COST WITHOUT DAMAGE
How do you cut the cost of a customer operation without damaging service?
Take out the contacts customers never wanted rather than the people who answer them. Fix the upstream failures that generate volume, tell customers what they were phoning to ask before they phone, and consolidate suppliers and sites. Cost then falls because there is less work, not because service got worse.
Answered by Alex Mead. The dated record behind this answer.
How it is actually done
There is an order to this and it is the whole discipline. Demand first, then structure, then automation, then price. Programmes that damage service almost always ran that list backwards.
1. Demand. Find out what the volume is actually made of
Sit with the people answering and listen to the calls yourself. In every operation I have taken on, a large share of contact exists because the company failed to tell the customer something it already knew. At City Link the dominant question was where the parcel was and when it would arrive, so we gave customers the delivery time before they had to ask. That removed 50,000 calls a day across 3,000 drivers, and the sector copied it. Rentokil Initial plc's 2012 annual report records a 13% reduction in cost per delivery on volume growth of 17%, which is the shape you want: the work fell while the business grew.
2. Structure. Stop paying nine partners to do one job
At IAG I removed 38m pounds of annual operating cost and consolidated nine outsourcing partners and more than 3,000 agents down to two. Fragmentation is expensive in ways a rate card never shows: nine sets of governance, nine training standards, nine quality regimes, nine sets of escalation that do not talk to each other, and no supplier large enough to invest in you. Consolidation buys back scale, and scale is what pays for quality.
3. Automation. Automate the genuinely repetitive, and nothing else
Automation is the third lever, not the first, because automating a process nobody should be running preserves the waste and adds a licence fee. Once demand has been cleaned up, what is left is either repetitive, which the machine should own, or consequential, which a person should own. That split is the design, and the handover between the two halves is where these programmes are won or lost.
4. Publish the service numbers while you cut, not afterwards
This is the guard rail that makes the whole thing safe. Put answer rate, speed of answer and resolution on the same page as the cost line, in front of the board, every month. If cost falls and service holds, the saving is real. If cost falls and service moves, you have not saved anything, you have moved the money into attrition, escalation and rework where nobody is counting it. On the worst day of December 2010 City Link received 127,000 calls and answered 6,000. A year later 90% of calls were answered inside two minutes, and an independent consultancy published the case study under its own name. The cost came out at the same time.
What most companies get wrong about this
- They cut heads first. Demand has not moved, so the same volume arrives at fewer people, service collapses within a quarter, and the saving returns as overtime, attrition and rework.
- They negotiate the rate card instead of the volume. An hour bought 5% cheaper against all of the work is worth far less than the same hour against 60% of it, and only one of those two options improves the customer experience.
- They believe outsourcing is the saving. Nine partners cost more than two at any rate, because you are paying nine times for governance and getting none of the scale.
- They count the saving on the day of the decision rather than twelve months later, which is the only date on which anybody can tell whether it was a saving or a deferral.
- They cut training and quality first because those are the easiest lines to find in a budget, and they are the two lines that decide whether the rest of the plan survives contact with customers.