By Peter Lyle DeHaan, PhD
In retail, the term shrinkage is euphemistically used to reference stock which “disappears” before it can be sold. In essence it is a product that the retailer bought, but can’t sell. To be direct, shrinkage is theft. While some of this occurs in the form of shoplifting, it also results from employees, both through acts of commission and acts of omission. Regardless of the source or the motives, shrinkage hurts everyone in the form of higher consumer prices and lower company profits. This affects jobs and threatens the business’s future viability. Some retail operations take a surprisingly relaxed position about shrinkage, viewing it as an inevitable cost of doing business; whereas others see it as the theft that it is, taking aggressive steps to eliminate or at least reduce it.
Shrinkage in the retail environment has an analogous application to the call center. True, a call center does not have tangible inventory that can disappear. A call center’s inventory is human capital, that is, the call center schedule. Shrinkage in a call center, therefore, is agents who are “on the clock” but who aren’t processing calls. This could be manifested by agents who are not at their stations when they are supposed to be, not being logged in, not being “in rotation”, or who employ some “trick” to block calls.
Similarly to retail, some call centers take a surprisingly relaxed position about this shrinkage of the schedule, also viewing it as an inevitable cost of doing business. Their response to it is intentional over-staffing. This only serves to cover the problem, not resolve the underlying cause. Other call enters see shrinkage as little more than stealing – stealing time. Like their retail counterparts, they too take aggressive steps to eliminate or at least reduce it. Call center shrinkage likewise hurts everyone: a lower service level offered to the client, reduced profits to the call center, decreased morale, and even less compensation for the call center agents.
There are three factors that help track, explain, and counter call center shrinkage. They are adherence, availability, and occupancy.
Adherence: Adherence is a measurement of the time agents are scheduled to work compared to the time they actually work. Why is adherence important? Quite simply, it is because the schedule was developed to match the traffic projection and when the schedule is not fully worked, the result is understaffing. In an ideal situation, staff should adhere 100% to their schedules. Unfortunately, this is not the case.
Adherence can be best tracked by comparing logged in time to scheduled time. Most call center managers are shocked the first time they look at this. It can represent a huge unnecessary cost to the call center, as well as contribute to lower service levels.
Several factors can account for differences between the schedule and the time worked. The first area is scheduled breaks, lunches, and training. This is the only acceptable contributor to adherence discrepancy. Depending on the length of breaks, the best resulting adherence will be around 90%. Forty-five minutes of breaks in an eight-hour shift will result in an adherence of 90.6 % (7.25 hours / 8 hours). The second consideration is absences, late arrivals, and early departures. Unless these openings are filled, the result is a disparity between the schedule and the fulfillment of that schedule. If this missed work is paid time off, such as paid sick time, then there is both a dollar cost and service impact that results. The third area is unscheduled breaks or any other distraction that causes agents to leave their positions. When factoring all of these items together, it is not uncommon for call centers to have adherence rates around 75%, although well-run centers will be in the low 90s (as determined by their established break schedule.)
Adherence is the first of three related scheduling metrics. The next is availability.
Availability: A second, and related, staffing metric is availability. Availability is a subset of adherence. Of the time that staff is adhering to their schedule, availability measures how much of that time they are ready (that is, available) to answer calls. It can be easily calculated by comparing available time (also called, “on time,” “in rotation,” or “ready”) to logged in time. Specifically, it is the percentage that results from dividing available time by logged in time. Although the ideal goal of 100% availability is achievable (that is, ready to process calls all of the time agents are logged in), 98% to 99% is more realistic.
Agent availability is strictly within the control of agents. It is determined by each agent’s willingness to keep his or her station in a state of readiness to be assigned calls. Simply put, it is whether the agent is available to take calls all of the time.
Availability is the second scheduling related metric. The third is occupancy.
Occupancy: Occupancy is the amount of time agents spend talking to callers compared to the time they are turned on or are available. Although it is possible to have 100% occupancy, the corresponding service level would be poor and generally unacceptable. One hundred percent occupancy means that agents are talking to callers the entire time they are logged in. It also means that there are calls continuously in queue, waiting to be assigned as soon as an agent completes a call. The resulting efficiency is great, but callers can end up waiting in queue for several minutes. Therefore, 100% occupancy does not produce quality service and can lead to agent burnout and fatigue.
Interestingly, ideal occupancy rates vary greatly with the size of the call center. Smaller centers can only achieve a low occupancy rate (perhaps around 25%) while maintaining an acceptable service level. Conversely, large call centers can realize a much higher occupancy rate (90% and higher) and still maintain that same service level. This dynamic relationship between occupancy rates and call center size is the underlying impetus for mergers and acquisitions among outsource call centers; it is a profound example of economies of scale. Call centers in the 10 to 20 seat range typically see occupancy rates around 50%.
To calculate occupancy, divide the total agent time (that is, talk time plus wrap-up time) by agent “on” time. This should be determined for each agent as well as for the entire call center.
Two Case Studies: Now, let’s consider all three of these metrics together and apply them to two call centers. The first, a well run call center and the second, an under-managed one. We will assume that they are the same size and both have a realized occupancy rate of 50%.
Call Center A has an adherence rate of 90% and an availability rate of 95% (along with the aforementioned 50% occupancy rate. For each 8 hour shift there is 3.42 hours of on-line time or actual work (8 hours x 90% x 95% x 50%).
Call Center B has an adherence rate of 75% and an available rate of 65% (with an occupancy rate of 50%). For each 8 hour shift there is only 1.8 hours of on-line time or actual work (8 hours x 75% x 60% x 50%).
Although the results for call center A, a well run operation, may be surprising, the corresponding number for call center B is shocking. In fact, to maintain the same service level, Call Center B would need to schedule almost twice (1.9 times) as many hours as Call Center A. Consider what a significant impact this would have on the bottom line.
Lest you think that these are unrealistic numbers, both are real situations describing call centers I have visited. It takes a concerted and ongoing management effort to be like Call Center A, while all too many operations are more like Call Center B. I challenge you to run your numbers to see how you compare – and then take steps to improve them.
Don’t let call center shrinkage lead to profitability shrinkage!
[From Connection Magazine – Jul/Aug 2004]