The ROI of Contact Center Benchmarking
March 11, 2020
By: Paul Chaney
“If you can’t measure it, you can’t improve it.”
That adage, coined by Peter Drucker, a man regarded as the inventor of modern business management, testifies to the fact that measuring performance is vital to the success of any business or industry — including the contact center industry.
And one of the best ways to measure improvement in the contact center, according to Jeff Rumburg, co-founder and managing partner at MetricNet, a contact center benchmarking and consulting firm, and the subject of this month’s expert interview series, is through the practice of benchmarking.
Rumburg defines benchmarking as comparing an organization against a valid external peer group and asking the question, “How are we performing?”
“Not until you compare to a peer group of other like contact centers can you genuinely answer the question,” he said.
Rumburg pointed out a common misconception regarding how some in the contact center industry understand benchmarking.
“There is a term used in the industry: internal benchmarking,” he said. “What it means is trending performance, not benchmarking. A contact center may look at trends for two, four, or even six metrics, but a good trend does not good performance make. Benchmarking tells you how you are performing relative to the industry.”
In comparing an organization with a valid external peer group, benchmarking not only looks at specific metrics but also an aggregate.
“It’s one thing to be low cost, for instance, but that by itself doesn’t tell you very much — you have to look holistically,” Rumburg said.
A contact center may look at trends for two, four, or even six metrics, but a good trend does not good performance make. Benchmarking tells you how you are performing relative to the industry.
Benchmarking and ROI
We posed this question to Rumburg: “Is benchmarking the best way to measure performance and, if so, why?” His answer spoke directly to the ROI it provides.
“If it doesn’t make the contact center better, faster, or cheaper, benchmarking isn’t worth it,” he said. “But take inbound or outbound sales, for example. Benchmarking can help identify opportunities to increase the average sales size, product count per sale, and higher percentage of contacts that result in a sale.”
Benchmarking can also demonstrate positive ROI in customer support contact centers, even though it’s not as easy to measure, Rumburg said, adding that high-quality support delivered through the contact center is key to revenue growth.
“The quality of customer service interactions has the effect of increasing the number of repeat sales, positive word-of-mouth referrals, average sales size, and average lifetime value,” he said. “Benchmarking helps a contact center deliver the best possible service, so you get to a higher sales or service level to drive repeat business, word-of-mouth, and the like.”
Importance of a Valid Peer Group
One of the most crucial success factors in benchmarking is to get a valid peer group, according to Rumburg.
“A lot of what passes for benchmarking in this industry is just a collection of data that comes from a bunch of contact centers when what’s needed is normalization,” he said. “Unless you get comparability on the services being offered, it lacks validity.”
Four classifications determine comparability: Scope, Scale, Complexity, and Geography.
When benchmarking, it’s important to get the vertical market normalized, which is why you shouldn’t compare inbound with outbound, according to Rumburg.
“The work is very different, and the way you staff is different,” he said. “Inbound is governed by the Erlang C distribution; outbound is almost like an assembly line.”
Scale has to do with volume. “You don’t compare a contact center that gets 1,000 interactions per month with one that gets one million,” he said.
Complexity relates to metrics such as handle time.
Contact centers are labor-intensive and much of the cost applies to personnel. Geography determines wage rates, so you don’t compare North America with Central America, for example, or a nearshore center with one that’s offshore.
Hard and Soft ROI of Benchmarking
Another revenue-related factor in benchmarking that Rumburg pointed out has to do with “hard” and “soft” ROI.
“Like any good business decision, companies should undertake benchmarking with the expectation that it will produce a positive ROI,” he said. “The ROI of contact center benchmarking includes both hard benefits, such as cost savings and profitability improvement, as well as soft benefits, such as improved customer satisfaction.”
Different Types of Benchmarking
Rumburg also said there are two different types of benchmarking, depending on whether you measure an in-house center or outsourced provider.
“We refer to it as cost benchmarking if you’re running an internal contact center,” he said. “You’re benchmarking your cost and performance versus an outside center. If you outsource, we call it price benchmarking because you measure the price you pay plus performance.”
Empirical data demonstrates that benchmarking is the most effective tool for delivering continuous improvement in the contact center, according to Rumburg. He cited that industry data shows a virtual one-to-one correspondence between contact centers that conduct annual benchmarking and those that achieve world-class performance.
“It’s a chicken or egg paradox,” he said. “Are great contact centers world-class because they benchmark or do they benchmark because they’re great? Regardless of the answer, empirical evidence supports the assertion that benchmarking is the quickest path to continuous performance improvement.”
Advice for Contact Centers
Rumburg offered two pieces of advice for contact centers with regard to benchmarking:
Hold Agents Accountable
“Accountability has negative connotations like you’re being heavy-handed or taking a ‘big brother’ approach to management,” he said but countered that at the agent level, it’s a good thing because it drives transparency, visibility, and accountability.
“The best agents love accountability because they know they are performing well and want the proof they are performing well,” Rumburg said.
He advised that contact centers measure FCR, schedule adherence, and customer satisfaction at the agent level, and then aggregate those in a balanced scorecard, citing that the “best performers are going to shine.”
Don’t Hire the Lowest-cost Resources
Rumburg’s view on hiring — whether it’s agents for an in-house center or partnering with an outsourcer — aligns well with our own: don’t hire the lowest-cost resources.
“It’s really common with offshoring to hire the lowest-cost resources,” he said. “But if you’re willing to pay 20 to 25 percent more, although payroll costs may go up, the value of the contact center increases in excess of the payroll price. The commodity segment is not where you want to be competing.”
We could not agree more.
To learn more about the ROI of benchmarking, download the MetricNet whitepaper: The ROI of Benchmarking: The Business Case for Benchmarking Contact Centers.
Want to do business with an outsourcer that understands the value of transparency, visibility, accountability, and quality over low-cost? Contact us.