Your client is an insurance provider. The company has recently acquired a number of regional companies and is now faced with the difficult task of consolidating operations. One area in which the company expected to have positive synergies from the acquisitions is in its call center operations. However, it is concerned that any disruption of its call centers might result in inconveniencing customers, even if it’s only temporary. This task of consolidating the call centers is made more difficult by the number of different legacy systems in place at each call center. How would you advise the company to proceed with this integration? Or would you advise against it?
You think you know what a call center is, but never assume anything. You had better get the interviewer to clarify.
Candidate: I would like to understand what role the call center plays in the company’s business.
Interviewer: A call center is a customer service center. It is staffed by a number of customer service representatives, or CSRs, who field telephone calls from the company’s customers.
Next you want to try to get an idea of the scale that we’re talking about here: two centers, 20 centers, or 200?]
Candidate: And where are our client’s customers located?
Interviewer: The majority of the firm’s customers are in the United States.
Candidate: How many different call centers does this company now have?
Interviewer: The company has over 20 different call centers, in various parts of the country. It employs about 500 CSRs.
You now know the number of centers and employees, but you have also determined that the call centers are all within the United States. This is important. The case would be quite different if there were an international element to it. But you also want to clarify that even having these centers located all across the United States is not important, as long as the customer is well-served.
Candidate: And how important is geography for locating a call center? I would imagine it is not necessary for them to be located close to the customer?
Just make sure.
Interviewer: I think that is realistic.
Candidate: Are these 24-hour locations?
Interviewer: Yes, they all are.
Now it’s time to set the framework from which you’re going to work on the case. There are two main questions: How many call centers does the business need, given their customer service needs? And how can it provide this customer service at the lowest cost?
Candidate: I would like to frame this analysis as follows. First, I’d like to address the question of what is the optimal number of call centers that are necessary for the company’s current business. Second, I will address the logistics of integrating the 20 centers the company currently operates.
Interviewer: So, what might be an optimal number of call centers?
Looks like you’ll have to answer the first question yourself. It’s not so tough. What’s vital is not the number of call centers, but the number of CSRs that are needed to answer all the customer inquiries efficiently. In economic terms, you have to equate the “marginal cost per call” to the “marginal benefit of the call.”
Candidate: I think there are two important dimensions on which a call center should be judged. The cost per call, and some measure of customer satisfaction.
If the company were starting from scratch, it might be best to have just one call center. However, since it’s not starting from scratch, there might be reasons to have more than one.
Minimizing the number of call centers would be beneficial for many reasons. The key cost drivers for the call centers are personnel costs, telephone expenses, and the cost of the technology infrastructure. Locating all the CSRs in one location would reduce overhead expenses, make CSR training and supervision easier, and reduce the cost of maintaining and controlling the technology support systems. Since all the centers are open 24 hours, locations becomes even less important.
Collapsing the 20 centers into a single center has the added benefit of a lower overall personnel cost. Since call volume will vary at different times and days, each individual center will have some excess CSR capacity. The excess CSR capacity required at one centralized facility will be less than cumulative excess capacity at 20 centers, for a given level of customer service.
Interviewer: Are you recommending that the company close 19 of its 20 centers? I would like you to discuss morale issues now.
This is interesting; the interviewer is now turning your attention towards personnel issues. Roll with it, but be prepared to present an analysis that is based on financial considerations.
Candidate: Not without understanding some of the other factors that will also influence this decision. The decision to close call centers may be met by resistance from the employees, resulting in employee dissatisfaction and negative publicity. What is the possibility of this happening, and how can the company minimize this? Are call center employees full-time staff or temps?
Interviewer: Fifteen of the 20 centers only employ temps. There is some fear among staff members of the other five that they may lose their jobs.
Candidate: How large are each of the five centers that employ full-time staff?
Interviewer: Three of them are quite small, staffed by less than 30 CSRs total.
The other two are very large; each has over 50 CSRs.
Candidate: Are these two large centers located close to each other?
Interviewer: Yes, they’re located within 10 miles of each other.
Candidate: What is the cost per call at these two centers?
Interviewer: These two centers have among the lowest cost per call of the 20. This is partly due to their size, and partly due to lower rent and salaries in this geographic area.
Candidate: Do the full-time employees have any unusual skills or experience that would make them difficult to replace? Is a training program in place to ensure customer satisfaction?
Interviewer: There are training programs in place at all facilities. Some of the CSRs must answer somewhat complicated questions about insurance matters, but most inquiries are routine.
Now you have enough information to submit an initial hypothesis. Synthesize the information you’ve received and make a recommendation. As it turns out, the morale problem is something that might be able to be dealt with, given that most of the centers employ temps. Because the company is apparently concerned about both morale and customer satisfaction, it makes sense to try to retain some full time staff.
Candidate: I think I’m ready to set forth an initial hypothesis. The per-call cost can be minimized by collapsing all 20 of the centers into a single center, which will be physically located at one of these two large centers. Ceasing to employ temps is unlikely to cause employee dissatisfaction. As for handling the full-time employees at the four locations with full-time employees that are to be shut down, employees could be given the option to transfer to the centralized location.
Interviewer: And how will the company deal with maintaining customer satisfaction?
This is a question that you haven’t considered yet. Just how will all these centers be collapsed without disrupting regular operations? It’s time to look at all the possible problems that can arise, and how they can be avoided.
Candidate: Customer satisfaction will depend on how smoothly the company is able to consolidate all the operations. There appear to be two important factors in the call center operations: human resources, and infrastructure (both physical and technology).
We have looked at the human resource angle of the integration already. The company should allow current full-time CSRs to transfer to the central facility. The new central location should have adequate staffing levels. If new CSRs need to be hired, they should go through the training programs in place. It might be best to close one center at a time, and reroute calls to the new facility, in order to minimize the possibility of disruption.
Physical infrastructure should be expanded at the central facility. Finally, the issue of technology infrastructure should be addressed. This might be the subject of a whole new consulting study. The company might either select the most appropriate system from its current range, or choose to install an entirely new system altogether. Assuming all systems show equal customer satisfaction, however, I would select one of the systems already in place at the location to be retained to minimize retraining.
Interviewer: Are there any other issues you would like to mention?
Here’s where you can bring in that international aspect finally. Call centers use a lot of labor, and since wages are lower in many other English-speaking countries, it might be worthwhile for the firm to consider relocating its call center to another country, though this might impact the previously mentioned morale issue.
Candidate: Yes, I believe many companies are shifting call center operations outside of the U.S., to English-speaking countries with cheaper labor. This is an option worth investigating. However, while this might reduce the cost per call, it is important to keep in mind its impact on customer service. Many call centers in India, for example, have proven themselves proficient in providing fluent English-language customer service. But since we’ve already determined that training is an issue, it might be more expensive to make sure that these new centers could provide good customer service.
There’s another issue that I haven’t brought up at all. The call centers are currently open 24 hours a day. We should investigate whether or not it is really necessary to provide such service. Even reducing hours to 16 instead of 24 would reduce costs further.