How to Measure the Costs of Agent Attrition

ron.davis

Ron Davis

Founder, CEO: Tenacity

Defining and Segmenting

I’m going to lay out the items that should be in any model that estimates your call center turnover costs. Building from this, executives should be able to figure out how much agent retention is really worth. That way, when they make cost-benefit analyses about employee retention efforts, they aren’t playing make believe.

Defining agent attrition

The first task is defining agent attrition. What qualifies as an “attrit”? Some companies do a good job of measuring voluntary (agent quits) versus involuntary (you fired them) agent attrition. But there are often misclassifications. For example, at one leading BPO, when an employee just stops showing up to work, he gets classified as an involuntary attrit, because he technically got fired for not coming in. But clearly he quit; the decision was his. Figure out the primary reason they leave: you want them to go, or they want them to go.

This matters a great deal. Perhaps you lose 12% of agents in the first month after they are released into the wild out of training. If only 2% are voluntary, and 10% involuntary, your diagnosis and treatment will be very different than if these numbers were reversed.

Segmentation

Tenacity recommends bucketing agent attrition into at least two groups. First, track turnover for agents once they start making unsupervised calls. And then lump everyone who hasn’t yet reached that level of responsibility (trainees) into a separate group. The cost of attrition is much different for the two groups, and sometimes the solutions to the problem are very different too.

You can also get more granular. Track for each stage: the hiring stage, the training stage, the supervised calls stage, the first week, month and quarter of making calls, as well as the time when agents reach the top of the productivity ramp and become “fully baked.” If you don’t know this already, you will soon see that the longer an agent stays, the more likely she is to continue to stick around.

Rate Calculation

This is the easy part. For any of the buckets, take the number of agents who quit and divide it by the total number of agents in the bucket. If three out of twenty trainees quit, that’s a 15% rate. And divide into voluntary and involuntary whenever you are able. Even a drunk dart thrower can do that.

How to Measure the Costs of Agent Attrition: Hiring Costs

Often when I speak to call center executives, hiring (and training) costs are the only items they include in their tally of the costs of employee turnover. This is a mistake. Still, it’s worth recounting all the pieces that should be included.

Separation, Hiring, Sourcing

Say, after a hard day’s night shift, George quits after one year with the company. There are certain predictable rhythms that follow: HR has to process him, revoke his access to the building, close out payroll, etc. Since HR does this so frequently in contact centers, they are pretty efficient at it. Still, you should count the time and paperwork costs. These are your separation costs for losing George.

Next up is sourcing his replacement(s). Perhaps you use a recruiter who charges a fixed fee. Or perhaps your recruiter charges a percentage of salary for the first six months. Or perhaps you source internally, through advertising, combing through applications, interviewing, background checks and the like. Whatever the costs, figure out how many people you hire and divide by the total costs to find the average.

To keep the math easy, let’s say you hire a freakishly small class of three people and you typically only have one in three people make it through the full training cycle. John, Paul and Ringo come together to replace George and they cost $500, $1000 and $1500 because they come from different sources.  Divide by three and voila! Your average cost sourcing a new call center agent is $1000.

Here is where HR processing returns. John, Paul and Ringo need to be processed: put in your system, put on payroll, given a corporate ID and given security access. This includes any reporting to the state or employment bureaus and anything else that needs to be done to get this person into his first day of training. As with separation, figure out the total cost and divide by the number of hires. This is your cost per hire.

Training and Leakage

Training Costs – Providing the Training

The cost to train new agents is a major source of legitimate variance in the cost of employee turnover. Some centers require only a few days of training. Some require twelve weeks. We find the average to be around three or four weeks of classroom training.

Here you want to measure the marginal costs, which are the additional costs each time you train someone new. Since you are always going to have some employee turnover, you don’t necessarily need to amortize the fixed costs from your basic training infrastructure.

These include the cost of holding a training class. First, figure in the total bill to pay the instructors. This includes salaried and hourly employees who are taken away from other productive work. Next is the price of software and materials. If any of your training materials or technology is charged on a per user or per class basis, you should add that to the total tally as well.

The math on this one is pretty easy. You add the above to get the total cost per class and you divide by the number of successful graduates. This way, if Paul decides to run for his life and drops out, you have baked in the costs associated with his training into your final product (John and Ringo). After all, training Paul is part of the cost of replacing George. If the cost for the class, including Paul’s costs, was $3000, then the cost per successful trainee is thus $1500.

Training Costs – Salary During Training

This is a big line item. Here you have to include other salary related costs such as benefits and taxes. If John, Paul and Ringo makes $10 per hour, their true salary cost will be more like $12 per hour. Multiply this by the number of hours it takes to finish the training. This is the salary cost for your successful graduates. For each graduate in a 4-week class, this is 160 (hours) x $12 (wages/overhead) = $1920

Leakage – Nothing To See Here.

Here executives often make a huge mistake. They only count the cost to get an agent through training. They tend to think like this: George quit? Now we have an empty seat. John takes his place. The cost to get John there was X. Done! It’s a rosy, beer goggles sort of perspective.

But they forget that it takes more than one trainee to fill that seat (can’t forget Paul and Ringo!). A lot of agents quit during the hiring and training process, and this is expensive. It has to be figured in too. If you lose 25% of trainees during training (leaving you with 75% of the original hires), that means you have to hire 1.33 trainees to fill George’s empty seat, and you can’t ignore the costs of that other one-third of a person.

We already baked this into the fixed cost tally above. On salary, there are two ways to do it:

  1. Take the TOTAL salary and overhead costs for the entire class, including everyone that walks out the door, rather than the individual costs, and then divide by the number of SUCCESSFUL graduates. Or,
  2. Figure out the salary and overhead during training costs per successful graduate (say, $12 x 160 hours for a four-week class = $1920). Figure out the average rate at which people quit training (say, 30%) and average percentage of the training they finish (say 50%). Multiply $1920 x .3 and .5. This adds $345.60 to the cost per successful graduate.

If you are still unsure, think of it this way. Remember that George quit at the beginning of our story, and we are filling in his spot. We are measuring the cost of George’s attrition. Paul quits during training. John and Ringo haven’t yet (we will soon see that John is the one that makes it all the way through to the floor). The cost of replacing George (in this case) includes John, Paul and Ringo’s time in class.

The lesson here: to calculate the cost of agent attrition, you don’t calculate the cost of the replacement agent, because that leaves out all the ones that don’t make it to the floor. You calculate the cost to fill the seat, which includes the Pauls and Ringos of the world.

The Halfway House and Leakage

Let’s look at what I like to call “the Halfway House”: its costs, and the problem of leakage at this stage.

This halfway house stage immediately follows training. It’s when agents start answering calls, albeit at a grossly diminished rate and with a lot of supervision and feedback. This usually lasts for a week or two.

John and Ringo may have been stars in your class, but this is where they are really put to the test: talking to customers. In the halfway house, there are three major sources that contribute to the cost of agent attrition: support, wasted salary and software, and, like training, leakage.

Support is the cocoon that you wrap around your budding agents. Usually this comes from training personnel. Imagine that John and Ringo have a little help from their coach, Janice. If Janice coaches just these two for the week, but Ringo quits early, all of Janice’s salary ultimately went toward only John graduating. Any teaching or support associated with the halfway house should be included here. It should all be added up and divided across the universe of everyone that graduates. In our example, the only one that makes it through this (tiny!) class is John.

Next is wasted salary. In the halfway house, agents receive wages but are extremely unproductive, answering very few calls. Using your workforce optimization software, you should be able to determine how they compare, on average, to a fully baked agent that has finished the productivity learning curve (usually about six months after training).

Let’s assume here that halfway house agents are completing 1/3rd as many calls. That means 2/3rds of John and Ringo’s salary and technology costs and overhead is wasted. Let’s say the software licenses cost $3 an hour, bringing their total per hour cost to $15. So for John, at $10 per hour in waste, that’s $800.

But then there’s that sneaky leakage problem again. Ringo quits after a week, so he wastes $400 in wages. Since they are the whole class, you add these together ($1200) and divide across whoever made it out—in this case, just one person, John. Now we have filled George’s seat with John, and the cost of the halfway house salary waste, including leakage, was $1200.

The next blogs in our series will detail the productivity ramp and the most commonly missed and hard to calculate cost – bulking up.

 

 

 

 

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