One of THE all time favorites of my blogs is the one about the different kinds of hours referred to in customer service. There were only two minor imperfections to this blog: first it needed some updating, especially inclusion of a reference to the relevant COPC definitions. Second, it was in Dutch.

One of my motto’s is “Creativity is the capacity to solve one challenge with the other.” So guess what I am going to do below.

Financial Background

In the ‘Wonderful World of customer service’ I regularly meet people who try to simplify a cost discussion into simple facts. Sometimes that is also necessary to be able and compare apples to apples. One of those ‘plain pancakes’ (to mix metaphores) is the comparison of ‘cost per hour’. Often this measurement is used by Purchasing Departments, just doing their jobs, and a purchaser with any smarts – or an in-house Controller – will use the measurement as well. One that I have heard multiple times, only varying in the AHT used goes like this: “The AHT for this transaction is 6 minutes, so an agent does 10 transactions per hour.”

Unfortunately, I have not met many parties who could answer my question “Which kind of hours do you really mean?”, let alone comprehensively. Once, we even had to adjust a complete quotation because the wrong numbers had been used by my own Sales Department. Therefore, a short explanation of some of the intricacies follows below. Nothing of this is really innovative or new, except to the uninitiated. To support various arguments, I will use some figures from a previous assignment I did, where my successor made national ‘Contact Center Manager of the Year”, so these numbers could not have been too out of sync. On purpose, I introduced one error to ensure everybody still has to look at her own situation rather than just mindlessly copying these.

Financial Departments are, of course, mainly interested in paid hours and their costs. That the costs of permanently contracted employees and temporaries seem so far apart is not only due to the margin of the temporaries agency, but also by the fact that illness (sometimes education) and vacation need to be covered. In the margin of the bureau itself a budget for recruitment needs to be covered, just as generally deeper down a risk assessment for quick downscaling is maintained. When deciding about the right mix between temporaries and contracted, these are significant amounts and factors to keep in mind.

Interestingly, the net hours of a contracted employee in the case below is about 78% which would roughly equate to the paid hours of temporaries. With a factor of +33 on salaries for a temporary agency this would make a temporary about as expensive as a permanent employee, which would only keep flexibility and cost of attrition as factors deciding on the ratio between these 2 categories of employees. However, that margin for the temporary agency generally is a little bit higher.

Operational execution

For an in-house operational manager, often the log-hours are the starting point of analysis, since that is where most registration and her felt sphere of influence starts. Here I would like to broaden the scope a little bit. First of all, the illness ratio might often be the result of policies in the past, but the illness ratio in the future is determined by the policies of today. Second, depending upon her responsibilities, the ratio between temporaries and contracted employees should be part of her considerations as well.

Then, in our example you will see some operational requirements translated into their effects on efficiency.

The overview above is interpreted and used by different parties in slightly different ways, and often there are lengthy discussions about whether agents should log in for breaks or not. In the end, it does not matter, as long as all parties know which numbers are being used.

These numbers then provide the basis for the overview below, which shows that one log hour of an(y) agent generates 28% (16/57) more Productive Time than a paid hour of a contract agent. In this business, an error of 28% is higher than the EBIT most providers are making…

Standardization

One way to standardize an approach is COPC. Their definitions focus on the essential relationships between numbers. In this discussion (which is only a very small part of the overal concept) COPC focuses on two essential ratio’s: Utilization and Occupation. The first focuses what percentage of time agents are available for work, in short, how much of their time are they utilized, so (Total Handling Time+Total Available)/Total Paid Time. All other time agents loose (or more accurately the employer loses) to vacation, illnes and generic company tasks like Workers Councils and the like.

The part of the Utilization agents are actively used to produce services for customers is something’s they can not influence themselves (at least not in we’ll-managed organizations like the reader’s).This Occupancy depends on how much ‘breathing room’ they are given in between transactions compared to the time they are actively utilized, to allow them to provide the Service Level that is required by the client. In formula’s this is: Total Productive Time* / (Total Productive Time + Total Available Time). Below these concepts applied to the case above.

The alert reader wil have noticed that the product of these two ratio’s Utilization and Occupation , which COPC names ‘Productivity’ is exactly the ratio of Total Handling Time divided by the Total Paid Time. In the end, that is the simplest, most straightforward quantification of efficiency: how much of the time the employer has paid for is transformed into real ‘interaction time’. The table above shows that the productivity per paid hour for a temporary agent is 18% higher than for an employee on a fixed contract.

Many other elements are not taken into consideration: how efficient these Handling Times are being used, just like the quality of the interaction, but those are different topics.

Another quantitative step further would be to translate these times again into costs and revenues, to also properly compare the usage of temporaries versus contract employees, and the efficiency among projects, but that I will leave to the Financial Departments, where this topic all started.

*Please note that in COPC terms ‘Productive Time’ is used as what most people describe as ‘Total Handling Time’, so excluding Available Time. Not everybody uses these terms in this way, so I prefer to use the unambiguous Total Handling Time.

(Originally published on September 12, 2013)