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Time to Take a Fresh Look at Agent Compensation

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Time to Take a Fresh Look at Agent Compensation

/ People, Culture, Turnover, People management
Time to Take a Fresh Look at Agent Compensation

The frontline agent’s compensation should reflect the importance of the role to the enterprise.

In many large organizations, the frontline agent may be the primary or only human touchpoint for the enterprise. As such, they can greatly influence customer retention to the quality of interaction. Following are a couple of stats that back this up:

  • A 5% reduction in the customer defection rate can increase profits by 25% to 80%, and seven out of 10 customers who switch to a competitor do so because of poor service” (“The Loyalty Effect,” Frederick Reichheld, 1996).
  • Two-thirds of consumers are willing to pay more for excellent customer service (“2012 Global Customer Service Barometer: Findings in the United States,” Echo Research on behalf of American Express).

Given the above, one might reasonably expect that top-notch customer service agents would be among the most highly sought employees in the enterprise. They would be well compensated and encouraged to exercise their judgment in retaining high-value customers. Well, not so much.

Table 1 shows that wages for the job classification customer service agent have increased an average of only 1.6% over the past 10 years. Frontline agents remain among the lowest paid workers within the modern enterprise. There is a widely held view that contact center work is routine, requiring few special skills and only a high school education. With an ample supply of such workers and the options of automation and outsourcing there is little incentive to increase wages. While this view has merit for telemarketing and order entry, there are a growing number of agent jobs that require some level of advanced education and superior technology and interpersonal skills. Also, the notion that human agents can be readily replaced by automation is not playing out as anticipated. Self-service technology has advanced to the point where the interaction closely the approximates the advantages of working with a live agent. However, the reality so far is that self-service has been most valuable for weeding out the easy stuff, leaving the more demanding interactions for the agent. Table 2 illustrates reasons why people contact the enterprise.

According to this research conducted by the CFI Group, consumers are most likely to communicate with the enterprise about complicated matters such as product support and billing disputes. Moreover, consumers rarely call about just one subject—especially if they have to endure what they perceive to be excessively long hold times or unhelpful self-service menus. When they reach a live agent they are loaded for bear. And they have done their homework. With easy access to Internet search sites, user forums and social media, callers may know more about the firm’s products or services that the freshly hired agent. If companies want to retain these valuable customers they need to recruit well-qualified individuals, invest in initial and ongoing training, and create an environment that encourages the exercise of judgment in dealing with complex situations.

The Cost of Turnover

At an average of 25% to 35% per year, the attrition rate has remained stubbornly high even during periods of high unemployment. To get a better handle on turnover costs we spoke with Kevin Hegebarth, vice president of marketing and product management for HireIQ. Kevin’s company develops software that helps organizations cost-effectively recruit high-quality agents. Recognizing that the cost of turnover varies considerably depending on the industry and specific job requirements, Kevin suggested that a figure of $6,500 a year is a reasonable average. If we take Kevin’s number and assume an annual 25% attrition rate, a 250-agent call center would incur costs of more than $400,000 per year. This includes the direct costs for advertising, recruiter fees, testing, screening, interviewing, human resources, training and extra supervision such as more frequent QM assessments. Other less visible but no less important costs include;

  • Low morale
  • Critical skills or knowledge drain
  • Dissatisfied customers
  • Last intellectual capital
  • Lost business

Add it all up and the annual cost could easily exceed $500,000 per year. While compensation is only one factor that goes into the calculus of whether or not to stay on the job, it is an important one. It’s worth noting that new agents are most likely to quit during the first 90 days of employment. This is also the time during which potentially more attractive offers may come through from potential employers with which the new recruit had previously been in discussion.

Some Companies Get It

On January 19th of this year, Aetna CEO Mark T. Bertolini told employees that the company was raising its minimum wage to $16 per hour. The wage adjustment would affect 5,700 employees including hundreds of call center workers. He explained, “The turnover, lost productivity and recruitment costs that this should help address are significant. I’m willing to make this investment.” Other well-known organizations that have voluntarily raised wages to reduce turnover and improve customer relations include Costco, Gap, Starbucks and Whole Foods. At Costco, the average wage is $17 per hour, or 42% higher than their largest rival, Sam’s Club. Jim Sinegal, Costco’s co-founder and CEO, explained, “Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees.”

Looking to the Future

The role of the customer service agent is certain to become more demanding in the future. Products and services will continue to grow in complexity, requiring knowledgeable and quick-thinking individuals to walk consumers through the available options and help them make mutually beneficial decisions. Agents will continue to have to navigate through multiple software applications and databases to help assure that queries get resolved at the initial point of contact. People are stressed for time today and increasingly impatient. They expect quick answers from polite and knowledgeable people. The frontline agent’s job is no longer routine, if it ever was. The responsibilities are great and growing.

The level of compensation should reflect the importance of the role to the enterprise. Attractive incentives should be provided for superior performance such as achievement of outstanding customer satisfaction scores, revenue generation and customer saves. The unemployment rate in United States continues to drop which means potential employees have more options. Other things being equal, people normally gravitate to higher-paying work.

Dick Bucci

Dick Bucci

Dick Bucci is Chief Analyst at Pelorus Associates, which provides market research and consulting services to the contact center industry.

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