The High Cost of Turnover

In an ideal world, we’d all like to think that the sales or service associates in our customer contact centers are shining examples of all your company and brand represents: focused on caller satisfaction as well as sales…knowledgeable about every aspect of your products, services and policies…and creative in solving and avoiding problems. These skills aren’t developed overnight – or by the end of your three-day or three-week training period. It takes time to mold the raw potential of a new recruit into the star quality of a seasoned telephone professional.

One of the greatest challenges to building a stellar phone staff is employee turnover. Not only is the investment of recruiting, training and “nesting” wasted when a rep walks out the door, but productivity, sales and service levels invariably suffer while a replacement climbs the learning curve all over again.

It’s much the same scenario as with customers – repeatedly finding new ones is a lot less profitable than keeping the ones you already have (assuming, of course, your current staff has the skills and abilities to be successful on the phone).

The first step toward improving retention and slowing employee churn is to measure your current turnover rate. Sounds simple enough, but defining a practical, consistent, easy-to-administer formula for charting annual turnover percentages in the dynamic call center environment is not always straightforward.

How do you account for the constant flow of new hires throughout the year? What happens when a particular calling project ends or is cut back? What if your call center expands mid-year? How do you work longevity differences between full-time and part-time staff into the formula?

While most companies will quote you an annual percentage, few can explain the formula they use to calculate that turnover figure. That’s why most data currently available doesn’t track well with our own experience – the reported numbers are based on widely different formulas, or no discernable formula at all.

Once you add the cultural differences among vertical markets and from company to company, it’s nearly impossible to point to a magic “industry average” for the call center environment, although we can use some of the data out there for broadly comparative purposes.

As illustrated in the Purdue University study chart to the left, expect higher turnover from part-time staff than from full-time staff. Generally, inbound reps will stay with you longer than outbound reps. If we added calling applications to the comparison, we’d likely see that turnover for sales is higher than for service. More complex calling applications like ongoing business-to-business account management requiring higher skill sets, for example, will generally result in lower turnover than simple, one-call consumer campaigns.

The issue is not the number, it’s your number. Don’t sweat the stats out there – concentrate on improving your own retention profile.

Since calculating annual turnover percentage with any degree of assurance is difficult if not impossible, I prefer identifying “time in title/ function” or “time on campaign.” This time span is a lot easier to calculate, as seen in the hypothetical example below, and much more to the point. What really counts, after all, is:

– how long reps, on average, stay on your program or with your center

– how much time they’ve had to accumulate training, product knowledge, skills, etc.

– where they are on the learning and development curve

– how long they’ve been at full productivity

– how much of your initial investment (using average time before reaching full productivity and average sales or service production) they have returned.

Once you can calculate your own baseline, the goal is lengthening the average time in title or on campaign. Like anything else worthwhile, it will take some initial investment to produce this return. How much can you afford to spend to increase retention? The first step is to calculate what your company is already spending (losing) on turnover costs.

The Society for Human Resource Management recently estimated that the cost to find, hire and train an entry-level employee is $2,300-$9,300. This represents “hard” turnover costs excluding lost productivity and coincides fairly well with average costs related to call center recruitment, screening, new hire processing and initial training. (In a recent outbound sales training application, the per hire hard costs averaged $5,000-$6,000.)

In determining your hard (pre-production) costs, most companies rarely calculate anything beyond the cost of recruitment advertising. Here’s a sample checklist of the costs that are often over-looked:

Advertising preparation time: Who writes or updates the recruitment ad? Does the call center manager sit down for a few hours with the HR administrator to write headlines or copy, review what media has been most effective in the past, and plan where and when to place the ad?

Outside design: Are there any applicable graphic design or preparation costs involved?

Recruitment screeners: Will you use dedicated recruiters to field and screen incoming calls from applicants? Will center supervisors and/or managers field these calls? Will you use dedicated voicemail or answering machines to initially screen applicant calls (highly recommended)? If so, who will listen to the messages and/or tapes and place outgoing callbacks to callers who seem suited to your needs? In all cases, the time and salaries involved must be calculated as a screening cost.

Interviewing: Whether by telephone, in-person, or both, the time and cost to interview applicants is another often overlooked cost.

Processing: New hires must be processed, including payroll paperwork, security measures, employee identification/access cards, system setup and passwords, etc. Include all individuals involved in each step of the process.

Dedicated training: Training specific to the call center that is performed by dedicated new hire trainers.

Outside training: Training performed by non-dedicated individuals outside the call center, such as product managers, field sales representatives, clients, consultants, etc.

Supervisory training: Remember to include the additional time non-trainers, such as supervisors and quality assurance staff must spend with new reps in the learning curve.

Calculating “soft” turnover costs can be even more illusive and requires a firm grasp of your daily operating costs and revenue generation or revenue retention figures.

Start by determining the average revenue each rep generates/retains per day at various levels (post-training, from weeks 3-6, at full production, etc.) Then determine average weekly (or daily) compensation, including all incentives, for reps at each level.

Some issues to consider in calculating soft turnover costs:

– Are new hires paid at a training or full hourly rate during training?

– After or during training, do your new reps typically “co-pilot” with seasoned reps to learn the ropes?

– Are seasoned reps paid an average compensation rate (including incentives) when they help train in this way (to compensate them for lost commission, for example)?

– What’s the typical rate of revenue generation for new reps in Week One?

– How many weeks, on average, does it take new reps after Week One to reach full production? What percentage of full production (in either sales or service levels) do they achieve during this period?

It’s not at all unusual for hard and soft costs together to equal nearly a year’s compensation. Once you understand how much turnover is actually costing you, you can determine what percentage of that number can be invested in retention strategies and incentives.