call centers – The OM Blog by Heizer, Render, & Munson

OM in the News: Call Center Jobs Are Going to the Robots

As technology improves, an increasing number of the Philippines’ 1.2 million call-center workers, such as those shown above in Manila in 2012, will be at risk of having their jobs outsourced to customer-service robots — As technology improves, an increasing number of the Philippines’ 1.2 million call-center workers will be at risk of having their jobs outsourced to customer-service robots

“The Philippines’ economically important call-center industry has joined the growing list of businesses at risk of being gobbled up by automation,” writes The Wall Street Journal (June 22, 2016). In recent years, the Philippines, like India, has capitalized on its relatively large pool of English speakers to attract Western companies eager to cut costs by shifting customer service and other tasks to lower-wage countries.

But robots already are starting to displace some humans from low-end tasks such as monitoring the performance of digital networks. And, while robots aren’t yet smart enough to replace the human phone operators who do jobs like fielding calls from bank clients or helping people reset their modems, they will be within 5 years or so, say industry experts. Automation has also taken a significant toll on India’s outsourcing industry, which is heavily involved in networking and information-technology services. Not long ago, some of those services, such as network monitoring, required dozens of human network engineers, but can now be done with a handful of people who oversee a largely automated system.

Climbing the value ladder won’t be easy. TaskUs, a U.S.-based outsourcing company with operations in the Philippines, is among those that are trying. “Innovation is the key to survival,” said its CEO. He says just 1/10 of the company’s 5,000 employees actually are answering phones. Most are managing content on websites or handling customer relations via online chat. A decade ago, nearly all Philippine outsourcing work was phone-based. Now, it is just 60%.

Classroom discussion questions:

What must the call center industries in India and the Philippines do to survive?
What are the implications for U.S. operations managers?

OM in the News: Why Customer Call Centers Matter

Dollar Shave Club, a quickly growing California company with 2.2 million members known best for its viral commercials, has 36 member service agents who answer phones and emails, conduct online chats and reply to queries on social media — all while channeling the brand’s distinctly playful and irreverent tone. But finding the right personalities is challenging. Training takes weeks. It would be a lot easier to contract with a third-party customer service firm.

Online retailers, though, including pioneers Zappos and Bonobos, have found the investment in unscripted customer service worthwhile, reports The Los Angeles Times (Sept. 25, 2015). The interactions, they say, feel more authentic and help humanize e-commerce brands that are, by their very nature, faceless.

The approach is “high cost, difficult to execute, but the word of mouth” makes it worth it, said an industry analyst. That’s imperative for Zappos, which relies on repeat customers and word-of-mouth marketing to power its $2 billion in sales. Zappos has been at the forefront of unscripted customer relations and instills what it calls “WOW” service in its 600 agents through a 7-week training course. That results in some extreme cases of customer satisfaction, like the time an agent visited a rival shoe store to fill an order Zappos couldn’t because it didn’t have the right size. “It certainly would be cheaper to contract out customer service,” said a Zappos exec. “But it wouldn’t be better. 75% of sales come from return customers, so it’s important for us to control the customer experience as much as possible.”

A similar approach is taken by online clothing retailer Bonobos, whose team of 40 customer service “ninjas” are encouraged to be playful and spontaneous with customers. Many are recent college grads, aspiring comedians and actors. “Rather than looking at customer service as an expense, we see it as a fundamental investment, just as we invest in the design and quality of our clothing product,” said Bonobos’ VP.

Classroom discussion questions:

Compare the approach these 3 firms take with the bank’s service documentation in Example 2 in Chapter 5.
Why do most firms outsource their call centers?

OM in the News: Scheduling Zappos’ Call Center Employees

Last September, Zappos’ CEO Tony Hsieh was wandering the halls of the online retailer’s Las Vegas headquarters and noticed that the customer service center’s walls were covered—floor to ceiling—with sheets of printer paper. He had stumbled across the scheduling method for the center’s 540 employees, who respond to the 10,000 customer inquiries the online retailer receives every day. Employees choose their shifts in order of seniority, by writing their names on sheets of paper listing the shifts they want. “It was like how I signed up for college courses before I could do it on a computer,” says a senior manager at Zappos.

“The old-school, paper-and-pencil process didn’t sit well with Hsieh,” writes Fortune (Jan. 28, 2015), “who is known for his devotion to customer service.” (The Amazon-owned company aims to answer 80% of customer inquiries within 20 seconds.) The wasteful manual sign-up process is now being replaced with Zappos’ Open Market, a newly created online scheduling platform that allows workers to set discretionary hours and compensates them based on an Uber-esque surge-pricing payment model: hourly shifts with greater caller demand pay higher wages. The goal of Open Market is to create a “free-market system,” and strike a balance between the rigidness of customer service center scheduling and what the company says is its dedication to giving employees time to pursue other opportunities at Zappos. Everyone receives at least 10% flexible time, so during a 40-hour week, employees would have 4 hours to play with. They could choose to not work during those hours or they could fulfill them whenever they liked by tacking them onto the start or end of a workday or by coming into the office on a scheduled day off.

Employees decide when to work with the help of Open Market’s real-time metrics algorithm that shows customer demand, as measured by the wait time of the longest-holding customer, and the accompanying compensation rates. The longer the hold time, the higher the customer demand, the more the employees working that shift would get paid. The idea is to tie compensation for the employees—who earn an average of $14.50 per hour—into the Open Market model and pay them a range of hourly rates based on demand.

Classroom discussion questions:

1. What are the advantages of the new scheduling system?

2. How does Open Market differ from employee scheduling systems you are familiar with?

OM in the News: U.S. Call Centers Dial Up Employee Service

Handling a customer call at PNC's new Pittsburgh center — *Handling a customer call at PNC’s new Pittsburgh center*

In Chapter 2, we discuss the advantages and disadvantages of outsourcing such “non-core” functions as call centers to countries like India and the Philippines. But despite the offshoring of some call centers, it is still a big business in the U.S., reports The Wall Street Journal (Nov.27, 2013). As of last year, 2 million Americans worked as customer service representatives, many of them in call centers. That was up 6% from a decade before. About 68% are women.

“Companies are more likely to keep call center operations in the U.S. today than they were 10 years ago,” says one industry expert. “Workers have become more available amid a weak job market, and employers like the idea of having more control over their call centers.”

Companies also are striving to avoid being blasted on Facebook or Twitter for lousy service. As a result, they are making more efforts to recruit and retain high-quality call center people. Those efforts sometimes include offering something more than “nondescript buildings in nondescript locations.” Upgrading call center workspaces makes economic sense. They tend to handle more complex customer questions and problems than they did years ago. Customers get basic information from websites, and that leaves the more complicated matters for the call centers.

For example, in the heart of downtown Pittsburgh, call center employees of PNC Financial just moved into luxurious space inside a 6-story granite building that once housed Mellon National Bank and later served as a Lord & Taylor department store. The newly renovated Classical building features the original marble columns and 32 foot ceilings. The new space is so bright and white that “it feels like we’re in the Apple Store,” said one of the 700 PNC employees.

Classroom discussion questions:

1. Why are companies “nearshoring” their customer call centers?

2. Why upgrade call center workplaces?

OM in the News: Philippine Call Centers Overtake India

For the past decade, when you called an 800 number for customer service or a plane reservation, the chances are you would be speaking with a young person in Bangalore or Gurgaon, India. But Businessweek (Dec.6-12, 2010) reports that you are now more likely to be phoning up the Philippines. With $5.7 billion in call center work this year,vs. $5.5 billion for India, the Philippines have overcome a slow start in outsourcing. OM managers in the US may wish to take a note.

Why the move from India? (1) English is taught in all schools; (2) Filipinos have a cultural affinity for the US (with teens weaned on radio stations that play US Top 40 and hip-hop); (3) Special economic zones offer tax breaks and exemptions from import taxes on telecom gear; and (4) power is more reliable than in India, where companies often rely on diesel generators. The call center jobs are popular, as nocturnal workers can earn $6,850 a year in a country where per capita income is 1/4 of that.

This is not to say that India is giving up its dominance in outsourced work that requires a higher level of skill. Its overall outsourcing revenues are still $70 billion (vs. $9 billion in the Philippines). Indian outsourcing firms are migrating from answering phones to account management,high-tech support (it graduates 400,000 engineers annually),and financial and supply chain consulting. “In IT and software, India really doesn’t have any competition”‘, says a Wipro exec.

As a sidebar/update, on Jan.10,2011, USA Today devoted a cover story article to the Philippines call centers.

Discussion questions:

1. Why are the Philippines a popular call center alternative for US, European, and Australian firms?

2. How has the call center industry matured in the past decade and what has been its impact on India?

3. Identify other outsourcing industries that have migrated from one country to another in the past 20 years.