In the USA employee turnover averages about 12% (and in the call center industry about 35%) and about 75% of “new” hiring is done to replace an employee who left, according to a 1996 study by William H. Pinkovitz, Joseph Moskal and Gary Green. Of course this was well before the current economic meltdown and certainly turnover has declined as people cling more tightly to the “security” of a paycheck. But downturns end and we can expect the numbers to trend back toward their typical values, possibly after a post-recession “spike” as people begin to bail out of jobs for ones they consider better.

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The cost of all this to a company is commonly estimated at about 150% of annual wages/salary (and 200%+ for sales and managerial positions), but obviously this will vary from industry to industry and even company to company within an industry group. In his article “The Cost of Employee Turnover“, William Bliss, President of Bliss & Associates, a Wayne, NY consultancy has enumerated the various components of turnover costs and concluded that replacing a $50,000 a year employee can easily cost a company $75,000 or more. Any way you slice this cake its big money.

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But what does this mean to you? What are your numbers? The Pinkovits, et al article provides a nice cost calculator that you can use as a starting point to make one of your own. Its worth the effort. It might just be a real eye opener.

In his excellent book First Things First, personal development guru Stephen Covey introduces the concept of a “Law of the Farm”. In a nutshell, this suggests the commonsense principle that if you want to reap wheat during the harvest season you had better be planting wheat now and caring for it in the interim. If you want wheat, you better not be planting corn. If you aren’t planting anything then don’t be surprised if your wheat crop is scanty.

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In his FurstPerson blog, Jeff Furst points out that those of us responsible for filling seats at a call center are very much in a “Law of the Farm” moment. Because the call center industry is one of the few that is still doing significant new hiring it is creating an upsurge in the number of job applicants walking into call center HR offices. He suggests that call centers use the current economy and general hiring slowdown  to become much more selective in who we bring aboard, with an eye toward improving performance and reducing turnover over the long term.

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This is good advice not only for call centers but for any industry that is fortunate enough to be looking to hire additional employees right now. This includes healthcare, insurance, home and garden maintenance companies, wireless telephony organizations and many sectors in the retail industry. You will also find that there are sales jobs open nearly anywhere. Anyone in the happy position of needing to hire should be viewing it not only as a short term applicant boom, but as an opportunity to pick and choose people who will be assets to the company for the long haul.

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What steps ought hiring managers be taking right now to ensure a great harvest during the coming recovery?  Mostly the obvious ones.

1. Remember that everything is temporary. Eventually the economy will improve, the applicant pool will shrink back to more normal levels, and a lot of those “easy” hires will be leaving to take what they see as “better” or “more interesting” work.
2. Take the time now to know…. I mean to really KNOW…. what it is about your top performers that make them your top performers. Frame this in measurable, objective terms that examine not only their job skills but the attitudes, behaviors and interests that help them to excel.
3. Use this information to create verifiable “profiles” of your most successful and valued employees and put your profiles to work for you in the selection and hiring process.

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A little extra work now will reward you with a bountiful harvest later.

In a July 7th article in the Wall St. Journal, authors Jonathan Whitaker, M.S. Krishnan and Claes Fornell discussed the results of a study they had done examining the impact of offshore outsourcing vs outsourcing to domestic service providers on customer satisfaction. Their conclusion? Customers dislike both about equally. The study analyzed results from 150 North American companies over the eight years ending in 2006 and showed that, as a group, those companies that outsourced their customer service function saw a drop in their customer service scores (American Customer Satisfaction Index). The decline in customer satisfaction was about the same regardless of whether companies outsourced domestically or overseas.

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Much has been made of the negative impact of offshore outsourcing, usually proposing that language and cultural differences are viewed unfavorably by North American audiences. The Whitaker, Krishnan, Fornell study suggests that such factors are overdone and that there is no measurable penalty for shipping your service operations to Bombay rather than to Des Moines. There is, however, a “significantly negative” impact to outsourcing this function at all. The study suggests that the average decline in a company’s ASCI score was associated with a 1% to 5% drop in its market capitalization (stock price for a corporation). That is a pretty steep price to pay for the cost savings expected from outsourcing.

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The authors do not conclude that outsourcing of the customer service function is without any benefit, pointing to the considerable cost savings that can be achieved. But they note that few companies re-invest any of the the savings back into improved customer service or even into reducing the price or improving the quality of their products. Instead the savings are usually pocketed as additional profit. The real benefit to outsourcing, they suggest, is the opportunity it creates for companies to devote at least some of the savings to upgrading their customer service. And they suggest several areas in need of an upgrade.

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Among the suggested improvements? Upgrading CRM systems so that agents (wherever located) have accurate and up to date customer information; giving the customer service agent the skills and authority to make decisions on the spot to best assist customers; taking full advantage of support technologies such as remote systems control and online chat. They also suggest the outsourcing of some “back office” functions offer cost savings similar to customer service outsourcing, but without the negative impact on customer satisfaction.