.

Dealing With Unrest in Foreign Lands

Most experienced MNCs take political unrest very seriously and have emergency plans in place to protect their human, financial, and physical assets in case of a government collapse. Given the reality of occasional unrest, every company and individual operating abroad should be prepared to take some basic steps:

• Awareness – Develop trust and maintain close interaction with local leaders, business peers both local and foreign, and with U.S. government officials. Interaction helps understand the dynamics of the country where you operate, and provides valuable insight and access to last minute information. Do not live in a vacuum. Continuous and conscious awareness of your surroundings allows detection of early signs of major disturbances. Turmoil doesn’t just happen overnight so it is important to keep a finger on the pulse of nations and regions where your company does business.
• Contingency plans – Establish sound security practices and planning ahead for a sudden disturbance and/or change of government. This allows your company to better protect assets and personnel on a moment’s notice. Have specific plans for providing an escape route for foreign personnel if necessary. Designate safe gathering sites and establish a communication system that helps maintain open contact with HQ and with all personnel around the country. Your company should register and have your foreign personnel registered with the closest U.S. embassy or consulate so they can contact you if the situation requires evacuation or other emergency measures. The Overseas Security Advisory Council (OSAC) of the U.S. Department of State was created to keep a close dialogue between the U.S. government and American companies doing business overseas. It provides guidelines for effective security (http://www.state.gov/documents/organization/19795.pdf).
• Stay out of the way. Local unrest has a deep impact on local employees who will be nervous and inclined to take a strong position either in favor or against protesters and the local government. Suspend operations and close the office instructing everyone to stay at home. Foreign personnel should not take sides but maintain a neutral position as silent observers. Regardless of how long they have lived in the country, foreigners are still foreigners and should not become involved or express opinions on the political situation of the host country without the risk of becoming targets of an attack.
• Restoring business – After order is reestablished, assess the local business and social climate before trying to conduct “business as usual.” For instance, if the situation is such that the local banking system has collapsed, chances are your clients may not be in position to meet their financial commitments with your company. Make every effort to meet with your clients, one on one, to determine how to best work together to restore normalcy to the business relation.

While Unrest is Certain, Arab Markets Cannot Be Ignored

The situation in Egypt is serious and raises valid concerns about the country’s future and the uninterrupted flow of global trade through the Suez Canal. Unfortunately, serious unrest around the world is nothing new; it has happened before and sadly will happen again. As in the past, however, the situation will sooner or later stabilize, and the affected countries will continue to develop, some faster than others.  To what extent the situation in Egypt will destabilize the Arab world remains to be seen. Even if there are changes in some Arab governments, it is still questionable if and to what extent it may affect the oil exporting countries of the Gulf. They are certainly vulnerable to unrest but their resources, traditions, and local cultures are different from those of North Africa. As long as they listen to world events, they may yet have an opportunity to make social amendments and avert trouble.

However the situation in Egypt unfolds, the fact remains that the Western world needs to pay more attention to the Arab market, just as Arab leaders need to modernize their governments and institutions. One fact that cannot be denied is that the Arab world will be a force to deal with sooner rather than later, not only when doing business in the Middle East and Africa but also in other geographic areas, like Indonesia, where the Muslim population predominates.

What should MNCs Do Now?

There are many things that Western MNCs can do now to benefit from helping incorporate the Arab world into the global economy:

• Take Advantage of Opportunities – Ten years after 9/11, Americans are still hesitant to acknowledge and discover the new Middle East, in spite of billions of dollars being thrown around to modernize the region. It is not just the lack of trust and familiarity, because the same applies to dealing with strong regimes in China, India, and Russia. With the exception of the defense and the energy services industries, Western enterprises have been lagging well behind Asian governments and industries in developing new trade partnerships with Gulf countries. Roughly one in ten delegations visiting Saudi Arabia in recent years has been from the United States. Europeans, historically used to dealing with the region, have been far more aggressive. As a Dutch colleague told me last year in Dammam, “We invest in the region because we have no option; the market is just too important to ignore.” U.S. companies should take note. . .
• Acknowledge a Large Consumer Base – The Muslim population stands today at 1.6 billion. By 2030, it is projected to increase 35% to 2.2 billion. Of these, 60% will live in the Asia-Pacific region and 20% will live in the Middle East. This 20% should not, however, be discounted. Given the wealth and power of Middle Eastern countries they are likely to exert significant influence on the Muslim world well beyond their borders. All together the Muslim market will soon represent 26% of the world population. The potential of this consumer market is as attractive as those in India and China, or even more given the wealth of some segments of the market. And yet, it is barely being considered in most emerging markets strategies.
• Building a Better Future – Western luxury goods and food chains are well represented in Gulf countries like the UAE, Bahrain, Qatar, and Saudi Arabia. Trademark names like Starbucks, McDonalds, T.G.I. Friday, Baskin Robbins, and Chili’s are displayed in Arabic to help integrate them into the local communities and are popular among the young and not so young population. What is missing, however, is the arrival and expansion of heavy and light industries that generate jobs and help elevate the level of education and the technical skills of a young population eager to learn and progress.

Trade, industry, and technology transfer create jobs, strengthening a middle class with increasing purchasing power. Purchasing power reenergizes trade and provides the foundation for higher investments in education, health services, and the local economy. These investments raise the standard of living and help stabilize societies, thus creating a bulwark against extremism.

In several recent commercials—click on the links below for YouTube clips—companies boast of exceptional customer service and customer centricity in creative (and hilarious) ways, encouraging prospective customers to switch or otherwise use their products.

Certainly some of the commercials are as clear and simple as highlighting Dish Network’s CEO citing customer satisfaction data, the highest of all competitors in a recent poll.  Others focus on communicating the low effort nature of their business, certainly a principle that CCC endorses.

But based on a review of a dozen or so commercials, two primary themes emerge in most advertising campaigns that reference customer service:

• We don’t make you endure a frustrating IVR experience—Reflecting on some customers’ ill will toward the IVR and GetHuman’s focus on abolishing the IVR as a service and support tool, companies such as TD Bank and Chase advertise the fact that a customer can pick up the phone and automatically speak with a live person.  These commercials feature two customers in disbelief that they actually speak with a live person as soon as they place a call and Regis Philbin and Kelly Ripa gibing companies whose first face to customers is an IVR.
• We provide you superior onshore service—Numerous ads deride offshore service and support staff and feature staff with stereotypical accents working in antiquated and remote call centers.   The hilarious Peggy in Discover Financial’s advertisements highlight a Slavic language-speaking male pretending to be a rep named Peggy who hangs up on customers.  Companies such as Time Warner Cable, First Bank, and Citi all have similar commercials whose premise is that they provide onshore support, which is purportedly better than offshore alternatives.

The fact that these two themes emerge so clearly is quite interesting, though not particularly surprising given the public’s aversion to both.  I do wonder, however, whether companies are simply reinforcing stereotypes—or if customers do actually consider either of these themes key differentiators that affect their loyalty.

Certainly while CCC knows the jury is still out on onshore versus offshore service, we also know that companies can manage IVR and offshore experiences and still create a positive customer outcome.

But then again, isn’t truth in advertising a relative concept?

Tell us. Have you seen any other commercials that tout customer service as a differentiator?  And how is your company using service and support to brand itself?

CCC Members, If you’re not quite convinced that IVR necessitates a poor customer experience or the time for offshoring is over, review CCC’s resources on effective IVR design and offshore/outsource resource center.

As a quick background for those who did not watch the show: the premise is that an American novelty company has run into financial difficulty, so they cut costs by sending their call center operations—and one American manager—to India.  The main dynamic for the manager is that of a stranger in a strange land – experiencing the TV-version of India for the first time.  What ensues is an in-your-face barrage of crude humor that is as subtle as a jackhammer.  This being TV, I expected everything to be exaggerated for the sake of gaining a few extra laughs, though I’d argue that the writers beat my expectations.

Midway through the show, we get our first glimpse of call handing.  The first call viewers witness reinforces the idea that companies considering using accented agents should research their customers’ connection with domestic sites, as well as the language capabilities in countries of interest.  Mid American Novelties (the company featured in the show) apparently did not do their research, as the caller ordering an “America is #1” mug fumed over the discovery that the center was in India.

As unappealing and irreverent as I’ve made the show seem, I did notice two solid instances of good customer service insight:

1. The following statement made by one of the reps is spot on: “Even if we memorize the catalog, what we are memorizing makes no sense to us.”  Product (and cultural relevance) education is crucial to have effective offshore reps, especially in a sales environment.  The American manager, although clumsy at first, is eventually effective here by providing references to American culture, demonstrating them on the floor with actual products.
2. I was happy to see that there was an instance of integrated coaching in a call handled by an extremely shy rep at the end of the show.  The manager is right there to provide in-the-moment coaching to the rep (albeit to sell gag gifts) based on an earlier group conversation about effective up-selling techniques.  Tailoring coaching to reps in their natural environment is pivotal to performance in all centers, not just outsourced ones.

Overall, while there were major gaps in how realistic the scenario and environment of this outsourced call center was, I was surprised by how much I could relate to it (for better or for worse).  For anybody else who watched the premiere, what are your observations?

We get a lot of questions from the membership asking whether everyone is onshoring again – and if they should onshore their operations. We hear more members casually mention they’re taking their outsourced/offshored operations back home. Perhaps they didn’t follow the 3 Keys to Offshoring Success, or maybe this is part of a bigger trend.

To find out, let’s start by reviewing the facts. There are several reasons companies take operations home:

• Cost—Rising labor costs in traditional offshore locations are causing organizations to review their sourcing decisions.
• Reputation—The media loves draining ink on sending jobs offshore; especially in the current economy.  And it doesn’t help that some especially loud customers rant about jobs lost to offshore locations on social media sites.
• Legislation—Current legislation in the U.S. is making it less appealing for companies to do business overseas by eliminating various tax benefits.
• Quality—While top talent can be found around the world, service centers often find the best people in their own backyard.

Sounds like a lot of good reasons to seriously consider backshoring, right?

Our advice? Don’t get caught up in the hype. Take a close look at your own situation to evaluate where to source your service activities.

How to begin your sourcing decision?  Here are a couple of quick tips to get you started:

• Compare costs – but don’t just think about cost per call – As you look at cost differentials between in-house and offshore operations, don’t forget to think about the costs to transition back in-house, including infrastructure, technology, and location costs.  Do you have a location already in place for an in-house contact center or are you starting from scratch?
• Review the skillsets you have – and what you need to acquire – Of course you’ll have to hire in-house frontline reps, but what about your coaches, workforce managers, trainers, supervisors, quality assurance team?  If these functions were also offshored, consider how you will develop or hire for these important skill sets to appropriately support the frontline.
• Consider your timelines – Given the response to the two above tips, you may be looking at a long time to grow your in-house operations to maturity, especially if you are starting from scratch.
• Most importantly, it’s not an all or nothing game – Consider the types of issues and channels that your offshore operations handle and consider either segmenting or phasing in what you bring back onshore based on what makes the most sense for the customer and the company.  For example, you may want to only bring your more complex issues onshore since those need greater oversight from the company – or you could consider keeping chat contacts offshore since accent is less likely to translate over chat.

What are your thoughts? Will hindsight show backshoring as a bona fide trend or just a temporary headline?

CCC Memberss: Our research Avoiding Common Pitfalls of Outsourcing and Offshoring provides guidance on making your sourcing decision. Our Decision Tool walks through a number of critical questions, offering solutions at each step.

“What level of cost savings can we expect after offshoring?”  It’s a question I get a lot.  The unsatisfying answer: “It depends.”  AT Kearney recently released a fascinating exploration into why.  In their Offshore Success Study, AT Kearney gathered data from 35 offshoring companies and analyzed what differences explain the drastic variability in performance across the high performers (who averaged 64% savings and often improved service quality) and the low performers (who only had an 18% average savings).

What’s responsible for this difference?  The Offshore Success Study finds that “execution strategy” – how you handle the transition – is more influential in determining success than variables like offshore location or process complexity.  In short, how you offshore matters more than where or what you offshore:

• Winners don’t focus on savings. The best performers emphasize improving operational performance rather than generating savings (and paradoxically achieve greater savings in the process!).
• Winners invest more to save more. Companies investing more in managing their offshore programs (bigger management teams, more internal on-site resources, strong cultural integration) achieve better performance and savings results.  The best performers had one onshore manager for 50 to 75 offshore FTEs (a ratio that may improve after the operation has stabilized).

So how do you become one of the ‘winners’ – one of those companies with the right execution strategy?  I would have three pieces of advice for someone transitioning to a new offshore location.

1)  Train quickly, coach constantly. CCC benchmarking reveals outsourced reps receive longer periods of new-hire training than a domestic rep performing the same tasks.  Unfortunately, a majority of training material is not absorbed and never used (our research finds that if a rep doesn’t put learning into action within 2 weeks, he/she loses that knowledge).

CCC Members: CCC has great best practices from Friends Provident on how to reduce onboarding training without harming customer satisfaction and from EarthLink on how to implement a customer-focused coaching scheme with outsourcing partners.

2)  Place more emphasis on retention than recruitment. Retention means lower turnover costs and improved performance.  In fact, CCC data reveals that companies that place extra emphasis on retaining high performers have higher performance levels than those similarly focused on recruitment.  Creating advancement opportunities significantly increases agent intent to stay, but offshore agents’ satisfaction with advancement opportunities plummets after six months in role.

CCC Members: Learn how Dow Chemical uses a clear career path to clearly communicate advancement opportunities and increase retention and tenure.

3)  Use contracts to drive quality and focus on results. Too often, contracts reward speed rather than quality. One promising trend we’ve noticed is outcomes-based outsourcing contracts – in other words, charging for the results achieved rather than the number of hours it takes to do a task (e.g., for a travel company, paying per reservation completed, not per call or per hour).  The benefits to this model are increased flexibility, improved incentives for outsourcers to be productive and drive issue resolution, and potentially reduced costs.

CCC Members: Access our white paper on vendor metrics that drive high performance.

What do you think is key to offshoring success?  Were there any steps that your company took that you felt were particularly effective at ensuring a smooth transition?

By Dan Clay

For years I’ve been saying “No” (a firm “No” at that) but recent findings push me to temper this inference.

Like any good researcher, my shift in opinion comes with plenty of data—particularly important for a topic rife with some very loud assumptions. 

CCC’s been measuring customer service preferences for over 5 years, and we always came to the same conclusion about service with an accent: it’s a constant “noisemaker.”  A customer complains about the offshore location only when something else goes wrong on the call (let’s say it was a transfer).  Poor service is seen as a product of the accent—“I didn’t understand the rep” says the customer—but the real problem is the transfer (and the customer would be just as negative if he had been transferred by an onshore rep).  If the transfer hadn’t happened, then the customer would have had no issue with the accent. 

Customers notice it, they mention it in surveys, but our data showed us that if the customer received proper service, rep accent had no meaningful impact on the customer experience.

This conclusion was corroborated by data from our prominent offshore members and bolstered by my nagging faith in global brotherhood (the citizenry behind “We Are the World” couldn’t possibly devalue discussions simply because the service rep sounded different than the weatherman).

Then this happened.  The recession not only changed where we eat and how we shop, but what we value in the customer experience. In 2009, CCC conducted an extensive study on customer’s service preferences using conjoint analysis – a rigorous method to tease out these preferences. We asked 18,000+ customers about things like self vs. live service, tolerance for wait times, and (of course) preference of accent.

This survey revealed something we hadn’t seen before: a clear aversion to offshore service.  Of all the attributes we tested, customers were most averse to offshoring.  In fact, customers were willing to wait more than 12 minutes on hold to speak with an onshore rep.  

How can we explain this seeming shift in customer preference?  When the going gets tough, the tough get protectionist.  PepsiCo CEO Indra Nooyi recently told an Indian news channel that nationalism is a natural consequence of a global recession; a “huge amount of joblessness in certain countries” means “protectionist tendencies are inevitable.”

While it’s interesting to examine the causes underlying this onshore preference, we shouldn’t overemphasize its implications.  We have reason to believe that an improved employment rate will alleviate social pressures for onshore service.  Call it heightened protectionism, patriotism, or nationalism—like coupon clipping, tattoo removal, and eating expired food—it should soon return to pre-recession levels.  And while customers state a clearer preference for onshore service, we haven’t seen precise evidence that offshore interactions, in and of themselves, drive disloyalty.

This all highlights why, when asked for support in helping major corporations think through transitions offshore, we focus so much attention on talent and knowledge management. Now more than ever, reps have to be able to solve issues above all else.  Sure, customers realize they’re speaking to someone with an accent, but don’t give them a reason to leave because of that.

What do you think?  Would you draw the same conclusions from this data? 

CCC members, take a look at our B2B data and B2C data on the offshoring preferences mentioned above.