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**All figures referenced in this article can be found in the November/December 2005 issue of Contact Professional magazine.**
Performance Management for Contact Centers: Beyond Metrics
By Jonathan D. Becher
Pity the contact center manager who has been charged with two conflicting objectives: increase customer satisfaction and reduce the cost of providing customer service. Faced with this conundrum, organizations have chosen to emphasize the more tangible of the two: cost efficiency.
Turning to analytical tools such as business intelligence to streamline their operations and meet their cost efficiency objective, the number of metrics tracked by contact centers has mushroomed—from simple activity measures such as number of calls per day and average length of call, to more complex output measures such as service level, staff occupancy and shrinkage. While these metrics have helped transform contact centers from managing by intuition to managing by the numbers, the sheer number of metrics has become overwhelming. Instead of enabling fact-based decision making, this information has so inundated contact center managers that, should multiple metrics simultaneously fail, prioritizing which ones to focus on would be nearly impossible.
Compounding this prioritization issue is a fundamental shift transforming the contact center from an independent entity solely charged with solving service issues to what is often referred to as the unified contact center. No longer the island it once was, but rather a hub for all customer touch points (including sales and marketing), the new contact center has been elevated from focusing purely on operational processes to becoming a strategic asset in improving overall business performance. In other words, it no longer has the luxury of selecting which objectives to focus on; it has to find a way to enable seemingly conflicting objectives to coexist.
This change can have a wide-ranging impact for the contact center, including the need to re-examine its metrics. For example, while contact centers have often struggled with using the average length of the call given their objective of increasing customer satisfaction, what happens if the contact center’s goal now includes conducting incremental market research? How about if it would like to cross-sell customers additional products? In both of these cases, rewarding a shorter average call length is likely to be in direct conflict to the contact center’s overall objectives.
As a result of this new charter, contact centers must change their focus from emphasizing efficiency (doing work in the right way) to considering effectiveness (doing the right work).Performance management can provide the backbone for this transformation, and can helps organizations achieve the following key benefits:
1. Align business goals and day-to-day execution.
2. Ensure a shared perspective of the business.
3. Manages the effectiveness of individuals.
4. Shares best practices with other stakeholders.
What is Performance Management?
Performance management is a methodical process for helping an organization accomplish its goals by ensuring that everyone is working collaboratively toward the same goals. Put another way, performance management focuses on alignment to ensure that day-to-day execution is consistent with an organization’s strategy. While this seems simple in principle, in practice an organization’s actions are often contrary to its stated goals; not intentionally, of course, but because strategy and execution are typically handled by two distinct functional groups within the organization. As such, successful performance management emphasizes the collective understanding of what the goals are and how they will be accomplished, not just the measuring of progress toward them.
Unfortunately, as with many valuable concepts, the term performance management is increasingly being bandied about by vendors and consultants alike to describe a wide range of solutions. Most commonly, analytic and business intelligence providers have slapped the performance management label on their existing metrics-based products. Regardless of whether they use the terms financial performance management related to budget and financial data, workforce performance management for incentive and compensation data, or even contact center performance management for operational data, the emphasis is always on defining and tracking a series of metrics. However, managing performance requires more than just managing metrics; it also requires a way to explain and discuss goals (objective management) and a way to track and prioritize efforts to achieve those goals (initiative management). Figure 1 illustrates the differences between business intelligence and performance management.
Why is Performance Management Valuable?
Performance management can deliver tremendous benefits for both an executive audience and front-line employees of the contact center. For executives such as chief operating officers and vice presidents of service, performance management can help identify new ways to drive value from the contact center and provide a feedback mechanism to refine objectives in a timely fashion, allowing organizations to remain competitive in a dynamic environment. Because performance management emphasizes goals over metrics, it provides an easier-to-understand business context for status and results. Metrics become a way to monitor progress toward objectives, not just a series of numbers. As a result, executives can manage by exception, focusing their attention on those elements that are most critical. This frees up their time from examining metrics and dashboards to initiating corrective actions or promoting lessons learned.
For front-line managers and individual managers, performance management provides ongoing guidance on organizational priorities, empowering them to respond more effectively and impact organizational results. Especially for geographically dispersed and outsourced teams, performance management can ensure that all contact center members understand organizational objectives and their roles in achieving them. In addition, successful performance management ties individual and team incentives back to the same organizational objectives, rather than rewarding efficiency metrics such as number of calls per day or average length of calls. Motivated employees are almost always more effective.
Managing Objectives
As previously mentioned, the modern contact center might have multiple objectives, from increasing customer satisfaction to conducting market research. Successful performance management captures, documents and publishes these objectives so that everyone in the contact center understands not only what the objectives are and what they mean, but also how the objectives affect each of them. While communicating objectives to all stakeholders is critical, performance management also allows for collaboration, in which individuals can ask for clarification, make suggestions and share ideas with their colleagues.
A strategy plan is a useful device for showing the relationships between a contact center’s strategic objectives and tells the story of how, together, the objectives enable the contact center to achieve its overall mission. The strategy plan shown in Figure 2 borrows an idea from the Balanced Scorecard methodology and organizes the objectives from multiple points of view, including financial, customer, process and people. Alternately, some contact centers may want to consider the role-based perspectives of customers, management and agents. Regardless, true performance management comes about when the strategy plan goes beyond a simple static image and uses interactivity to motivate the entire organization to the common mission.
Managing Initiatives
A contact center that understands what its objectives are may still fall short of its goals unless it also describes how it plans to accomplish them. Without documenting initiatives that tie together objectives and tactics, contact center employees may inadvertently be working on conflicting agendas or lower priority tasks. As with objectives, successful performance management requires more than just communicating initiatives and their associated milestones; collaboration allows contact center teams to share best practices and build repeatable processes.
Managing Metrics
Unlike traditional systems, performance management uses a small number of metrics (sometimes called key performance indicators, or KPIs) to monitor progress toward objectives. While there is no standard set of KPIs for every contact center, it is instructive to start with customer, management and agent points of view. Customers typically care about service and quality, management about effectiveness and profitability, and agents about workload and learning. As such, a performance management scorecard might have KPIs for each of these categories.
However, depending on the contact center’s objectives, the KPIs for these categories can vary substantially. For example, consider the challenge of choosing a KPI that monitors the level of service from the customer’s point of view. Should service level focus on how long a caller waits before starting to talk to someone (often called availability), or instead how long it takes to get his or her question answered (often called speed of answer)? If the contact center focuses on availability, should it track the average delay time for all callers or the longest delay for any one caller? Furthermore, should these results vary by customer segments? These—and many other questions—can be answered only by understanding the contact center’s goals.
Performance management goes beyond elevating a select few metrics into key performance indicators that monitor progress toward goals. It also provides a mechanism to ensure that those KPIs are still relevant as an organization’s goals inevitably evolve. Without this feedback mechanism, those “perfect” new metrics designed for today’s situation may end up like the activity metrics of yesterday; interesting but inappropriate for the new reality.
Putting It All Together
While most contact centers have gone beyond managing by intuition to managing by the numbers, few have updated their metrics to reflect their emerging roles as a unified contact center. As a result, organizations may be faced with an unintentional disconnect as employee incentives and activities are not aligned with contact center goals. Performance management removes this disconnect by tying together objectives, initiatives and metrics, increasing alignment and performance of the contact center.
Sidebar 1:
Case Study: Connecting Metrics with Goals
With integrated contact centers playing an increasingly strategic role in boosting overall business performance, they must reassess the metrics by which they have historically measured success. As the contact center for one financial services organization with $1.2 trillion in assets and operations in more than 50 countries soon discovered, old standby metrics, such as average speed-of-answer and time-to-resolution, when viewed in isolation, can actually lead the organization off course.
When this financial service organization started using an operational performance management solution, a critical first step was to create and share a strategy plan—one designed to ensure that all contact center employees knew not only what the organization hoped to achieve with its new plan, but also how they would achieve it. An important feature of the rolled-out strategy plan was the objective to “maintain consistent sales growth among the existing customer base”—an emphasis on up-selling and cross-selling services to existing customers during the service resolution process.
With a historical focus on solving customer problems quickly, which was both engrained in organizational culture and tied to compensation, it soon became clear that the organization’s time-to-resolution metric ran counter to the new objective. Though the metric was still useful to track internal agency efficiency, this performance management-centric organization recognized that the contact center could no longer be treated as an island, with separate and potentially conflicting metrics from the rest of the company. As a result, the organization realigned employee priorities, compensation and its metrics—eliminating its time-to-resolution metric—to reflect its new performance management approach. Its new key performance indicators (outcome-based metrics) included retention-percent, share-of-wallet and percent-products-owned—ones that better reflect its new objective. The result: Substantial progress toward its goal to “maintain consistent sales growth among the existing customer base,” with nearly a 30 percent increase in sales to existing customers.
Sidebar 2:
Choosing Metrics Based on Objectives
It’s common for contact centers to use “average delay of all callers” as a customer-focused metric. However, do customers care that the average delay was 45 seconds, or that the delay when they called was 45 seconds? Furthermore, do they care that they normally only wait 45 seconds, or that they occasionally have to wait 180 seconds? In addition, reducing the average delay time by 10 seconds can be very time-consuming and costly; how much would it increase customer satisfaction? Would it help any objective?
While average delay is a potentially useful internal metric, it is difficult to tie it to any outcome goal and therefore rarely belongs on a performance management scorecard. On the other hand, since customers tend to remember their most negative experiences, “longest delay of any one caller” is usually a better quantitative indicator of customer satisfaction.
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Part 2:
Three Reasons Enterprise Application Budgets Continue to Miss the Mark
By Michael Parker
For years, we’ve read about enterprise software implementations being over budget and failing to deliver expected returns on investment (ROI) in a timely manner. But why, with an Internet filled with lessons learned, best practices, deconstructed case studies, and ROI assessments, do organizations continually fail to budget correctly for these projects? Are you really doomed before you begin? Of course not, but it takes more than reading articles like Seven Habits of Highly Effective Budgets—you need to look at budgeting in a new way.
The causes of budget failure are a combination of factors ranging from our budgeting methodologies and skills to our cost-cutting policies. Plus, the budgeting process involves influences you’ll never see documented in a project plan such as turf wars and ego-driven technologists. Let’s look at three reasons budgets continue to fail, and then consider new approaches for defining budgets and ways to cut costs without cutting success.
Project Myopia
Budgeting for an enterprise application tends to be a linear process: define business objective, create cost justification, get budget approval, set project plan, estimate, overspend and realize you have not achieved business objectives. Although this is a humorous oversimplification, the reality is that we are project myopic—dangerously shortsighted—when we set enterprise application budgets. There are two typical project budgeting styles, from the bottom up and from the top down.
• Bottom-Up Project Budgeting: We lose sight of the business objectives by treating project planning and budgeting as separate, discrete processes. Teams take a bottom-up approach and budget according to the tasks and activities involved in completing a project. Along the way, we fail to trace the costs back to objectives and requirements. Projects get accomplished; business objectives do not.
• Top-Down Project Budgeting: The opposite approach is top-down budgeting, where higher-ups set a budget boundary. This also creates project myopia. Teams will plan until they hit the budget limit—defining a project to fit the budget, not the business goal.
Project myopia also prevents us from seeing and planning past the go-live date. The budget starts and ends within the implementation project, and ongoing maintenance and management costs are not assessed nor budgeted. Companies find their ROI eaten up by post-implementation labor costs needed to do repetitive tasks such as migrate and test changes, customize and configure the application, and sustain Sarbanes-Oxley compliance. Automating these activities is almost never a part of the enterprise application budget, so people pay a premium for these activities after implementation.
Wishful Estimation
Estimating an enterprise application budget can be difficult, especially if it’s a new initiative. Even with experience, people grossly underestimate the time needed to deliver their portions of the plan. Research the major cost factors, and always hesitate to believe the developer who says, “I can do that in half the time”—no matter how much you want to believe it. Leverage your vendor and systems integrator for estimation; these two will have a vested interest in giving you the lower limit (vendor) and upper limit (integrator) cost and time estimations.
Dangerous Cost Cutting
Of course, we’d all like our budgets accepted without any cuts, but that’s not likely. Unfortunately, the current approach to cutting an enterprise application budget jeopardizes the entire program’s success. We cut costs across objectives and project plans, undermining the overall success. For instance, when asked to cut, teams remove or reduce end-user training and functional testing. The result is predictable: a poor quality production system that few people use or use effectively. The project is complete, but objectives were not reached. And the organization doesn’t save money, but just delays spending it. To recover from this misstep requires a huge post-implementation investment in training (much more difficult after go-live once the staff is frustrated and resistant) and labor-intensive manual testing, if you have not deployed automated testing.
Magic Budget Triad
Budgeting for implementation projects needs to be an iterative process bound by the business objectives. Each phase or deliverable of the plan should be budgeted and mapped to the business objective it supports. Here’s how it works: \
Good project planning establishes business objectives up front, but you should be diligent about ensuring that objectives, project plans and budget continue to be linked throughout the planning and implementation cycles. Conduct reviews throughout the planning and budgeting process, and ensure each milestone relates to an objective, rather than merely measuring project progress. In the end you’ll have an enterprise application that achieves your objectives and sustains those objectives at a price you’re willing to pay.
Saving ROI
The budget should include ongoing and recurring support costs, which should be subtracted from the business benefits. This approach makes it very easy to determine ROI and payback for your enterprise application. If one of your objectives was to cut the new hire process from 3 days to 3 hours and save $200,000 a year at a hire rate of 80 employees, then spending $180,000 a year on labor, maintenance, change control, testing and system downtime destroys your ROI.
Keep in mind that any enterprise applications will increase costs in these support areas:
• Software upgrades and additional packages
• Hardware/Network capacity
• Database upgrades
• Training
• Staffing
• System administration and management
• Help desk and support
• Testing
• Consulting labor
• Custom applications
Many of these areas are labor intensive, repetitive activities, so assess where automation can drive down ongoing costs. Budgeting and deploying automated support solutions in the initial implementation can sustain the application, end-user satisfaction, and the business return. Integrating automated support solutions into the initial implementation project is also easier and cheaper than tacking it on later—after you’ve already been paying escalating costs and fighting user dissatisfaction. Consider automation for help desk/service request management, testing, configuration management and change control.
Cutting Costs, Not Success
Most budget cuts are handled by removing line items such as training and testing across the entire implementation project, which jeopardizes the project’s success. A better approach is to cut by business objective. If you’ve planned and budgeted by objectives as suggested previously, then you’ll realize some objectives just don’t generate as much return or are more risky. Cut these entire objectives, along with the associated project plans, activities and budget line items. You’ll have reduced costs, but maintained project plan and budget to successfully achieve most of your objectives.
If you do cut areas like training and testing, find internal substitutes for these activities, such as train-the-trainer programs. Involve the business unit—the objective is usually theirs. They need to be part of the success—or failure—of the initiative. User adoption training and user acceptance testing are the first areas to be cut in an enterprise application budget. You can survive this cut if the business unit is willing to take this responsibility. If not, then you’ve saved budget, but compromised the project’s success.
One approach to consider for cost cutting is planning for early disengagement of consultants. Insist that your consulting partners train internal staff—have specific knowledge transfer metrics in their contract. For instance, a required number of your staff should be able to pass the software vendor’s certification test. Then transition consultants out earlier in the project to save consulting dollars.
Business objectives drive the decision to implement an enterprise application. We sometimes lose sight of that fact as we dive deep into project plans and cost estimations. In the end, your enterprise application project will be judged not on budgeting precision, but on progress against those business objectives.
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