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Article : Small Town Call Center Location

There is a well-established trend in call center location strategy that involves placing call centers in low cost labor markets throughout the world. Strategy drivers include a mix of achieving/maintaining cost minimization, hiring the best talent to deliver excellent customer service, serving customers in different languages, maximizing business continuity, and allowing flexibility to up or downscale the physical portfolio as market conditions warrant.

Introduction
This article demonstrates the actualization of a well-established trend in call center location strategy. That strategy embodies a multi-shore location game plan for establishing new call center capacity. The strategy involves placing call centers in low cost labor markets throughout the world.


Strategy drivers include a mix of achieving/maintaining cost minimization, hiring the best talent to deliver excellent customer service, serving customers in different languages, maximizing business continuity, and allowing flexibility to up or downscale the physical portfolio as market conditions warrant.

One component of the strategy embraces the siting of call centers in US labor markets that allow an operation to recruit/retain top quality labor at relatively low cost. Wadley- Donovan- Gutshaw Consulting recently completed a location study for a highly regarded third party outsourcer that exemplifies the aforementioned strategy.

This outsourcer needed to find a suitable location for a 200 FTE inbound customer service center to handle mostly routine inquiries. WDGC was retained to advise the firm on the best US location. Simultaneously, we were charged with recommending locations for the company's first two offshore operations, targeting South America and Asia.

In the remainder of this article we illustrate the process by which WDGC recommended a small town locational solution (Gillette, WY) for the company's new US call center. While the firm has tentatively decided to move to Gillette, no official announcement has been made. Hence, management has requested anonymity until the decision is ready for public consumption.

Study Focus
Given the outsourcer's existing call center network in North America, management determined that the new facility should be located in the western US (Mountain or Pacific Time zones). All states would be considered except California. The latter has a labor legislation climate (e.g., paid family leave) which management believed was too restrictive and costly for a customer service business.

As a third party vendor, new capacity was dictated by the signing of a contract with a company (in this case, a communications corporation) that needed to bring customer service functions live at the earliest possible date. Consequently, to save on time, WDGC recommended 20 communities (based on experience) that had a realistic chance of meeting the call center's pre-eminent locational criteria, which were heavily weighted toward labor market (cost, supply, quality). The universe of 20 locational candidates spanned 10 western states.

Arizona
Bullhead City
Casa Grande
Kingman
Yuma
Colorado
Fort Collins
Grand Junction
New Mexico
Clovis
Hobbs

Idaho
Moscow
Twin Falls

Montana
Helena
Bozeman
Washington
Centralia
Walla Walla
Oregon
Corvallis
Pendleton
Utah
St. George
Wyoming
Casper
Gillette
Nevada
Carson City

Location Criteria
The following were deemed to be of overriding importance in choosing the ultimate location.

  1. Labor Cost

  • Ability to staff basic customer service positions at a start rate of $8/hour or less

  • Minimal future payroll cost escalation due to competitive labor market pressure

  1. Labor Supply/Quality

  • Ample supply (at least three qualified applicants for each of 200 positions) of workers possessing solid basic skills (e.g., reading, writing, communications, problem solving, a high school education, and some previous work experience (e.g., retail clerk)

  • Workforce stability

    • Annual turnover less than 35%

    • Daily absenteeism less than 4%

  1. Minimal labor/management relations risk (i.e., nonunion)

  2. Favorable labor legislation (e.g., Employment at Will)

  3. Proximity (within 75 miles) to a Point of Presence (switch) of a long-distance carrier|

  4. Broadband telecommunications on a self-healing SONET ring

  5. Availability of a 25,000 SF building on one floor with ample parking (at least 8 spaces per 1,000 rentable square feet of office space)

  6. Community leadership that would welcome an enlighted call center employer

  7. Absence of sales tax on out-of-state telecom calls

  8. Ability of the company to be viewed as a 'white-collar' employer of choice (absence of major, direct labor market competitors)

  9. Minimal natural disaster risk (e.g., severe storms)

  10. Presence of a commercial airport

Location Screening
WDGC conducted a comparative analysis of the 20 locational candidates to identify a shortlist of the six most promising areas. Those areas would then be subjected to further empirical research to choose the best long-range location.

To compare/rank the 20 locations, WDGC examined statistical indicators suggesting the degree to which each area could satisfy primary operational criteria. Exhibit A illustrates the data elements that were utilized in the locational rankings.

Individual factors were aggregated into three major categories. They (along with representative factors) were:

Information utilized to compare the 20 areas was drawn from WDGC's proprietary database and other secondary sources (e.g. state departments of labor) plus contact with local economic development entities. The chart below shows how the 20 areas stacked-up on overall rankings.


Final Analysis
The shortlisted locations were further evaluated to ascertain their acceptability for the project in question. Each area was subjected to a field based due diligence analysis, composed of the following.

  1. Interviews with white-collar employers to learn of their labor market and other operational experiences

  2. Interviews with other pertinent organizations that could shed light on business operating conditions, e.g.,

  • Personnel agency

  • State employment service

  • Local government officials

  • State labor department officials

  • State/local tax officials

  • Education/training representatives

  • Office building owners

  • Telecommunications representatives

  1. Physical inspection of potentially suitable buildings

  2. Area tours of residential neighborhoods

  3. Request of local/state economic development agencies to provide an incentives package

Location Selection
Predicated upon this original research, the six finalist areas were ranked/scored. Current and future labor market conditions weighed heavily in the analysis. Two areas emerged as superior for this specific call center. They were Gillette (WY) and St. George (UT).

Both areas rated well on the following criterial locational considerations.

  1. Absence of direct labor market competition (none in Gillette and only a small center in St. George)

  2. Large underemployed labor pool suitable for call center operations

  • Retail and second income earners whose principal breadwinners were displaced by the decline of the minerals industry in Gillette

  • Hospitality/tourism and retail in St. George

  1. No impending call center location activity which would impair the company's ability to recruit during start-up

  2. Flexibility to grow beyond the 200 FTE level, possibly to 300 in either area

  3. Buying power (generating a large flow of qualified applicants) of a starting wage in the $7.25-$8.00 range

  4. Good labor quality (basic skills, PC literacy, basic problem solving, work ethic)

  5. Comparatively low turnover (under 35%) due to several forces

  • Company's HR package (wage, benefits, policies)

  • Minimal labor market competition

  • Workforce attitudes

  1. Fee pre-employment training offered by each area's community college

  2. Nonunion operating environment

  3. No deal breakers on labor legislation

  4. Satisfactory and reasonably priced (gross rent below $14/SF) office space (including former retail stores) comprising around 25,000 SF

  5. Adequate telecommunications

  6. Low natural disaster risk

  7. Acceptable tax practices/rates
     

  8. Area leadership warmly embracing the proposed business

There were no significant drawbacks to either location. While air service was limited, this can actually be viewed as a positive because neither area is likely to experience a substantial infusion of new businesses. One minor disadvantage of both locations was a limited economic incentives package. Each area offered free pre-employment training worth about $1,500 per new hire. That was the extent of the incentives. However, a built-in incentive for Gillette was no state taxation on corporate or personal income.

Despite the paltry incentives offerings, labor market attractions are far more important for successful operation of a call center. This is especially true in these two areas, wherein wage levels are highly favorable.

In the end, Gillette was chosen for two reasons. They are:

  • More suitable available building (e.g., easier and less costly to retrofit)

  • Somewhat more risk that other call centers would discover St. George due to its strong growth in tourism/retirement and the fact that there are few other undiscovered small town alternatives in Utah while there are several in Wyoming.

The other four locations were a decided notch below the two finalists. They were judged less attractive primarily due to more labor market competition, somewhat higher cost, and probable future wage escalation pressure.

Concluding Remarks
By following a structured analytical process, companies can find locations that will enhance potential success of future call center operations. And as this article demonstrates, there are still viable low cost locations in the US, which can be integrated into a global platform for delivery of call center services in a manner that balances cost, risk, and flexibility. To arrive at an optimal locational solution, several guiding principles should be followed. These are enumerated below. Application of these principles should result in a location strategy that maximizes a company's ability to provide superior customer service at attractive cost levels.

Keys to Successful Call Center Location

  1. Think globally or multi-shore

  • Customer concentrations

  • Current call center portfolio

  • Future capacity needs

  • Ability of existing portfolio to accommodate new capacity

  • Determination if a new center is required

  • Success drivers, such as

    • Geographic coverage

    • Language requirements

    • Labor costs

    • Total costs

    • Risk/business continuity

    • Flexibility to grow/downsize

  1. As best as possible, estimate near-term and longer range

  • Staffing

    • Entry level

    • Experience

  • Occupancy

  • Design/layout

  • Telecommunications

  • Accessibility

  1. Determine most desired traits that new customer service representatives should possess

  2. Ascertain maximum tolerance for starting wages, benefits levels, yearly turnover, and daily absenteeism

  3. Outline an exit strategy that could be quickly activated if necessary

  4. Thoughtfully weight locational criteria, keeping in mind there will be tradeoffs such as ideal labor market vs. minimal incentives and marginal air access

  • Labor costs
  • Labor supply
  • Labor quality/stability
  • Future labor supply/cost pressure
  • Union risk
  • Available office space
  • Occupancy costs
  • Telecommunications
  • Electric power
  • Air access
  • Taxation
  • Incentives (should only be considered after promising areas have been identified)
  • Leadership attitudes toward call centers
  • Flexibility to grow (headcount)
  1. Determine flexibility to tweak benefits, HR practices, and on-site amenities based on local labor market dynamics

  2. Explore possibility of telecommuting

  3. Put together a project team led by an operations executive and to also include

  • Corporate support (e.g., HR, real estate, IT)

  • Outside advisors

  • If appropriate, major customers

  1. Set realistic timeline for all tasks required to get the new operation live

  2. Specify rules of confidentiality/disclosure concerning the impending call center location project


About Dennis Donovan:
Dennis J. Donovan is a Principal of Wadley-Donovan-Gutshaw Consulting (WDGC). For 30 years, Dennis has been working with major corporations in resolving locational challenges for office and industrial operations. WDGC has been advising corporations on facilities location for over 25 years. Dennis is a graduate of the University of Nebraska at Omaha, and earned a masters degree in Economic Geography from the University of Rhode Island.

About WDG Consulting:
Company LogoWadley-Donovan-Gutshaw Consulting is a management consulting firm specializing in corporate location and economic development consulting services. Since 1975, the firm has provided advisory services to private corporations and economic development organizations. Experience and knowledge that are second to none will be the keys to maintaining WDGC’s stature as the corporate community’s preferred service provider for global site selection services.
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Published: Thursday, July 28, 2005

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