How to Measure the Costs of Attrition -Part III

Ron Davis

Founder, CEO: Tenacity


To continue with our previous blog on the cost of attrition, there are two more major sources of cost from agent attrition, and they are two of the most undercounted line items.

First is the productivity ramp. Most call center managers know how long this is. During the first few months on the floor, agents aren’t on average very productive, but they improve pretty significantly. At some point (often about six months), this levels off. At that leveling off period, we call them “fully baked.”

The time between the end of the halfway house and being fully baked is the productivity ramp. Recall that our friend George quit his job after a rough day in the life in his call center. John, Paul and Ringo got hired as replacements, and Paul quit during training and then Ringo quit during the halfway house. Now John is sitting in Ringo’s chair, answering calls on his own.

The productivity ramp can be quite expensive. To keep the math simple, let’s assume that the first month an agent is 40% productive, the second month he is 50% productive, and so until after the end of the sixth month, he is 100% productive.  That means that in the first month, 60% of his salary, overhead and marginal technology costs (i.e., for programs that charge on a per seat basis) are wasted. If he costs $15 per hour that means $9 per hour is wasted the first month ($1440), $7.50 per hour the second month, $6 per hour the third, and so on. The total waste for John is $5040 over 24 weeks. While this ramp is steeper than most actual ramps, this is usually a very large line item, adding about 35-45% to all the previous costs of agent attrition we have discussed. (When agents quit during the productivity ramp, replacement costs only include the waste up until the same point at which the quitting agent left. So if an agent leaves at month four in the ramp, only count the waste up until month 4.)

And, much like poor Sisyphus, condemned for eternity by the gods to roll a rock uphill, only to have it roll back down and force him to start over, agents climb the ramp, waste tons of the employers money, only to leave shortly thereafter.

Bulking Up Your Workforce

How to Bulk Up – Have Higher Agent Attrition

I call the last major item “bulking up.” More attrition means a less tenured workforce. Because a workforce is, during its productivity ramp, less productive, that means it can’t answer as many calls. So not only is part of the salary of the new agents wasted during the ramp, but you also have to hire more agents just to produce the same output.

Doing the math on this one is more difficult, and you will likely need a little help from your friends in the finance department. First, you will need to make sure you have a good grip on your productivity ramp. What is the average percentage of productivity for each of the months during the productivity ramp? And then see how many agents are in each of the first six months of production.

To keep our example relatively simple, let’s figure your average agent after the ramp is taking 100 calls a day and that you have 5% monthly attrition and that everyone makes it through the ramp. If 5% are in month one and answering 40 calls a day, 5% are in month two and answering 50 calls a day, 5% are in three answering 60 calls a day, and so on, you end up with 30% of your agents answering an average of 65 calls a day, and 70% of your agents answering 100 calls a day. This means your average agent is answering 89.5 calls.

Say your call volume runs 100,000 calls per day. If you had zero attrition, you would need 1000 agents. But because you have 5% attrition, you need 1117 agents.

Obviously you cannot and do not want to have zero attrition. But run the same scenario with attrition one point lower. Then you have an average of 91.6 calls per agent, or 91,600 calls per day. In this scenario, you need 1092 agents.

‘Roid Rage

To then calculate this last line item in the costs of attrition, look at the difference between the 4% and 5% monthly rates. One percentage point of difference per month means you have to have 25 more agents on staff per year. If each agent, on average, costs $30,000 per year in marginal costs, that means 1 point of monthly attrition costs an additional $750,000. Since a 1% attrition rate per month in a center with roughly 1100 agents equals 132 agents per year that means that “bulking” adds $5600 per agent that quits.

Now these numbers were simplified and it inflates the total. Your agents are probably better than 40% productive in their first month and their ramp is faster at first. A more typical, actual tally in a four-week training scenario, with a week or two of halfway house time, and a six-month ramp, is a bulking cost of about $2600. In any case, this is a huge line item that people tend to ignore. Even though it takes more work to measure it, it is a real hard cost. Not some airy fairy soft cost.

That’s the primary list. There are others that are worth considering in certain circumstances, although they are harder to measure. These include BPOs aiming for rewards or avoiding penalties from clients or trying to win clients. All benefit from lower attrition. But these risk based calculations are more complex and contract dependent. Captured centers that want to avoid outsourcing face similar risks, but these are harder to quantify, unless there are known internal triggers for outsourcing. And CSAT and NPS are significantly affected by attrition, but it is very difficult to put an exact dollar value on these, which is what this long, long, long series is about.

I hope this journey has been educational. Hopefully this will sober up the drunk darts approach. If your centers have a three or four-week training process, you pay people ten bucks an hour, and you have even normal leakage in the training and halfway house and a six-month productivity ramp, you now know that your “it costs $5000” number is just a pants-on-fire statement (it’s roughly $10,000). And if this series didn’t change your mind, I promise that nothing’s gonna change your world when it comes to attrition. The only executives I meet that have really genuinely been able to tackle it are the ones that know how to measure it properly.

But hopefully it did change your mind, and now you know how expensive it is.

So now, go fix it.



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