First call resolution: Avoid the waste but don't avoid the value

Call centres that can resolve customer issues at the first point of contact may increase customer satisfaction, but does first call resolution actually create value for the customer and remove waste within the organisation? Stephen Parry investigates.

By Stephen Parry, See Business Differently

At the risk of being accused of stating the obvious, a well-known research company has demonstrated that call centres resolving customer issues at the first point of contact will increase customer satisfaction.

This influential report has fuelled the drive by many companies to increase their first-contact resolution performance through the introduction of call eradication or call avoidance schemes. All well and good, you might say. But hang on a moment. The research results may seem obvious but everybody appears to have missed a very important point. Does anybody truly know whether these first-time resolutions are actually creating value for the customer and removing waste within the organisation?

The research is fundamentally flawed, because it fails to consider the customers' perspective of value, and the company actions are quite literally the wrong solution to the wrong problem. Why? Because our own findings have demonstrated that in many call centre operations, as much as 90% of the demand made for the service is actually waste that has inadvertently been created by the organisation itself. Fixing things which should not have gone wrong in the first place is not creating value for the customer. If companies design call centres around the problems of their own products and services, these operations end up as mere corporate waste disposal units.

The modern call centre is not designed to meet the needs of the modern customer

Take a closer look at the costs associated with this type of approach. A conservative cost estimate of a call centre with 1,000 staff will be around £30m per annum, and anywhere between 40-90% of the calls handled by a typical call centre, add no value to customers. This means that businesses incur unnecessary costs of between £12m-£27m. It's no wonder there is a drive to reduce costs through the use of automation or 'offshoring' to low-cost labour markets, but again, this is the wrong solution to the wrong problem.

So, let me pose a few important questions:

• Do you have any idea how much value you create for your customers today?
  
• Even if you think you do, can you quantify it?
  
• And can you identify how much waste presently resides in your processes and how you could create value at no additional cost?

If you answered 'no' to any of the above, the likelihood is that you're generating unnecessary waste with associated negative cost implications.

The answer is to create a framework for defining what is and what is not value from the customers' perspective. To understand this we must examine the customers' purpose, for it is the customers' purpose which provides the one true definition of value, not the organisation's belief. Once the customers' purpose has been identified it becomes obvious what types of calls are valuable and must be resolved first time, and those which are waste to be eradicated.

This change of emphasis has a significant impact for the role of the contact centre. It is no longer about simply understanding the transaction, but is about seeking out a thorough understanding of the customers' purpose within the context of the whole value stream. It really is a different type of organisation with a different purpose.

CORE profile: A purpose framework

Most companies genuinely want to create value for their customers and sincerely believe that their customer-service operations are indeed doing that. But often they are simply restoring lost value caused by a failure to do something right the first time. Customer demand can therefore be classified into two types: demand that is essentially driven by the customers' positive needs, and demand that is negative or remedial in its origins.

Positive and negative customer demands each have two sub-components, as shown in the diagram above: creation and opportunity demands, which are both positive in origin; and restorative and external demands, which are both negative in origin. Identifying the proportion of positive to negative demand is an integral part of improving services and reducing operating costs.

C = Creation demand

Creation demand comes into a service organisation because customers want to understand how to optimise the functionality of their service or product, or how to obtain more of what they already have. Creation demand is not the result of something being wrong, but rather the result of customers' questions such as: 'Which product is best?' or 'How can I get more out of my product or service?'.

The customer is looking for a highly efficient answer to their questions. Optimised efficiency can be achieved by helping reduce the number of decisions a customer has to make to obtain their desired outcome and streamlining the processes and information required to fulfil the request. This type of demand is often suitable for automation or web-based assistance provided the customers' purpose does not require a human touch.

O = Opportunity demand

Opportunity demand occurs when the customer wants something that is not currently offered. Most organisations will merely apologise to customers, saying that they can't fulfil the demand, and will then terminate the transaction, but it is critical to capture this type of enquiry. Opportunity demands can provide a rich source of ideas and data for new services or product lines. Organisations ignore this type of demand or eradicate it at their peril; they might just be throwing away their future existence. Many organisations don't realise they are often standing on a mountain of diamonds looking for gold.

R = Restorative demand

Restorative demand occurs when the organisation delivers unfit products or services, generating unwanted demand as a consequence. The work involved in correcting this situation is deemed to be restoring lost value but the main results are customer dissatisfaction and loss of money, time, reputation and loyalty.

Restorative demand needs to be removed by identifying and rectifying the originating cause, which may even reside in other parts of the organisation. It is a huge drain on resources and risks the future wellbeing of the organisation. And here's the golden rule:

Never automate or outsource restorative demand.

Automation for this type of demand locks in frustration for the customer and for the frontline staff. The customer has to make repeated calls when the problem is not resolved and support staff who feel disenfranchised because existing constraints prevent them from making any difference in this situation. The spiral continues, with the customer becoming more and more disillusioned, which generates additional negative demand, while the frontline staff feel increasingly powerless to change things.

Only in poorly run or unethical companies would you find revenue being generated against demand of this type.

E = External demand

External demand is failure generated externally by other agencies, institutions or companies. Organisations can generate revenue against this type of demand as long as the external failure continues to present itself, or until a competitor metaphorically fixes the road and removes the need to fix tyres.

External demand should be addressed by rethinking the environment that allows it to exist and by developing new solutions. In this context it is perfectly respectable for a company to restore value, because the other things that are not working are the responsibility of other people. In fact, some businesses are set up specifically to handle this type of demand. However, organisations with this business model have to question the basis of their future. Are their profits largely dependent on other companies failing to perform their duties? If so, what happens if those companies start performing well?

Once demand has been classified, each type needs to be treated in an appropriate way. Most organisations do not separate types of demand and treat all demand in the same way, as units of work to be processed efficiently. The result, of course, is ongoing and unnecessary waste.

Let's take a look at the CORE profile from a number of industries.

Approx 300,000 enquiries every month: These enquiries are due to one of three principal causes:

1. Problems with the provision of internet services.
2. Consumers experiencing problems with their own equipment, such as personal computers.
3. Consumers requiring additional services or enhancements.

Analysis demonstrates the following:

• 58% of the demand is generated when consumers experience a problem with the supplier's internet infrastructure (restorative demand).
  
• Another 38% originates from the customer's equipment (external demand). A significant proportion of this demand includes revenue opportunities currently not considered.
  
• The remaining 4% represents demand that provides a real potential to add value to customer experience, such as increasing their bandwidth or helping them use their broadband connection for new purposes (creation demand). Ongoing revenue from connecting customers to the network has only a limited lifespan. Future revenue has to come from providing greater content and services, as well as enhancing and expanding existing usage.

The current support philosophy of this company is to design against problems. To change the demand profile, a new philosophy is required that removes root causes and provides value to customers. The current demand profile, with 5–6% creation demand and 1–2% opportunity demand, demonstrates the effect on customers of the current approach.

This analysis conducted at a financial services company, revealed that 71% of the call demand was generated when consumers experience a problem with the company's financial product. Since using the CORE profile to pin-point negative demand and remove the root cause, the company has reduced Restorative demand by half.

Interestingly, the CORE profile also identified that 17% of the demand was generated by poor financial products supplied by this company's competitors. This knowledge provided insight into how their competitors products were performing and allowed the organisation to develop better products and marketing strategies.

This operation had many broken and inefficient processes, there was little in the way of informed information gathering or corrective action. Each function was only worried about its part in the process, and no one measured or even looked at end-to-end service delivery. The telesales staff accused marketing of withholding information about catalogue drops. The delivery issues were blamed on the distribution centre and the complaints department were inundated with re-delivery requests. Product line managers blamed the sales staff for not selling hard enough.

Identifying CORE demand types provided a current state analysis and data upon which to base their rescue plans. It provided the evidence the call centre needed to demonstrate that it was the way in which the whole organisation worked together which needed changing. Once they understood the nature of CORE demand and determined the root causes, the organisation as a whole was able to take effective action.

There were many significant improvements as a result. For example:

• 32% reduction in restorative demand


• 82% reduction in customer complaints


• 35% reduction in order entry time


• 75% reduction in compensation payments

When managers say they have little or no resources to create operational improvement. I point out that they already have the resources but they are squandering them doing the wrong work. In this case, 66% of the available resource in this company was spent on doing the wrong work; they were just institutionalising waste and locking in resources and costs.

As a consequence of using the guiding principles of the CORE profile they were able to remove the customer complaints department. Today the operation has more customer focus and its managers have a new customer perspective. They have created an organisation that is capable of understanding changing customer needs and responding accordingly. This provides a long-term competitive advantage.

The CORE profile is a Value Compass for call centre operations. It provides organisations with the information they need to identify existing demand types and make the required changes. The results are a reduction in waste, minimised cost, an enhanced customer experience and improved customer loyalty, leading ultimately to increased business success.

Stephen Parry is director of See Business Differently. He is the author of 'Sense and Respond, The Journey to Customer Purpose' (MacMillan 2005), which outlines how customer services can drive the whole business enterprise. Parry is also a visiting fellow to the Lean Enterprise Institute Cambridge Massachusetts and a research member of the Customer Contact Association

www.seebusinessdifferently.com