What’s the difference between Customer Service and Customer Loyalty? Can you achieve one without the other? Are these two terms intertwined so much that they are synonymous? Are you measuring one or both of these terms to determine how well your business is performing? These are just some examples of the questions we often hear from clients. We will address these questions and a few others to help clarify the definitions and reasons each are important to your business in the next two blogs. Today, we focus on Customer Service.
Customer service is defined many different ways. Here are some common definitions of customer service in use today:
“Customer service is the ability to provide a service or product in the way that it has been promised.”
“Customer service is about treating others as you would like to be treated yourself.”
“Customer service is an organization’s ability to supply their customers’ wants and needs.”
“Customer Service is a phrase that is used to describe the process of taking care of our customers in a positive manner.”
“Customer Service is any contact between a customer and a company, that causes a negative or positive perception by a customer.”
“Customer service is a process for providing competitive advantage and adding benefits in order to maximize the total value to the customer.”
“Customer Service is the commitment to providing value added services to external and internal customers, including attitude knowledge, technical support and quality of service in a timely manner.”
“Customer service is a proactive attitude that can be summed up as: I care and I can do.”
A Definition to Guide Customer Service Today
If you are a contact center, a high-tech company, a company in a traditional industry, a non-profit, a manufacturer, a government agency, or in the hospitality industry, you can create passionate customer loyalty using the following definition:
“Excellent customer service is the process by which your organization delivers its services or products in a way that allows the customer to access them in the most efficient, fair, cost effective, and humanly satisfying and pleasurable manner possible.”
How would you define good customer service? Try to define it. It’s not as easy as you’d think.
So, we have to define customer service and develop a model that will work for your organization. We can’t do what we can’t describe. That’s true in breaking a sports record or building a bridge.
Customer service has often been done badly because it’s been defined badly. Business needs a customer service definition and model upon which you can build a strategy for your organization and industry.
Let’s see if you agree. Here’s a bad definition, a professional customer service consultant, defines good customer service as “Exceeding the customer’s expectations.”
This definition doesn’t tell you much of anything, and unfortunately, it’s what you often get in customer service seminars and publications. Here are two illustrations that tell you “exceeding customer’s expectations” can actually lead you astray.
Case Number One: If I go to a McDonald’s, then I don’t want you to exceed my expectations—quite the contrary. I’m looking for an experience that I can rely on. It may be many fat grams and exactly the same fries to someone else, but to me knowing that I’m getting McDonald’s fries is the experience I seek. The last thing I want is for McDonald’s to “exceed my expectations” by changing the fries.
Case Number Two: I went into a large store recently and quite by accident came upon a refrigerator with a plasma TV in the door of the fridge. I must say the TV had a really good picture. This fridge certainly “exceeded my expectations,” because I thought it was weird. Perhaps it could be a good dieting tool. I’m standing in front of the refrigerator and want to make myself a peanut butter and jelly sandwich. Suddenly I change my mind, “No, I think I’ll just stand here and watch American Idol.”
A Definition of Customer Service and a Model that Will Work for You
Here is our customer service definition again that you can use invariably to set up the customer service model for your organization.
Excellent customer service is the process by which your organization delivers its services or products in a way that allows the customer to access them in the most efficient, fair, cost effective, and humanly satisfying and pleasurable manner possible.
Here is the first point to remember: Customer service is a process, not a set of actions that might include greeting the customer, smiling, asking if you can help, etc.
Customer service is about how your organization delivers its product or service. The part that sales people play in the customer service process is taking the customer through the process in order for him or her to receive the product they walked in the door, called, or clicked to acquire.
The process is efficient. Product information is immediately available. It is complete and correct. The sales person can refer the buyer to the website, spec sheet, literature, ingredients—or whatever other information is relevant.
The features and benefits are presented convincingly, but honestly and with a personalized approach. The terms of the purchase are clear. The payment process takes place in the least amount of time possible. If the product requires manufacturing or modification, accurate estimates are given about the time required. If the product is immediately available, there is virtually no lag time in taking possession of the product or experiencing the benefits of the service.
The process is fair. The customer service process must be transparent. If an organization can practice full disclosure in an obvious way in their product information and their contracts, they are on the way to creating customer loyalty. If the customer experiences your organization as one where they were never surprised and never felt deceived, the organization will create a competitive edge in a world where there is precious little confidence in the customer service process.
The product or service is cost-efficient. The product or is competitively priced, competitive pricing is the only way to survive in the marketplace.
Products should not seem to look like better quality than they really are. Say you take home a DVR player for a present to one of your children that looks chrome plated and is really cool. In a couple of weeks you discover the “chrome” is really cheap plastic and it has peeled, looking like fury animal that’s shedding. You’re really steamed because of this product. It they had just used sturdy gray plastic that stayed on you would not feel ripped off. Coffee pots and blenders often look just like durable appliances, and they expire in six months. I’d rather know I’m getting a throwaway product because it looks like one. Don’t create expectations that will be disappointed.
Customer service is a sellable commodity, but most companies are not cashing in on it. You can sell customer service. Companies are so focused on sales and cost cutting that they can’t see service as a commodity when it’s right in front of them. That’s actually what a service contract is all about.
The product should last through the first year of the standard limited warranty. If it doesn’t, if you sell them a service contact for the first 12 months, then you’re not selling service, you’re selling protection—protection against your inferior product.
If, however, you assure that your product is highly unlikely to develop problems during the first year, you’ll gain significant customer loyalty and also have a consumer that will be positive toward buying an extended customer warranty beyond the first 12 months.
Customer service must be delivered in the most humanly satisfying manner and pleasurable possible.
Here’s where the fun comes in after you’ve done the hard stuff.
In the human pantheon of pleasures, the act of spending is close to eating and sex in its importance, and for some people, it’s a lot more important than either of the other two.
The act of buying or acquiring is one of the strongest human emotions. I buy Starbucks coffee when I don’t even want coffee. Why? Because I enjoy the act of buying. If I feel sad, it always makes me feel good to go out and buy some nice new clothes. As the CEO of my company, what more powerful feeling could I experience than buying another company or a huge piece of equipment? It’s a real trip to spend a few million dollars. Why do department heads want a bigger budget? It’s so they can spend! In spending they feel useful and powerful.
So, yes, romancing the customer continues to be important in order to make to make the act of buying pleasurable at every level of sale. Enhancing the pleasure on the small-ticket item may be a great checkout system with a checker who is friendly. At the big-ticket level it may be a resort encounter with customers and sales people at an exotic location.
You have to sell more than the “sizzle.” Store interiors that look a movie set from Star Wars don’t compensate for an inferior product mix. Wal-Mart success certainly is a testimony to this fact. Sales people nicely dressed and smiling big will create a negative reaction if the sales system doesn’t work efficiently.
Yet the pleasure of the buying experience in many cases is as an important as the product itself. Creativity in creating the buying experience is a key component or organizations today.
Building a Customer Service Model for Your Organization
This customer service definition can build a customer strategy with it for a high tech company, a fast food restaurant, an IRS office, a mortuary or a theme park. You can build a model that will develop customer loyalty and will not bankrupt your organization.
Any organization can have good customer service. You don’t have to have genius employees to achieve customer service. Whether your organization is selling a half-million dollar piece of equipment, a public sector government service, or a meal at a restaurant, the model works. All it requires is that you go through your process from beginning to end and create a repeatable formula that allows the sales/service person to guide the customer through the process. Our next blog will address Customer Loyalty.
Do you need to create more Customer Loyalty? Click Here for more information.
In our last post, we addressed the first 5 P’s to increase your power of persuasion. If you recall, the 10 P’s are:
Let’s jump right back to the next 5 P’s to creating more persuasive power:
Average salespeople do a lot of talking. They can give you a 30-minute speech on any subject you want to name.
That’s why silence is so threatening to most salespeople. The instant a prospect pauses to take a breath, the amateur will jump in with a sales spiel, just to break the silence.
But powerful persuaders use questions to diagnose the needs and concerns of a prospect much as a skilled physician uses them to diagnose the problems of a patient.
They become masters at asking penetrating questions, and they use those questions to draw prospects into the selling process.
The most powerful word in selling is you. The emphasis on you marks the difference between manipulative and non-manipulative selling.
Manipulative selling is self-centered. It focuses on what the salesperson wants and needs. Non-manipulative selling is client-centered. It focuses on the needs and desires of the prospect.
A person who is looking at the business proposition you are offering wants to know just one thing: What’s in it for me?
If you want to add power to your persuasion, personalize every part of your presentation to meet your prospect’s own personal needs and wants. Present personalized benefits and describe how the customer will feel when using the product or service.
Powerful persuaders seek to close sales by pleasing their clients. When prospects become excited about the idea of owning what you’re selling, they become customers.
Professional salespeople know that they can’t force their prospects to buy. Their challenge is to make them want to buy. So they seek to please them in so many ways that they create the desire to buy.
Salespeople with selling savvy don’t make statements they can’t back up with facts.
And they don’t expect their clients to accept at face value everything they say. They are always prepared to prove every claim they make — to back up those claims with hard data, with test results, and with performance records.
One of the best ways to persuade by proving is to give proof statements from people who are happy with your products or services. Third-party endorsements go a long way in building credibility for your claims, and for your products.
Facts and testimonials are very persuasive. Learn to use them, and become a powerful persuader.
Call on good prospects as many times as it takes to sell them. About 80% of sales are made on the fifth call or later. Yet studies have shown that:
* 50% of America’s salespeople call on a prospect one time, and quit
* 18% call on a prospect twice, and give up
* 7% call three times, and call it quits
* 5% call on a prospect four times before quitting
* Only 20% call on a prospect five or more times before they quit.
It’s that 20% who close 80% of the sales in America.
You don’t have to become a dynamic personality to sell. You don’t have to put pressure on people, or out-talk people to sell.
The most effective thing you can do is to apply your own selling savvy to these ten ways to add strength to your persuasion. Learn how to persuade more effectively and you will boost your selling power.
If your sales leaders aren’t using the 10 P’s, then your sales team isn’t reaching its full potential. How much is that costing you in lost productivity? Can you afford to continue to underperform? Why not measure the ability of your sales leaders and sales people? Check out the link below to complete a FREE assessment of your team.
Are your sales leaders leading? Or are your people following poor leadership? If your teams are failing to reach objectives, then you need to read this article.
What makes any person a LEADER is their ability to set goals and achieve desired results. Leadership is no longer about possessing certain personal characteristics, but rather about the ability to set goals and achieve desired results. Leadership is about doing “those things” which lead to achieving results.
One of “those things” when it comes to sales leadership is the ability to persuade. Sales leaders must be able to use the power of persuasion and teach their sales people how to add power to their persuasive ability.
How can you add power to our persuasion? How can you become more effective at persuading your customers? Let’s look at the way the skilled professionals put power into their ability to persuade. I recommend you use the 10 P’s to create more persuasive power.
The 10 P’s are:
In this post, we will take a closer look at 1 through 5.
Shakespeare wrote “There is nothing good or bad, but thinking makes it so.”
Attitude is one the critical differentiators between people who succeed and people who fail. Charles Swindoll wrote “Attitude to me is more important than facts, it is more important than the past, than education, than money, than circumstances, than failures, than success…than appearance, giftedness, or skill.”
Creating a positive attitude is 100% controllable by each of us. Successful salespeople are positive people.
They have positive mental attitudes about themselves, the companies they represent, the products or services they’re selling, the prospects they’re attempting to persuade, the country they live in. They’re positive about everything.
Enthusiasm is contagious. When you’re excited about life and the work you’re doing, you can persuade with power, because you can get other people excited.
Successful salespeople have learned to direct their persuasive power toward people who have the resources to buy and have good reasons to buy what they are selling.
Professional salespeople pinpoint prospects that are likely to provide long-term profitability. They analyze the possibilities for cross-selling. They know that it takes an average of three calls to cross-sell an existing customer but seven to sell to a new customer.
In short, the powerful persuader targets all efforts at the person who has the resources, the motivation, and the authority to buy, and the potential for profitable repeat sales.
Red Motley, who started Parade magazine, said “the average salesperson will work like crazy to get an appointment and often they blow the opportunity with a poor presentation after the decision-maker has agreed to the interview.”
You don’t make sales to busy people by rambling on for 40 minutes about features and benefits. Usually, after such disjointed presentations, neither the salesperson nor the prospect can summarize what’s just been said.
Professional salespeople always do their homework. They know that the better they’re prepared, the more persuasive they’ll be when they have an opportunity to make a presentation.
They research to find out everything they need to know about the prospect. They plan what they will show and what they will say. And they practice, practice, practice. Mike Ditka, the former Head Coach for the Chicago Bears of the National Football League, described the difference between amateurs and professionals when he said “Amateurs practice until they get it right once. Professionals practice until they can’t get it wrong.”
Amateur salespeople complain furiously when they are beaten out by a competitor. How could that customer buy that overpriced, poor-quality product? He must be an idiot!
The customer was no idiot. The complainer was just outperformed by a more competitive salesperson.
Remember: People don’t buy; they’re sold. In fact, nothing is ever bought. Everything has to be sold. If you don’t make a strong presentation, you can’t persuade your prospect to buy.
Powerful persuaders are like stage actors playing to a full house. They are artists at making their presentations. They’re entertaining and informative to watch and hear.
To succeed in business, you have to make every second of every minute of your “action time” count.
Powerful persuaders are alert to everything that happens during a sales interview.
They are not preoccupied with personal problems, with airline schedules, or even with the next call they are going to make. They know that reaching a sales goal always begins with making the sale at hand.
Powerful persuaders tune into their prospects and look for the motivating forces in the life of each. Once they discover that motivating force, they play to the motivation.
To add power to your persuasion, learn to read your prospects and to discover the motivations they have to buy or not to buy.
In our next post we will address the next 5 P’s of the power of persuasion. In the meantime, if you are concerned about the power of your sales leaders, then check out the link below for more information about measuring the abilities of those leaders.
Why “Metric Managing” may be costing your call centers millions in
lost revenue, employee attrition, and customer disloyalty
How many times have you heard a call center manager discuss metrics as goals? Perhaps you’ve even passed down goals as numbers. Let’s say a center objective is to sell “X” number of units. Most call center managers will divide “X” by the number of agents. They will share this metric and the “Goal Setting” is done. The call center manager prints it neatly on a dry-erase board and may even have their promotions team design a contest to motivate the agents to achieve the “Goal”.
Sometimes, you may find call center managers who really like to take metric managing to the next level. They will ask the agent something along these lines “How much money would you like to make next month?” Based upon the answer, this call center manager helps the agent set a goal for “X” widgets to be sold which will allow the agent to earn the commissions to reach their earnings goal. Honestly, how many times have you seen this exercise be accepted as “Goal Setting?” Maybe you have even used this type of “Metric Managing” in the past. You might even be wondering, why all the fuss about “Metric Managing”?
The difference between “Metric Managing” and creating “Positive Behavior Change” is akin to the difference between telling someone to catch you an 8 pound fish and teaching them the technique to successful fishing. “Metric Managing” takes no real skill, leadership talent, or extraordinary effort. The “Metric Manager” does need to possess rudimentary math skills, but we can find a 5th grader to help with the math. Creating true “Positive Behavior Change” requires call center managers to become leaders and focus on the behaviors which result in real success. It requires a management team which understands WHY customers purchase their products or services, HOW their agents should best communicate with their customers, and WHAT the agent should say to inspire the customer to make a buying decision during the contact. Good luck finding a 5th grader to help create “Positive Behavior Change”.
When call center managers rely upon “Metric Managing”, the cost to the call center could be millions of dollars in lost revenue, higher employee attrition levels, and customer dissatisfaction. Are you suffering from any of these ailments?
What is the culture of your call center? Are you in a “metric managing” environment? How do your agents feel about the leadership and direction of your call centers? Are your employees following poor leaders?
In order to create real sustainable results through “Positive Behavior Change”, your call center managers must transition into leaders who understand the formula:
(Attitude + Skills + Knowledge) + Goal Setting = Positive Behavior Change
Think about the last training delivered to your employees. Was the session focused on Attitude, Skills, Knowledge, and Goal Setting? If you are like most call centers, then the training session was likely focused on Knowledge or Skills. If you have an above average training team, then the session may have included a focus on both Skills and Knowledge. The absence of Attitude and Goal Setting in training sessions is the reason why most call center trainers and managers fail to consistently impact results.
You might believe that agents are responsible to control their own attitudes and should be setting goals to achieve the metrics required in the job. You would, of course, be correct that in a perfect world this would happen. Unfortunately, most employees in call centers rarely understand the impact of their attitude on results. Additionally, most call center employees have never been taught goal setting. So, if you want to improve your revenue results, reduce employee attrition, and increase customer loyalty, then you need to focus on improving attitudes, skills, knowledge, and goal setting. If your employees already have the requisite skills and knowledge, then you MUST focus on creating improved Attitudes and Goal Setting. Transitioning call center managers into call center leaders with the ability to inspire proper Attitude and create behaviorally focused Goal Setting is your next step. Effective leaders must have the ability to help their agents become more self-aware and authentic. When mastered, this ability creates astounding results. Agents become more focused on positive behavior change. This positive behavior change results in revenue increases, improved retention, and higher customer service scores.
Inspired Performance Solutions, Inc. can help you determine if you are “Metric Managing” or creating “Positive Behavior Change”. Using a diagnostic tool from Resource Associates Corporation called D.I.AL.O.G. or Data Indicating ALignment of Organizational Goals. This organizational assessment tool provides information as to how well critical elements are working together to achieve business and strategic goals. It also identifies which of these critical elements are working against you. Our approach is unique in that we measure the interrelationships of the essential elements which become predictors of future strength. We are not concerned with measuring communication for communications sake, but rather how effectively is an organization communicating to its employees. Our approach is outcome focused rather than simply measuring non-relevant activities.
Visit us at www.inspiredperformancesolutions.com/assessments.html to learn more.
Have you ever felt this way about YOUR Leaders?
Are your employees frustrated with the communication coming from your Leaders?
If you or your leaders are struggling with communication, then implement these 8 Steps to Clear Communication:
- What’s Your Story?
- Be Conversational
- Use Repetition
- Be Transparent and Honest
- Connect the Dots
- Be Intentional
- Listen with Intensity
- Become Feedback Hungry
1. What’s Your Story
The best communicators use stories to help people receive and retain information. As you are attempting to change behaviors, create stories to help people understand the behavior you are seeking to change and the behavior you are seeking to reinforce. One of the best examples of this is found in the Bible. Think about the Parables. If you are not familiar with this reference, then I recommend you check out this reference:
2. Be Conversational
This may sound simple and obvious, but think about the types of communication call center mangers usually share with employees. Often, communication is formal, written to communicate objectives, rules, regulations, or expectations. These types of communication may be important, but a balance of communication must exist. Sometimes, even the sharing of recognition or praise is communicated in a formal manner. Make these communications more conversational.
3. Use Repetition
The power of spaced repetitive learning is well documented. Don’t be afraid to continue to message important information. When your team is repeating the information back to you (even mockingly), you will know your message has been delivered effectively. Find many vehicles to deliver the information you need your team to receive. When the message is omnipresent, you have a much better chance of the message be received. Keep in mind, your employees will still need to implement the message to achieve desired behavior change.
4. Be Transparent and Honest
As we all know, most call centers are rumor central. While there are certainly times to keep information close to the vest, whenever possible, share information with your call center employees. Most employees want to feel included and “being in the know” is important to improve efficiency and productivity. The less impact rumors have on your business, the more effective your employees will handle your business.
5. Connect the Dots
This is critical to helping employees understand the strategy of the company. Many decisions are questioned by employees and may seem “stupid” by their standards. If decisions are explained and people hear “the rest of the story”, then the strategy becomes clear and the same decision or direction suddenly seems “wise”. Connecting the dots for people will turn you into a master communicator.
6. Be Intentional
Plan, then execute. When you are communicating it’s important to explain your plan in step by step directions before executing your plan. The planning and explaining of the plan is important to provide confidence to your teams. If you were traveling from Atlanta, Georgia to Washington, D.C., would you just jump in your car and drive? Probably not. Most people will take at least a brief look at a map and plan how to get to their destination. When you have others traveling with you, they are likely going to want to know your plan to arrive at the destination. Be intentional. Plan, then execute.
7. Listen with Intensity
How often do you see someone speaking, but all you hear is “Blah, blah, blah…”? Who is guilty of poor communication in this example? As a call center leader, you are likely expected to handle many tasks. When you are trying to complete an administrative task and you are focused on your computer, you may be interrupted by an employee with a question. Do you stop, turn and focus on the employee? Or are you like most call center managers and listen to the question with one ear and continue to work on your task? Often, these managers will need the question repeated, maybe several times, before focusing completely on the employee’s issue. Listening with intensity demonstrates to your employees that you care about them and their success. It demonstrates your level of professionalism. It sets the standard of listening for your team. If you don’t listen with intensity, then your employees may not listen with intensity to your customers.
8. Become Feedback Hungry
Your desire to improve your communication skills must begin with willingness to hear feedback. In fact, you need to seek feedback from people. Asking for feedback may seem like a scary idea at first, but most people who implement this idea find the value greatly outweighs the fear in the long run. Many people have received positive feedback and reinforcement of the things they do well. This may prove very rewarding. One question to ask when seeking feedback is “If I could change one thing about the way I communicated today, what should it be?” This type of question allows the person to provide their best feedback and keeps the communicator from feeling overwhelmed with negative feedback.
If you follow these 8 steps to clear communication, then you will improve your communications. Will you be an expert? It all depends on how well you understand your current ability to communicate. The link below will allow you to assess your communication style. The more you know about yourself, the more effective you will become.
If you are interested in more information about improving leadership skills, then visit us at:
In our previous post, we covered some of the costs associated with Employee Attrition. Today, we will discuss in more detail some of these costs:
- Recruitment Costs
- Training Costs
- Lost Productivity Costs
- New Hire Costs
- Lost Sales Costs
- The cost of advertisements (from a $200.00 classified to a $5,000.00 or more display advertisement); agency costs at 20 – 30% of annual compensation; employee referral costs of $500.00 – $2,000.00 or more; internet posting costs of $300.00 – $500.00 per listing. Talk to your Staffing Team and determine what costs are being incurred to hire your open positions.
- The cost of the recruiter’s time to understand the position requirements, develop and implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct interviews, prepare candidate assessments, conduct reference checks, make the employment offer and notify unsuccessful candidates. This can range from a minimum of 30 hours to over 100 hours per position. Now, what’s the cost of the internal or external recruiter fulfilling these roles for you?
- Calculate the cost of a recruiter’s assistant who will spend 20 or more hours in basic level review of resumes, developing candidate interview schedules and making any travel arrangements for out of town candidates. How much more are you spending for these tasks? If no assistant is involved, then how much more time is the recruiter spending on these tasks?
- The cost of the hiring department (immediate supervisor, next level manager, peers and other people on the selection list) time to review and explain position requirements, review candidates background, conduct interviews, discuss their assessments and select a finalist. Also include their time to do their own sourcing of candidates from networks, contacts and other referrals. This can take upwards of 100 hours of total time for a single position.
- Calculate the administrative cost of handling, processing and responding to the average number of resumes considered for each opening at $1.50 per resume. How many resumes are they receiving for the open positions?
- Calculate the number of hours spent by the internal recruiter interviewing internal candidates along with the cost of those internal candidates to be away from their jobs while interviewing. Many contact centers use front line supervisors to interview candidates. What is the cost of this practice?
- Calculate the cost of drug screens, educational and criminal background checks and other reference checks, especially if these tasks are outsourced. Don’t forget to calculate the number of times these are done per open position as some companies conduct this process for the final 2 or 3 candidates. If you are hiring a class of 20 new hires, then your costs are significantly higher. What’s the total cost per employee?
- Calculate the cost of the various candidate pre-employment tests to help assess a candidates’ skills, abilities, aptitude, attitude, values and behaviors. If you aren’t using a pre-evaluation test, then you are probably spending more money on interviews or overall attrition. Is your employee evaluation EEOC certified? What would be the cost of a lawsuit to defend your evaluation if it’s not EEOC certified? Significant amounts of money have been spent defending these types of lawsuits.
- Calculate the cost of orientation in terms of the new person’s salary and the cost of the person who conducts the orientation. Also include the cost of orientation materials.
- Calculate the cost of departmental training as the actual development and delivery cost plus the cost of the salary of the new employee. Note that the cost will be significantly higher for some positions such as sales representatives and call center agents who require 4 – 6 weeks or more of classroom training.
- Calculate the cost of the person(s) who conduct the training.
- Calculate the cost of various training materials needed including company or product manuals, computer or other technology equipment used in the delivery of training.
- Calculate the cost of supervisory time spent in assigning, explaining and reviewing work assignments and output. This represents lost productivity of the supervisor. Consider the amount of time spent at 7 hours per week for at least 8 weeks.
As the new employee is learning the new job, the company policies and practices, etc. they are not fully productive. Use the following guidelines to calculate the cost of this lost productivity:
- Upon completion of whatever training is provided, the employee is contributing at a 25% productivity level for the first 2 – 4 weeks. The cost therefore is 75% of the new employees full salary during that time period.
- During weeks 5 – 12, the employee is contributing at a 50% productivity level. The cost is therefore 50% of full salary during that time period.
- During weeks 13 – 20, the employee is contributing at a 75% productivity level. The cost is therefore 25% of full salary during that time period.
- Calculate the cost of coworkers and supervisory lost productivity due to their time spent on bringing the new employee “up to speed.”
- Calculate the cost of mistakes the new employee makes during this elongated indoctrination period.
- Calculate the cost of lost department productivity caused by a departing member of management who is no longer available to guide and direct the remaining staff.
- Calculate the impact cost on the completion or delivery of a critical project where the departing employee is a key participant.
- Calculate the cost of reduced productivity of a manager or director who looses a key staff member, such as an assistant, who handled a great deal of routine, administrative tasks that the manager will now have to handle.
Administrative New Hire Costs
- Calculate the cost of bring the new person on board including the cost to put the person on the payroll, establish computer and security passwords and identification cards, business cards, internal and external publicity announcements, telephone hookups, cost of establishing email accounts, costs of establishing credit card accounts, or leasing other equipment such as cell phones, automobiles, pagers.
- Calculate the cost of a manager’s time spent developing trust and building confidence in the new employee’s work.
Lost Sales Costs
- For sales staff, divide the budgeted revenue per sales territory into weekly amounts and multiply that amount for each week the territory is vacant, including training time. Also use the lost productivity calculations above to calculate the lost sales until the sales representative is fully productive. Can also be used for telemarketing and inside sales representatives.
- For non-sales staff, calculate the revenue per employee by dividing total company revenue by the average number of employees in a given year. Whether an employee contributes directly or indirectly to the generation of revenue, their purpose is to provide some defined set of responsibilities that are necessary to the generation of revenue. Calculate the lost revenue by multiplying the number of weeks the position is vacant by the average weekly revenue per employee.
Calculating and adding all these costs, given our original example of the $50,000 person can easily reach $75,000 to replace them. As you can see, the costs and impact associated with an employee who leaves the company can be quite significant. This is not to say that all turnover should be eliminated. However, given the high cost and impact on running a business, a well thought-out program designed to retain employees may easily pay for itself in a very short period of time.
If your contact center or organization is struggling with employee attrition, then we have a diagnostic tool to help you understand why attrition is negatively impacting your organization. Contact us about using D.I.AL.O.G. to help you. Here’s a link to more information about the D.I.AL.O.G. tool:
You may reach us at:
If you are like most contact center leaders, then you know the pain of employee turnover. Do you know the REAL cost of your employee attrition? I’m not talking about the number someone from Finance provided you years ago. I’m talking about calculating the REAL cost to your business today. The following information is designed to help you identify these costs and develop a plan to reduce these costs.
The comprehensive checklist is designed to be used with any organization. I have also attempted to make this as easy as possible for those of you scared of the math. So, don’t be scared, keep reading.
You may need to add or remove some of these items to your formula. To determine the costs, have the hourly and weekly cost of fully loaded payroll costs (salary plus benefits) of the vacant position, the management staff, the recruitment staff and others as outlined below.
It should be noted that the costs of time and lost productivity are no less important or real than the costs associated with paying cash to vendors for services such as advertising or temporary staff. These are all very real costs to the employer.
These calculations will easily reach 150% of the employee’s annual compensation figure. The cost will be significantly higher (200% to 250% of annual compensation) for managerial and sales positions.
To put this into perspective, let’s assume the average salary & benefits of employees in a given contact center is $40,000 per year. Taking the cost of turnover at 150% of salary, the cost of turnover is then $60,000 per employee. For the mid-sized contact center of 200 employees with a 50% annual rate of turnover, the annual cost of turnover is $6 million!
We all know you will never remove all your employee attrition because some attrition is necessary. Let’s say you reduce your attrition from 50% (a relatively low number for most contact centers already) to 30% annual attrition. The cost savings using the numbers in our example are still a staggering $3.6 million. Do you know any contact center leader who would not want to add $3.6 million to their budget? And, by the way, most of that figure would be carried over to the profit line!
What about the contact center with 500 employees and an average employee salary & benefits of $50,000, with annual attrition of 100%. Sound familiar? The cost of turnover equals $37.5 MILLION! Let’s say you improve your employee attrition from 100% turnover to 80% turnover. The 25% reduction in attrition equals $7,500,000 in real profit improvement. YES…$7.5 MILLION more in the bottom line.
So, what are YOUR real employee attrition costs? Here are some of the items you need to include in your calculation:
- Calculate the cost of the person(s) who fills in while the position is vacant. This can be either the cost of a temporary or the cost of existing employees performing the vacant job as well as their own. Include the cost at overtime rates.
- Calculate the cost of lost productivity at a minimum of 50% of the person’s compensation and benefits cost for each week the position is vacant, even if there are people performing the work. Calculate the lost productivity at 100% if the position is completely vacant for any period of time.
- Calculate the cost of conducting an exit interview to include the time of the person conducting the interview, the time of the person leaving, the administrative costs of stopping payroll, benefit deductions, benefit enrollments, COBRA notification and administration, and the cost of the various forms needed to process a resigning employee.
- Calculate the cost of the manager who has to understand what work remains, and how to cover that work until a replacement is found. Calculate the cost of the manager who conducts their own version of the employee exit interview.
- Calculate the cost of training your company has invested in this employee who is leaving. Include internal training, external programs and external academic education. Include licenses or certifications the company has helped the employee obtain to do their job effectively.
- Calculate the impact on departmental productivity because the person is leaving. Who will pick up the work, what work will suffer, what departmental deadlines will not be met or delivered late. Calculate the cost of department staff discussing their reactions to the vacancy.
- Calculate the cost of severance and benefits continuation provided to employees who are leaving that are eligible for coverage under these programs.
- Calculate the cost of lost knowledge, skills and contacts that the person who is leaving is taking with them out of your door. Use a formula of 50% of the person’s annual salary for one year of service, increasing each year of service by 10%.
- Calculate the cost impact of unemployment insurance premiums, as well as, the time spent to prepare for an unemployment hearing, or the cost paid to a third party to handle the unemployment claim process on your behalf.
- Calculate the cost of losing customers the employee is going to take with them to their new position or the amount it will cost you to retain the customers of the sales person, or customer service representative who leaves.
- Subtract the cost of the person who is leaving for the amount of time the position is vacant.
These REAL costs will help you determine your TRUE costs of employee attrition. If you would like to use a simple calculator to help you, theUniversityofWisconsin Extension Officeoffers the calculator at the below link:
Our next BLOG will address more specifics about the costs of employee turnover including recruitment, training, productivity, new hire, and opportunity costs. If you know YOUR employee attrition is out of control, then contact us NOW to schedule a time to discuss our diagnostic tool to measure your concerns.
Office: 402 707-4868
Skype: 402 575-9339
Office: 816 674-8112
Leadership Development isn’t just for the front line supervisor. What are you doing to help your leaders develop? What are doing to help yourself for that matter?
HR.com is offering a FREE virtual conference entitled “Developing Organizational Leadership Capabilities” on February 14 & 15. This virtual conference will allow you to sign up for several topics ALL for FREE. You just need to register at HR.com and become a member. Yes, it’s FREE.
There are no magazines to sign up for, no special coupons, no strings attached. It’s truly FREE. I know it’s an AMAZING concept. Educational-based information at no cost. Guess what? You also receive continuing education credits towards HR certifications. (That’s only important to you if you have the HR designations, I know, but it’s still FREE!)
Why should you attend a virtual conference on “Developing Organizational Leadership Capabilities”?
- The IHR is the only institute with certification that focuses on the area of Developing Organizational Capabilities.
- A specialty certification increases your market value.
- Adds value to your work experience.
- Furthers your knowledge
- Recognizes you as an industry leader and expert in the field.
So, register today at:
AND don’t forget, we are delivering two programs during the virtual conference:
The Paradigm Shift to Sustainability is scheduled for 11 am EST on Feb 14. Here’s the link:
Sustainability Advantage is scheduled for 11 am EST on Feb 15. Here’s the link:
We look forward to helping you develop your organizational leadership capabilities!
In today’s business, the team leader is the main link between the organization’s goals and the people who are responsible for the daily activities that make those goals a reality. Because of the necessary and integral role that this position plays, it is obvious that good team leaders are keys to the success of any organization.
Many everyday decisions required within this role affect profits, productivity, service levels as well as attitudes and morale. With a role and function of this magnitude, it would seem logical that the process of becoming a team leader would require years and years of training. However, most team leaders have had little or no training in the required skills. Almost universally, today’s team leaders are men and women who have been promoted from being a super worker to being a team leader.
Did this happen to you? Are you guilty of promoting super workers into Leadership roles without providing them the necessary training to be successful? How much is poor leadership costing your business? Do you know who your best leaders truly are? Not the ones you like the best, which of your leaders gets more out of the talent they have than anyone else?
One more question…can you answer each of the above questions with confidence and data to back up your assessment? If you can’t, then you are likely losing thousands of dollars, maybe millions of dollars, each month you allow poor leaders to impact your customer facing employees.
The good news is you can do something about it. It’s not too late to save your employees from these deadly managers.
Use this link to learn about saving your business…
The single most important element to success is 100% controllable by each of us. That’s right, you have the ability to control this element of success every day. The element I refer to is, of course, your ATTITUDE. One of my favorite authors, Charles Swindoll, wrote the following about ATTITUDE:
“The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts.
It is more important than the past, than education, than money, than circumstances, than failure, than successes, than what other people think or say or do.
It is more important than appearance, giftedness or skill. It will make or break a company, a church, or a home.
The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day.
We cannot change our past, we cannot change the fact that people will act in a certain way.
We cannot change the inevitable.
The only thing we can do is play on the one string we have, and that is our attitude.
I am convinced that life is 10% what happens to me and 90% of how I react to it.
And so it is with you, WE are in charge of our Attitudes.”
These words seem so simple and yet so accurate.
Why is it that so many contact centers struggle with the attitudes of their employees? I believe it begins with Leadership. That’s right, it’s our fault for allowing negative attitudes to impact the cultures and results of our centers.
What can you do to change the culture of your contact center?
It starts with assessing where your contact center is today. The assessment I like to use is called D.I.AL.O.G., which stands for Data Indicating ALignment of Organizational Goals. This assessment allows you to accurately take the pulse of your business. You will be able to identify, prioritize, and implement a plan to resolve the issues your business faces. Most importantly, you will receive the feedback from your employees about how ATTITUDE is impacting your business.
If you are concerned about the direction of your teams or you want to measure accurately how your leadership team is performing, then contact us through the link below for a FREE consultation about using D.I.AL.O.G. as a diagnostic tool for your organization:
We will help you achieve your vision of success.