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Article : The Economics of Call Center Turnover

When does a new employee become a profitable employee for your call center? That is a question that most call centers haven't answered. Call center management typically knows how long it takes to get a new hire up-to-speed.The more important question is when do these new employees completely return the investment made in them in recruiting, weeks of training, and make up for the loss of productivity and negative customer impact from the loss of an experienced person in the job? Determining the breakeven point for a new employee is a valuable exercise. 

Figure 1 details an actual example of the breakdown of the turnover costs for a client with a 300 seat inbound center. Their total cost of turnover per employee is $31,416. This center invests significantly in training before a new employee hits the phones. 

Maureen R.Wolfe
Principal Consultant
Legge & Company

They estimate 31% of the total cost of turnover is lost productivity and customer impact costs. Interestingly enough, only 18% of the cost is the actual cost of recruitment.

Figure 1: 

Turnover Costs Breakdown - 300 Seat In-Bound Call Center

$31,416 per Termination

A new hire's breakeven point for positive cash flow is typically quite long. Figure 2 reviews how the investment in a typical call center employee works. In our example, for the first ten weeks, the center is paying the new employee and investing significantly in getting that person ready for the job with training and supervisory support. After ten weeks, the employee is considered well enough trained to be an average performer. So in weeks 11 through 21, the employee is earning their pay and benefits cost, as well as earning back some of the investment through their productivity over and above their wages on the phones. The employee gradually earns back the investment week by week, but in this case, the employee does not fully return the investment until week 22.

Figure 2:

Sample Breakeven Point for New Call Center Agent

Once the call center realized the breakeven point for new hires was over five months on the job, they understood how important it was to make sure employees got through those first months successfully. Unfortunately, it is not unusual that it takes two to three hires to get one to stay five months. This extends the true breakeven point, sometimes beyond a full year, as the company has to start over and again experience the costs of recruiting, training, productivity loss, and more.

Even a modest increase in employee retention drives savings. Figure 3 depicts four different call centers that hired 100 people on the same day. The call center with a 60% retention rate has only 13 people left from the original 100 by year 5. A call center with 90% retention has 66 people left. Clearly, each 10% difference has huge impact on costs and results. The supervisors in the call center with 90% retention can work with agents to build performance and maximize results. The supervisors in the call center with 60% retention are just trying to keep their heads above water. The chronic training and re-training of new employees drains the critical first-line resources throughout the system.

Figure 3:

Number of Employees Remaining by Different Retention Rates

Turnover costs accumulate year over year as well. Figure 4 uses the same example of 100 people hired in four different call centers. Using $25,000 for the cost of turnover at the centers, the center with a 90% retention rate spends $1,825,000 over five years to bring on new employees. The company with 60% retention spends $5,775,000 in the same five years to replace employees. Clearly, higher attrition is an expensive problem.

Figure 4:

Turnover Costs Accumulate Year over Year

Most call center managers agree that there is a cost to employee turnover. Unfortunately, they usually only acknowledge a very small percentage of the cost, underestimating turnover's true impact by up to 80%. The true total cost or all-in costs include both hard and soft costs that directly or indirectly impact the center's bottom line. 

The "hard costs" that managers understand are the traditional recruitment and training costs. The "hidden costs" are many and include: exit costs of the previous employee, orientation, wages and salaries while in training, lost productivity costs from losing an experienced employee, job vacancy costs from having an empty seat in the center, customer impact costs such as higher percentage of disconnects and longer hold times, supervisor time to interview and support the new hires until they are up-to-speed, and agent overtime required to maintain service levels. In high turnover centers, supervisors are constantly working to get agents up to speed rather than working with agents to coach and guide them to maximize their performance. This is a significant opportunity cost for the organization. 

It is important to take the time to develop specific turnover costs for your workplace so everyone can fully understand the cost impact of employee turnover. We have found true costs are the best way to create resolve to take action. Top management understands the language of finance and will agree to devote resources and fund projects that have the greatest potential return. Once the numbers are summarized, they will speak louder than the lone HR Manager who understands turnover is an opportunity. The turnover opportunity will speak for itself. Suddenly, mid managers and supervisors are interested too because the whole issue has been quantified and elevated in importance. And everyone wants to be part of an important project that positively impacts the bottom line.

About Maureen R. Wolfe
Maureen R. Wolfe, Principal Consultant, has general management and call center experience working with Adelphia Communications and consumer goods companies Sentry Group and Zenith Products. In 2002 to 2003, Maureen acted as the Interim Director of Talent Management for Adelphia Communications, responsible for the restructuring and strengthening of human resources programs during the company's bankruptcy. A significant part of Maureen's focus was working with Adelphia's nationwide call centers to reduce turnover and increase productivity.

About Legge & Company
Legge & Company is a national provider of management and human resources advisory services to companies in need of performance improvement. Core services include call center retention and performance improvement, turnaround management consulting, crisis and interim management, and organizational and human resource strategy.

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Published: Wednesday, December 31, 2003

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