Note: The following is a two part article focusing on site selection for contact centers. Part one examines the processes for conducting these searches, from both a macro and micro perspective. Part two delves into the contact center climate in North America, and why these centers have been successful. While all companies’ location needs are different, we hope that this unique overview will assist you in planning your company’s next project.
Part 1: The Dynamic Duo of Contact Center Site Selection Analyses
By Mark Seeley
It is no surprise to anyone in the call center industry that, when it comes to location, labor is king. For years, a labor-focused approach to site selection has been the standard for most call center location consultants and corporations. But that’s not to suggest that new and better approaches to finding the optimal call center location don’t continue to develop. Today, the corporations that boast the best labor market hit ratio are the ones conducting site searches in a whole new way.
As the geographic limitations to call center location continue to be readjusted in a fervent effort to find “the perfect location,” it is oftentimes the methods used to evaluate labor markets—not the geographic parameters—that make the biggest difference between success and failure. It’s a matter of statistical modeling vs. anecdotal data—and the anecdotal data is proving to be more insightful in determining a labor market’s viability.
Statistical modeling, utilizing demographic and economic variables, has largely been considered the best, most objective method to evaluating the viability of labor markets. Far too often, consultants and corporations have used indicators such as unemployment rates, average household income levels and population growth statistics as the primary tools to cut through the thicket of potential locations. While statistical data are useful in the initial stages of the site selection process—such as using demographic benchmarking to filter through several thousand communities—nothing can replace anecdotal data when refining the search from the medium list (several hundred communities) to the short list (three to five).
True, gathering anecdotal data on several hundred communities can be a daunting task, but when one considers the repercussions of selecting the wrong market, its virtues reveal themselves. The gathering of anecdotal data is typically done in two stages—what might be referred to as the dynamic duo of effective site selection.
Stage One: Macro-Analysis
The first stage is the initial macro-analysis—an examination of the big picture. This stage is performed on the medium list of several hundred communities and typically comes inthe form of testimonials (via phone) from key individuals within the local labor markets (i.e., economic development officials, local call center managers, local staffing agents). Information gathered through these individuals might include a profile of the call center presence in the market, actual call center wage levels, and testimonials either for or against the quality and availability of the work force. Often, it is also possible to acquire insight into applicant-to-hire ratios and turnover rates at the local call centers.
Obviously, gathering such data can take an inordinate amount of time and resources. Therefore, unless a corporation has a designated site selection department, it is recommended that a qualified consultant—specializing in call center site selection—be used for this task.
Stage Two: Micro-Analysis
The second stage of anecdotal data gathering is the micro-analysis phase—the careful study of three to five short-listed communities. Once the communities have been identified, tours of the communities and agendas for visits should be prepared. Meetings with economic developers, city officials, local call center managers, staffing agencies, major retailers, community college representatives and telecommunication representatives should be set up. This is the opportunity to validate the information gathered during the macro-analysis, as well as to “dig deeper” to uncover the nuances of the community. How do the local employers rate the work ethic of the typical applicant? Is the workforce inclined toward full-time work, or part-time? Is staffing night shifts and weekends going to be a challenge? Do call centers have a reputation that precedes itself? These are the types of crucial questions that can determine the success of a call center operation, yet cannot be answered via statistical modeling.
Once the “formal” agenda is finished, save time for impromptu interviews and conversations with both the local residents, as well as other employers. Stop pedestrians in the street to gauge their opinion of the location of the top real estate option: Would they be comfortable leaving that building at 11 o’clock at night? What does the waiter have to say about the starting wage rate the center plans to pay? How does the manager of the local Wal-Mart rate the quality of their employee base? What’s their biggest recruitment challenge?
Candid answers to these questions are invaluable. The unemployment rate for a community may be high, but if you don’t typically hire from that sector, you’ll be more interested in understanding the under-employment rate—and the only way to find that out is through anecdotal evidence.
Today, with the geographic parameters of call center site selection reaching to India and beyond, this emphasis on “street level data” is even more important. Because statistical data in countries outside the United States is rife with holes and inaccuracies (or is simply unavailable), anecdotal data is the primary tool for accurate evaluations.
In the final analysis, a rigorous approach—one that blends statistical modeling for the long strokes and anecdotal data for the medium and short strokes—will ensure a successful site selection process.
Part 2: The Lure of North America for Contact Centers
By Laura Grimes
The site selection process can be a time of introspection for the strategic leaders of a contact center. You know that you need to provide efficient, relevant customer service, so finding capable agents is imperative. But many questions remain. Do you need a new center or should you expand the center(s) you already have? What should the additional or new capacity provide to the organization? How can you best save costs?
Lively exploration for the answers to these questions will often lead to one prevailing question: “Where should you locate a new center?” The answer to that question is best arrived at by conducting a thorough, structured needs analysis followed up with a comprehensive strategic operating plan. Both these activities help leaders craft a decision that is a strong, long-term, and solid fit with their organization.
Objectivity demands that we consider locations that fit our criteria beyond the shores of North America. However, North America should not be dismissed without using the same measuring stick. If the criteria you are using objectively weigh all of the factors to be considered, then it can reasonably be applied to all locations.
While the trends suggest that most contact centers have made (or will make) the decision to locate their call centers offshore, in fact many centers remain within North America. Some might find it surprising that, after an exhaustive evaluation of other global locations, many centers still find great value in establishing call centers in North America. However the growth might not be what you expect. Much of the call center expansion on this continent is found in newer, small to mid-size operations; represents a wide cross-section of industries; and employs professionals including doctors, nurses, lawyers, accountants, psychologists, counselors, engineers and translators, rather than just your typical call center agent.
Current Status of N.A. Operations
Due to weakness in the economies of North American countries, there have been a number of business closures and relocations. This has opened up attractive space at reasonable rates available to organizations expanding their centers. Some estimates of dark call centers reach as high as 10,000 facilities. Facilities range from former call centers, ready for immediate occupancy, to others that require redesign or fixturing. Often the closure of one center opens up a strong pool of labor in that community as well.
Various studies suggest there are currently 75,000–100,000 call centers in North America. In the United States alone, nearly 5 percent of the working population is employed within a contact center. This exceeds those employed by the health care industry by double and is two-thirds the size of the food services industry. The prevalence of contact centers within North America has provided access to talented professionals that are experienced in call center disciplines, which is an important competency for many employers.
The communities that have had experience supporting centers understand what a call center is, what services it needs and supports, and what potential centers offer to a community. This makes it easier for call centers relocating into an area to attract and retain employees, as local economic development councils often initiate, support and/or provide incentives for centers locating in their community. While other countries offer communities with existing call centers, the issue is that new centers may compete with existing centers for labor talent. Communities that have lost contact centers have an available work force.
Industries that are choosing to stay in North America include government contact centers, health care providers and emergency service providers. Additionally, regional organizations tend to prefer to remain in closer proximity to their customers.
Who chooses North America and Why?
So why are executives choosing North America? It is more than a decision of labor cost economics. It would be myopic to consider only the facet of labor costs to determine site location. Other considerations should be the labor supply, labor force composition, labor relations, technology and community infrastructure, real estate, non-labor cost issues, crime rate, cost and quality of living, environmental impact, accessibility and geopolitical risks.
The call centers being built in North America are mosaic. There is not a single rule of thumb that can be applied to determining where your call center should be, but there are some very valid reasons companies choose North America as an alternative to lower-cost offshore options.
Center size: Fewer than 2,500 call centers in North America have more than 200 seats. Around 90 percent of the contact center operations within North America are small to mid-range (30–200 seats), and most of the newer centers are smaller and offer boutique services.
The economies of scale in smaller centers may not be large enough to warrant expanding offshore into a cheaper labor market. Labor costs are a much smaller percentage of the budget (60 percent in a smaller center vs. 80 percent in a mega center). Technology and infrastructure costs are spread out over fewer associates, making the costs higher.
Furthermore, the efficiencies recognized at smaller centers where technologies and processes are being refined can be compelling. Organizations continue to consolidate transactions and contacts with their customers that were previously handled by multiple internal groups. The gains in productivity of implementing technologies, consolidating work groups or streamlining processes may support the needs of an organization without requiring the organization to venture into the global market and face the associated risks.
Agent experience: The skill set required of agents is readily accessible in North America. The increased unemployment—especially within the call center sector in North America—offers a labor supply that was not available three years ago. In addition to companies moving their centers offshore, there have been a number of center closures related to the demise of companies. This provides companies looking to expand or relocate with economical, nearby options.
Cost of Labor: While many companies concentrate on salary alone, savvy companies understand that there are additional costs to factor into the assessment. The reality is that companies must be comfortable with labor relations and understand the indigenous regulatory environment. Larger centers may be able to offset the increased legal costs and justify supporting multiple regulatory environments in North America and abroad, but this is an additional cost to centers that are small to mid-sized. For the smaller center it is often more cost effective to locate within the area where it is already doing business because of their knowledge of the labor and regulatory conditions there.
Community Infrastructure: This is another key reason why companies consider North America. In addition to reliable utilities, centers need a stable government infrastructure. The services that a government provides are an important consideration because those services can affect the ability of the business to compete effectively or continue operations.
Risk Aversion: Some companies are reluctant to consider offshore locations because of the risks involved. Unstable governments can bring about changes in the regulatory environment that make it difficult for a foreign company to comply and remain current. Volatile exchange rates can make locating offshore risky. Additionally, there may be language barriers and cultural issues that would require attention. There is also the risk that customers will not embrace dealing with a foreign call center. (Though proponents of the offshore option downplay the importance of this factor.)
Regulatory Environment: Some contact centers that choose to remain within North America do so because the industry they support is heavily regulated, and they find it beneficial to stay here to reduce potential liabilities. Liability risks for providing incomplete or inaccurate information may induce a company to keep their centers closer to corporate headquarters, as is often the case with some financial services and banking call centers.
Accessibility: Often companies that work closely with their contact centers in devising strategic planning and managing customer relationships find that accessibility requirements are important. They want key managers at the center to be available within a reasonable travel time to participate in meetings held during normal business hours at the corporate headquarters.
Incentives: Incentives at the federal and municipal level may entice companies to locate contact centers within North America. Canada, Mexico and the United States all offer some attractive incentives to locate contact centers. They will support training, assist with acquiring personnel, and may offer tax credits or abatements. Local governments can also offer support in obtaining necessary licenses and permits to ramp-up quickly.
The bottom line is that there are many outsourcers, site selection experts and corporate executives who are proponents of near-shore and offshore contact center operations, and for good reason. In many instances these options provide the most sensible choice for large multinational organizations with expansive legal and human resources expertise that are driven to reduce labor costs to achieve needed operational economies of scale. However, for the small to mid-size center, comprising 90 percent of the market in North America, it would be narrow-minded not to fully consider all options in locating a call center, including those within North America. In spite of the turnover and higher employment costs, North American contact centers continue to provide quality customer service efficiently, economically and accurately—plus they know this culture. While some companies remain in North America for benefits that are hard to quantify, others have discovered that moving a center offshore is not always the wisest choice.
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