The Herd Mentality: Why Do They Still Come?
1 Jan, 2004
By: James TrobaughIf It’s Right for Them – It Must Be Right for Me
If MCI, Chase, Sprint and Verizon are there, it must be a good labor market. Right? This herd mentality has been prevalent for the last seven or eight years with large Metropolitan Statistical Areas (MSAs), like Denver, Jacksonville, Orlando, Phoenix, Salt Lake, San Antonio, Tampa, and Tucson. As these MSAs have become saturated, it becomes more and more challenging for contact centers to find the right workforce at an affordable cost point.
While companies can always pay more, at some point it becomes cost-prohibitive to continue to stay in a chosen community. To effectively determine whether or not the community you’re located in is saturated, you need to examine it methodically. The CB Richard Ellis Call Center Solutions Group (CCSG), has developed a model that has become an industry standard for community saturation, which is a total of 2% of the labor force in call center jobs. What this means is that once a community reaches this 2% threshold, turnover starts to occur and wages start to rise. Below is a list of saturated communities in the United States, including the number of call center sites and percent of saturation.
What to Do When Saturation Occurs
Logically you might wonder why contact centers still want to locate in markets that are clearly saturated. It might be a complex strategic decision to penetrate a particular market across many business channels; it might be a fiscal or management necessity to locate near the corporate headquarters; or it could simply be a desire to have a location in a more desirable geographic part of the country. The reasons are endless. So the question is not why companies do this, but rather, what they do when the decision has been made to locate in a saturated market.
Remember, in the beginning, these communities were attractive because of favorable demographics, neutral accents and a good quality of life, among other things -- all the ingredients that most companies desire when selecting a new site. But over time, things change, which requires companies to change as well. Once saturation occurs, some companies adopt a strategy to pay higher wages and skim the “cream of the crop” from the local labor force. Others accept that turnover is a fact of life in the contact center industry and prefer to draw from the large labor market that a desirable MSA offers, so they can recruit new employees as needed. And, of course, there are those that deal with saturation by going offshore to locations such as India or the Philippines, where labor often starts at $2.00 per hour. Too often this is a very difficult trade-off, as this these companies can encounter quality issues and an even higher turnover rates abroad.
The other option, increasingly being chosen by companies, is to stay within the U.S. and seek solid third or fourth-tier communities that have the skill set required. This option can lower costs, maintain quality, and decrease the competition from other contact centers and major employers in that area. An added benefit is that, often, the new center becomes the employer of choice in the smaller market, which can initiate substantial incentives from the community. What’s more, these companies can eliminate the problems of locating offshore, including managing operations more than 20 hours away and their customers dealing with a large cultural gap.
The bottom line is this. If you decide to adopt the herd mentality and locate in a saturated MSA, there are ways to capitalize on the market you’re in by paying higher wages, accepting turnover as a way of life and maximizing the recruiting pool. If, conversely, you decide to run against the herd, and want to stay within the U.S., there are prime third and fourth tier communities awaiting that offer many of the same benefits as the major MSAs, without the challenges. You just have to know what it is you seek.
SunTrust Bank, one of the nation’s largest commercial banking organizations, located their contact center in Cookeville, Tennessee, 30 to 60 miles outside of a large MSA. With assistance from a local community college, the company was able to hire and train earlier than expected. In fact, SunTrust set up a temporary contact center using the same type of technology that enabled the newly hired agents to work from home before the permanent contact center even opened. By locating in Cookeville, the company experienced an increase in the quality of its workforce, as well as a reduction in wages. At the same time, SunTrust’s employees still enjoyed access to a larger community for quality of life.
