METRICS CATALOG SERIES: VOLUME 2/media/HDICorp/Files/Books/... · 2019-06-04 · the expectation that they will be able to contact a support center in a manner that meets their needs

METRICS CATALOG SERIES: VOLUME 2

n

Understanding Cost per Contact byCommunicat ion Channels

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METRICS CATALOG SERIES:VOLUME 2

Understanding Cost per Contactby Communications Channel

Robert S. Last Content Manager, HDI

September 14, 2005

Understanding Cost per Contact by Communicat ions Channel

Executive Briefing 9

Introduction 13

Chapter 1 – Definition of Cost per Incidentby Communications Channel 19

• Methods for Calculating Cost per Contact . . . . . . . . . . .22• Financial Management in the Support Center

and the Information Technology InfrastructureLibrary (ITIL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Chapter 2 – Applying the Balanced Scorecardto Managing Support Center Operations 39

Chapter 3 – The Impact of Cost per Incidenton the Balanced Scorecard 49

• The Balanced Scorecard Concept . . . . . . . . . . . . . . . . . .50• Origins of the Balanced Scorecard . . . . . . . . . . . . . . . . . .51• Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57• The Balanced Scorecard as a Management Tool:

The Operational Review Meeting . . . . . . . . . . . . . . . . . .60• Operational Review Attendees . . . . . . . . . . . . . . . . . . . .62

TABLE OF CONTENTS

Metr ics Catalog Ser ies : Volume 2

Chapter 4 – Case Studies on the Use ofthe Balanced Scorecard 63

• The Balanced Scorecard as a Management Tool:Case Study One – The Cleveland Bank Implementsthe Balanced Scorecard in the HR Department . . . . . . . .64

• Lessons Learned from the Project . . . . . . . . . . . . . . . . . .68• The Balanced Scorecard as a Management Tool:

Case Study Two – Using the Balanced Scorecardas a Decision Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70

• The Balanced Scorecard as a Management Tool:Tips and Techniques for Managing the Support Center’sCost per Contact by Communications Channel –Understanding Warning and Success Signs . . . . . . . . . . .72

Chapter 5 – Selected Industry Standard for theMetric and Sources of Information 77

• Industry Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78

Chapter 6 – Implementation Checklist for DeterminingCost by Communications Channel and TheirApplication to the Balanced Scorecard 81

Conclusion 85

Executive Briefing

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Cost per Contact or Incident byCommunications Channel is oneof several key performanceindicators that a support centercan use to monitor and assess itsperformance. A communicationschannel is simply any methodby which a customer choosesto contact a support center.Measuring the costs associated

with each contact channel is vital in monitoring theperformance of a support center. Contact costs are ameasure of efficiency, and when analyzed within thecontext of the Balanced Scorecard Service Model, alsoa measure of effectiveness. Support managers andtheir executive leadership need to consider thecontext of the goals identified in the BalancedScorecard. In assessing cost performance information,it is imperative that the reasons for any trends beidentified as a positive or negative trend, a temporaryanomaly, or an actual trend that requires correctiveaction or a cause for celebration.

Executive Briefing

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Every support manager should be held responsiblefor creating a data gathering program and translatingthe data into actionable information. This informationis best viewed in the context of a Balanced ScorecardService Model system.

A support manager attempting to determine the costsof each contact channel will need to be provided withextensive financial and cost-related data. This datawill be used to perform the calculations themselvesand the results will be monitored in periods of timethat are determined by the nature of the organization.It is best that monthly, quarterly, year-to-date, andyearly monitoring be done.

Introduction

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This booklet will providesupport managers withthe techniques necessary

to learn how to capture datarelated to the Cost per Contactfor each contact channel thatthe support center offers toits customers. Many supportmanagers still do not performthis most basic of managementfunctions. With the complexity

of products, the diversity of customers, and a global,mobile workforce that has high expectations ofservice, it is vital that costs and trends be identifiedand compared to organizational goals. Cost perContact is an indicator metric that indicates howresponsive and how efficient a support center is inmaking itself available to its customers. When thiscost data is added to the Balanced Scorecard ServiceModel, support managers and their executives cangain an understanding about the quality of servicethat is being provided and determine if the cost ofservice is commensurate with the results.

The Balanced Scorecard is a tool that proactively trackswhat end-users are experiencing in their use of IT tools.

Introduction

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The HDI Metr ics Guide

By examining why and when end-users and customersare contacting the support center, it is possible for thesupport center manager to ascertain what problems areimpacting the end-users productivity and correct them,or at the very least, identify the source of the problemsfor the manager of a particular line of business. This isno small ability for an organization to have, as onerecent survey concluded that technical support can costa large company as much as $4.1 million in lostproductivity because workers call for help when theyshould be working. Siemens Business Services foundthat 36% of U.S. white-collar workers surveyed say theyspend thirty minutes or more a week on the telephonewith technical support; 20% spend an hour or more;and 5% are on the phone five or more hours. 1

This booklet is composed of six chapters:

• Chapter 1 – Definition of Cost per Incident byCommunications Channel, explains what acontact channel is, how to calculate the cost ofeach channel, and how the concept of financialmanagement of a support center is bestunderstood within the context of the InformationTechnology Infrastructure Library (ITIL).

1 Information Week, August 9, 2004, “Big Tab for IT Support,” Page 18

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• Chapter 2 – Applying the Balanced Scorecard(BSC) to Managing Support Center Operationsdiscusses how to use the BSC concept as amanagement tool and shows that all metrics are,to some degree, interrelated to each other.

• Chapter 3 – The Impact of Cost per Incidenton the Balanced Scorecard provides a briefreview of the Balanced Scorecard Service Modeland presents examples of Key PerformanceIndicators in a Scorecard format and anexample of an Operational Review Agenda thatmanagers can use to analyze Scorecard results.

• Chapter 4 – Case Studies on the Use of theBalanced Scorecard presents two brief examplesof how the BSC can be used as a management tool.

• Chapter 5 – Selected Industry Standard forthe Metric provides data from the 2004 HDIPractices Survey that can be used as a generalbaseline for cost comparisons with othersupport operations.

• Chapter 6 – Implementation Checklist for Usingthe Cost per Contact by Channel

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Chapter 1

Definition of Cost per Contactby Communications Channel

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Acommunications channelis any means by whicha customer contacts a

support operation. Most supportmanagers are familiar withthe complexities and the trialsand tribulations of telephonesupport, but as end-users becomemore sophisticated, they haveincreasingly come to rely upon

and even demand, more methods of contacting asupport center than the telephone. These alternativemethods include e-mail, Internet Relay Chat (IRC),fax messages, postal mail, and in many organizations,“walk-tos” and self-help options such as FAQ’s,knowledge base searching, tutorials, Web-submittalof incidents, and fax-back.

Each channel, except for self-help, requires staffingcalculations to be made so as to determine theoptimum number of staff needed to service eachchannel. Self-help statistics will be drawn from Webservers, knowledge base programs, and fax-servers. Theneed for financial management to quantify and monitorthe expenditures for each channel is still a practice thatis rare in the technical support industry, but it is gainingacceptance quickly as support managers come to realize

Chapter 1

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that the collection and monitoring of data is the key toeffective management and revenue generation.

In today’s complex, distributed, and global supportenvironment, it is now common for end-users to havethe expectation that they will be able to contact asupport center in a manner that meets their needs andis convenient for them. Consequently, the necessityfor measuring the costs of contacting a support centerthrough each channel has become a necessary part ofsuccessful financial stewardship of IT resources aswell as a measure of the support center’s effectiveness.The ideal scenario for success is to tie a financialmanagement program to the Balanced ScorecardService Model by measuring both financial Costs andProductivity.* Beyond capturing raw financial data asan end in itself, prudent financial management needsto be balanced with Organizational Maturity,Customer Satisfaction, and Employee Satisfactiongoals represented in the Balanced Scorecard ServiceModel. Data must be translated into information thatwill enable line and senior managers to set and assessshort-and-long term goals, measure their performance,and answer the following questions:

* The Balanced Scorecard Service Model is explained in detail in Chapter 3 – SupportScorecard and was the subject of the HDI publication, The Metric Reference Guide.

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• Are we spending too little on supportinfrastructure and too much on labor?

• Are our costs for eSupport too high?

• How much could we save by moving ourend-users from phone support to self-help?

• Are our costs high because the business hasexcessive overhead allocations?

• When can we expect to get a return fromthe introduction of new support tools?

• Does our Level 1, Level 2, and Level 3 supportadd to our cost per contact? How much?

• Are we achieving customer satisfaction at aprice we can afford?

• Are we enabling our organization to matureto the next level? Can we afford this level ofmaturity at its current level of expenditure?

• Have we been successful in integratingEmployee Satisfaction goals into theScorecard at an acceptable rate?

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The answers to these questions provide informationthat serves the organization/business by measuringhow products are implemented and used bycustomers. A well managed support center will beable to capture and track the cost of each contactchannel and will compile information from thetracking in order to identify, analyze, and act upontrends and determine its impact upon the otherquadrants of the Balanced Scorecard.

Methods for Calculating Cost per ContactSources of Data: To calculate the Cost per Contact it isnecessary to identify all of the costs that go into theoperation of a support center. These costs can be brokendown into the categories of Capital, Technical Support,User Support, and Administration. Each category isdefined in Figure 1 – Formula Definitions. A completeCost per Contact worksheet is contained in Appendix 1.This cost data comes from multiple sources, e.g. payrollfor support center employees, equipment budgets,facility rents, budget depreciation, and other financialdata. Contact data should be mined from the ACDsystem, problem tracking system, fax server, Web server,and e-mail system.

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Step 1 – Determine what operating your supportcenter costs the parent organization.The formula itself is simple:

Then divide TCs by Total Contacts, as shown below:

Note: This is a high level metric that should be calculatedfor each contact channel.

Total Costs (TCs)/Total Contacts = Cost per Contact

Total Costs = Hardware + Software + People +Accommodation + External Service + Transfer

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Figure 1Formula Definitions

Hardware – Mainframes, disk storage, networks, PCs,portables, and local servers.

Software – Operating systems, applications databases,monitoring and management tools, and licensesand administration.

People – Payroll costs, benefits, recruiting, relocationcosts, consulting fees, training program costs,membership fees to professional organizations,and travel.

Accommodation – Offices, storage, secure facilities,and utilities.

External Service – Security services, disaster recoveryservices, and outsourcing services.

Transfer – Internal charges from other cost centerswithin the organization, network connectivity andsupport, HR support, and development team.

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To complete this formula, you must create a detailedlist of every cost associated with the support center,separated by contact channel. Many of these costs maybe included in your department’s annual budget or willbe available from your organization’s financedepartment.* A basic Total Cost worksheet is presentedbelow. An example of a TC worksheet and a blankform are presented in the Appendix and are alsoavailable in the HDI Members Tool Box for download.

The example used here represents a large IT servicedesk in Northeast Ohio serving a finance andinsurance company. The service desk provides supportto an eight building campus with over 20,000employees working 24/7/365, serving a globalcustomer base of civilians and U.S. military personnel.Several thousand employees serve customers directlyand any interruptions to their IT-related tools have thepotential to affect revenue producing channels and

* It is not typical for support managers in organizations of all sizes to control theirbudgets or even to develop them. It is also sometimes difficult to obtain staffsalary, depreciation, asset, and overhead costs from senior managers and financedepartment staff. The degree of difficulty depends upon the culture of yourorganization and your relationship with senior management. If these problems areencountered, it is best to be candid and explain the necessity of having thisinformation and how it will be used to make cost/channel calculations and how itties back to the Balanced Scorecard Service Model.

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customer service. The company is very technology-oriented and places a premium on service and supportto its end-users. There are a total of 71 FTEs assignedto the service desk that are distributed as follows:

• 45 Level One staff• 9 Level Two staff• 6 Level Three staff• 6 Team leaders• 1 Business analyst/Knowledge manager• 1 Trainer/Instructional designer• 2 Deputy Directors of Support• 1 Director of Support

The Total Costs for this support center are listed inFigure 2 – Support Center Total Costs and ContactVolume.

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Figure 2Support Center Total Costs and Contact Volume*

* Note: Due to rounding error and for ease of reading and calculation, not all columnswill have the exact total that would normally be expected.

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Step 2 – Identify the associated costs for eachcommunications channel. Identify the costs that areassociated with each contact channel. Total Costs identifyALL costs involved in the operation of the support center.Associated Costs are the costs that are specifically relatedto the operation of a communications channel. TheAssociated Costs for each communications channel inthis example are detailed below in Figure 3.

Figure 3Associated Costs by Communications Channel

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Step 3 – Perform the actual calculations.The calculations themselves are straightforward,as shown below:

Cost per Incident:Cost/Incident = Total Costs/Total Incidents$4.21= $3,901,641/925,275

Cost per E-mail: Cost/E-mail = Total E-mail Costs/Total E-mails$2.90 = $624,125/215,431

Cost per Phone Call:Cost/Call = Total Telephone Costs/Total Telephone Calls$3.33 = $1,209,248/362,637

Cost per IRC (Chat Session):Cost/IRC = Total IRC Costs/Total IRC Sessions$1.09 = $66,826/61,324

Cost per Walk-to: Cost/Walk-to =Total Walk-to Costs/ Total Walk-to Incidents$7.96 = $176,005/22,107

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Cost per Fax-back:Cost/Fax = Total Fax Costs/Total Faxes$2.97 = $41,000/13,775

Cost per Self-service:Cost/Self-service =Total Self-service Costs/Total Self-service Incidents$0.06 = $14,750/242,000

Step 4 – Analyze the data. The real power and utilityin cost per contact calculations resides in their abilityto identify trends. The results of the calculations shouldbe tracked over the following time periods:

• Monthly• Quarterly• Year-to-Date; and• Yearly

Keep in mind that you’ll only be able to identifytrends as the trend-line lengthens over time; thelonger the better is the rule of thumb because shortterm anomalies can skew the results and lead toinvalid conclusions. Just think of any “bad day” anysupport manager has had because someone indevelopment, Q and A, or sales forgot to include theservice desk in a project information loop. Such

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incidents as well as storms, floods, power outages,network failures, and even terrorist attacks can causesolitary aberrant spikes in performance reporting andskew the results of your calculations.

Financial Management in theSupport Center and the InformationTechnology Infrastructure Library (ITIL)For many support managers, the concept of financialmanagement is one that they are not well acquaintedwith, but with the growth of ITIL and the BalancedScorecard Service Model, that state of affairs isbeginning to change. One of the distinctive aspects ofITIL is that it recognizes that there are two types ofservice and support organizations and each hasdifferent imperatives.

The first is an “in-house” organization. In this contextthe support organization or service desk should haveas its goal:

• “to provide cost-effective stewardship ofthe IT costs and resources used in providingIT services.2

2 Malcom Fry, The Goals of ITIL: Exploring the goals of service management.Remedy, Sunnyvale, 2003, Page 25.

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In the second context, the service desk operates in acommercial environment with marketing and profitimperatives that have to be met in order for theorganization, and its parent company, to remain inbusiness. In this context the commercial-orientedsupport organization has two goals:

• “to be able to account fully for the spendon IT services and to attribute these costs tothe services delivered to the organization’scustomers,” and

• “to assist management decisions on ITinvestment by providing detailed businesscases for changes to IT services.” 3

For the purposes of this discussion, an in-house servicedesk or support organization supports only internalcustomers; for most of us in the United States, such anorganization has been, and still is, called a help desk.Determining costs in this environment has always beensomewhat abstract in both theory and practice. Forexample, most accounting professionals will maintainthat the lowest cost is the best cost to have.

2 Fry, Page 25

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Anyone that has been in a technical supportorganization (TSO) that is understaffed, overworked,and with long wait times on the telephone and evenlonger response times for e-mail or chat due to “costeffective” budget constraints, knows quickly that lowercosts do not automatically translate into acceptableservice and support. Still, IT services do not operate inan environment of infinite resources and supportmanagers are being driven by their CXO’s and theirfinance staff to justify every dollar of their IT investment.

Using financial management techniques in a supportcenter positions a support manager to answer thefollowing questions at the conclusion of the nextfiscal quarter:

• Do we have a clear understanding of what“cost-effective” means in my support operation?

• Can we identify all of my supportorganization’s IT assets and resources?*

* In the context of ITIL, an asset is a “component of a business process. Assets caninclude people, accommodations, computer systems, networks, paper records,fax machines, etc.” Resources are “…typically computer and related equipment,software, facilities, or organizational (people). Keep in mind that in the ITIL-world, an asset is a component and a resource requires a number of assets toprovide a service. For example, a server is an asset, but many services are usingthat server as part of their resources. Adapted from, Fry, The Goals of ITIL:Exploring the Goals of Service Management, Page 27.

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• Are all of the assets accounted for in a database?

• Do we understand what costs are associatedwith each asset?

• Does my organization have an implicit orexplicit definition of the term “asset?”

• Does my understanding of this term matchthat of my organization, or are the definitionsat odds with one another?

• Can I identify what my cost drivers are in theoperation of my support organization?

• Can I identify what drives these costs upwardsor downwards?

The support managers that can answer thesequestions in a clear and definitive manner have abasic information framework in which to examinetheir metrics and associated costs.

In the commercial-based support center, the sameITIL definitions apply, but they have the additionalchallenge of being profit-driven and “… to be able toaccount fully for the spend(ing) on IT services,” This

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means that there must be a system in place thatallows you to manage costs so that you can accountfor all IT spending. This is where you begin todetermine the costs of each contact channel (phone,e-mail, chat, fax, and walk-to) to determine theirfinancial impact on your support operation. Self-helpmethods of support are completely automated andreport information will be generated from the serversthat host the self-help tools. Calculating the cost ofthese transactions will require collaboration with thenetwork administration staff since they will mostlikely “own” the servers and the necessary cost datathat is needed to make the calculations.

Chapter 2

Applying the BalancedScorecard to Managing

Support Center Operations

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Using the BalancedScorecard requires thatseveral conditions be

met for it to be useful:

• Complete Data. If the categoriesthat make up the calculationpresented in Step 1 areincomplete or unreliable, themeasurements results willalso be unreliable. Currentand accurate cost data are anabsolutely necessity.

• Sufficient Information to Identify Trends.The term, “arbitrary, aberrant spike” is aninelegant term that simply means thatstatistical spikes occur from time to time andare not indicative of overall performance. Ifyour support operation saw a 33% increase intelephone calls in February due to a newsoftware or hardware rollout, you cannot useFebruary as a basis for comparison in Marchwhen the telephone call volume returns tonormal; your support has not reduced calls by33%. Compare time periods that reflect realityas you normally encounter it.

Chapter 2

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• Analysis of Data in Context. The Cost perContact by Channel will not be useful if thedata is not analyzed within the context of theentire Balanced Scorecard. The Scorecardconcept only has value if it is evaluated andcompared to the other quadrants of the BSC.As Mark Ellis points out, “…if you are 100%committed to customer satisfaction, yourcosts may get out of line or your employeemorale may suffer. The framework, outlined,identifies the key categories for measuring thesuccess of support.” 4 One of the keys tosuccess in using the BSC is, as the nameimplies, “BALANCE.”

4 Implementing Service and Support Management Processes: A Practical Guide,Chapter 1 – Financial and Operational Management, HDI, Colorado Springs,2005, Page 2.

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Figure 4First Quarter 2005 Balanced Scorecard

Customer Satisfaction Goals: 100%Supporting KPIs

• Customer Sat. Survey Results: 95%• ASA: 90 seconds• FCRR %: 64• % SR Reopened: 47• SR Escalated: 62%• Contract Renewal Rate: 75%• % Performance Against SLA: 63

Cost/Productivity Goal: < $5.00 per Contact ChannelSupporting KPIs

• Cost per Call: $2.33• Cost per E-mail: $2.90• Cost per IRC: $1.05• Cost per Walk-to: $7.96• Cost per Self-service Incident: $0.23

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Employee Satisfaction Goals: 100%Supporting KPIs

• Employee Sat. Results: 53%• Absenteeism Rate: 85%• # of Turnovers: 15• #Internal Turnovers: 5• # of Requests for Transfer: 12• Avg. Training Hours per FTE per year: 5

Organizational Maturity Goals: Within goalsSupporting KPIs

• Period to Proficiency: (90 days) 150 days• Formalization of IT Processes (Scale: 1-10) 5• Time to Fill Knowledge Gaps: (5 days) 10 days • Quality Problems Resolved: (5/Month) 1/Month

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The Scorecard provided on the previous pages isillustrative of the challenge of balancing theimplementation of the Scorecard concept. Severalpoints immediately become obvious:

• Customer Satisfaction. The goal of 100%customer satisfaction is aggressive and it is clearthat the support staff and the organization areworking hard to meet this goal. The 95% ratingfrom customer satisfaction surveys is indicative oftheir effort and success. However, 47% of servicerequests are reopened after their initial close and62% of this support center’s service requests areescalated, indicating that the support center staffhas excellent customer service skills. These skills,while obviously important, are delivering only a75% Contract Renewal Rate and the supportcenter is achieving only a 63% rate of performanceagainst Service Level Agreements.

• Employee Satisfaction. Compared to theEmployee Satisfaction Goal of 100%, however, the53% Employee Sat. Rate and 85% AbsenteeismRate suggest that the support staff is tired and isbeing burned-out. These results raise the question,how long will the support staff be able to maintainthe 95% Customer Satisfaction Rate?

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• Cost/Productivity. The Cost/Productivity Goalof $5.00 per contact channel is clearly being metfor each channel except for the “walk-to” KPIwhich costs $7.96 to complete. The supportcenter is meeting four of its five cost goals, but itis unknown if any further marketing efforts willbe directed towards persuading customers to usethe self-service functions that the supportoperation provides. At only $0.23 per contactand accounting for 26% of all support contacts,the organization’s self-service tool is a powerfultool that can reduce costs while maintainingcustomer satisfaction.

• Organizational Maturity. The OrganizationalMaturity quadrant shows there are two KeyPerformance Indicators listed that indicateonly moderate success has been achieved inraising the proficiency of employees and informalizing IT processes. It is clear that thesupport center has not made time to train newemployees since it takes 150 days to bringthem to proficiency instead of the objective of90 days. In addition, it takes the supportcenter 10 days to enter new knowledge intoits knowledge base program, compared to theobjective of five days.

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• Placing the Data into Trend Charts.Developing the tools to identify and capturemetrics and Key Performance Indicators is onlya starting point in using the BSC model. Theother 50% resides in the act of placing the datathat has been collected into a format thatcommunicates information over time and canbe used to analyze operations. An example of amodel Balanced Scorecard Trend Report ispresented on the following page in Figure 5 –Sample Balanced Scorecard Trend Report.

• Convene an Analysis Meeting. Most BalancedScorecard Service Model programs fail becausethe Scorecard owner fails to track the trendsthat the Scorecard reflects and fails to takeaction to correct any negative trends that areidentified. When bad news is discovered, it isnot uncommon for individuals to ignore italtogether or fail to adapt to the changingenvironment. It is important to convene aquarterly meeting to examine, discuss, and actupon trends in your operations.*

* The Metrics Reference Guide contains an agenda template that can be used asa guide on what to discuss during the analysis meeting.

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Figure 5Sample Balanced Scorecard Trend Report

Chapter 3

The Impact of Cost per Incidenton the Balanced Scorecard

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The Balanced ScorecardConcept

If you are new to the BSCConcept, you will find belowan introduction to the theory

and practice of its use.

Many managers equate capturing data with generatingactionable information; they are not the same. At therisk of stating the obvious, but for the purposes ofinstruction, let’s be clear about the purpose of metricsin a support operation. Metrics should be used to monitorand improve departmental performance within the contextof a flexible, well defined management system that is alignedwith the needs of the corporate parent. We all know that isthe way it’s supposed to work, but all too often supportmanagers capture and monitor lots of data, but don’tlook for information in that data that can lead toimproved support center performance; and, if they dofind it, they frequently don’t understand it. If they dounderstand the information they review, they fail to putit into a context that makes it actionable over the longterm. Granted, the long term view is not a characteristicthat American business is known for, but given the fact

Chapter 3

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that support operations are the face of many businesses,as well as a revenue center, it is time to begin toconstruct metric systems that lead to better service,lower operating costs, and improved employee morale.

Origins of the Balanced ScorecardIt may sound like an academic dream, but the conceptof a Balanced Scorecard works and is fast beingadopted by IT support operations around the world.The concept of a balanced scorecard was created byRobert S. Kaplan and David P. Norton in a seminalarticle written for Harvard Business Review.5 RonMuns, founder and CEO of HDI, and Mark Ellis, ofKronos, expanded the concept of the BalancedScorecard to the support center in their article, “TheSupport Center’s Balanced Scorecard Service Model.” 6

5 “The Balanced Scorecard – Measures That Drive Performance,” Harvard BusinessReview, January-February 1992

6 “The Support Center’s Balanced Scorecard Service Model,” The Muns Report,December 8, 2004

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In their article they argue that a support center BalancedScorecard should be based upon four elements:

• Customer Satisfaction Goals• Employee Satisfaction Goals• Costs/Productivity Goals• Organizational Maturity Goals

The four elements are defined as follows:

1. Customer Satisfaction – Is usually measuredby customer satisfaction surveys. Ideally, thesesurveys should be administered twice a yearby a vendor to minimize bias and even thesuggestion of manipulation. Equally important,however, is the use of transaction or incidentsurveys to monitor daily support activities.There are numerous, inexpensive e-mail andWeb-based software programs available todaythat allow support center staffers to effortlesslysend out a short e-mail survey to the customersthey have just concluded speaking with. Thesesurveys are returned to a support manager’se-mail for evaluation and distribution. Theworry that customers can be “over-surveyed”is a false one; customers that don’t respond tothe survey will simply ignore it or delete it.

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2. Employee Satisfaction – You can take the bestservice staff in the world and break their morale,burn them out, and abuse them to the pointwhere they leave, by placing them in a workenvironment that values everything but customerservice and treats them like a commodity insteadof knowledge workers. One of the reasons thatcustomer support is generally so bad in theUnited States is because in the quest forsuppressing operating costs, managers andexecutives have abandoned their obligation tomanage and maintain their employee’s generaljob satisfaction, motivation, and hopes foradvancement. It doesn’t take a 25% increase ina department’s budget to raise morale, but itdoes take a desire and a commitment to make asupport center an interesting, professional,and rewarding place to work. Supportprofessionals expect to be paid a fair marketwage, to be treated with respect, and havea chance for advancement, recognition, andtraining, and to work in an environment thatis disciplined, organized, and well managed bymature leaders. Organizations that fail to planfor and deliver these elements of employeesatisfaction will not only create mediocrity intheir support centers, they will ultimately fail

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in their goal to serve their customers andcreate an environment where high staff attritionis the norm.

As with customer satisfaction, employeesatisfaction should be formally measured onceor twice a year using confidential surveys. Thesurveys should be administered by a trustedmember of the Human Resources departmentand integrated into a human capital managementprogram, and the results shared with theorganization’s employees. Additional techniquesthat emotionally secure managers use is toencourage formal “open door” policies, “TownHall Meetings,” and individual and group luncheswhere any topic is open to discussion. Rankand file staff people are usually suspicious ofsuch invitations, but when the manager doesit with sincerity, these techniques can beilluminating experiences for decision makers anddevelop a sense of empowerment for staff people.

3. Cost/Productivity – The IT and support worldsstill treat the necessity of gathering metricsas a generic exercise that supports the beliefthat if enough metrics are gathered, allproblems can be solved. Put another way,

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just gathering cost and productivity datadoes not provide cost and productivityinformation. As an industry, we’ve becomevery, very good at generating so much datathat we’ve created data smog that obscureswhat is really happening in our support centers.

The kind of information that support managersand their executives need should answer thesekinds of questions:

∑• Is our operation cost-effective and

customer-centric?∑

• Are we spending too little on supportinfrastructure and too much on labor?

∑• If the reverse is true, have the expected

returns on investment been realized?∑

• Has a methodology been developed tomeasure return on investment?

∑• How much would be saved by developing

multi-channel contact avenues, i.e.,telephone, e-mail, self-service, and chat?

∑

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• Does the support center closely measureits operational costs by Cost perContact Channel?

• On a daily, weekly, monthly, and quarterlybasis is the support center meeting its goals?

4. Organizational Maturity –Assessing organizational maturity is a great deallike judging art; you know maturity when yousee it in an organization. Financial success doesnot necessarily equate to maturity. Just ask thefolks that used to manage and work at Enron,Arthur Anderson, and Tyco, to name a few.

On the positive side, the IT and support industrieshave taken huge strides in describing whatconstitutes a mature organization. To name two,HDI and ITIL have developed a set of certificationstandards and best practices that have become thede facto measurement for mature, sophisticated,and successful organizations.

Forward thinking organizations that expectto grow, that want to make their supportoperations a revenue center, and that want toalign their IT resources with their business

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strategy, will take aggressive and progressivesteps to move beyond the current status quo thathas been the standard operating procedure forthe last ten years. The “go-go” 1990’s are longover and the next evolution of IT and customerservice and support management has begun.

ConclusionBy linking the financial and operational managementof a support center to an integrated BalancedScorecard Service Model (See the example on thefollowing page) built on the elements listed above, itis possible to identify Key Performance Indicator’s(KPI) that will allow the support manager to assesscurrent operations, and also past performance andtrends. The goal of using a Balanced Scorecard is toforecast future costs, gauge operational performanceand service levels that are based on workload for bothinternal and external customers, and transformstrategic planning from a paper-generation exerciseinto an efficient and cost-effective management toolthat actually gets used.

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Figure 6Sample Support Center Balanced Scorecard

Key Performance Indicators Observations fromthe Support Center Balanced Scorecard

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The Balanced Scorecard as a Management Tool:The Operational Review Meeting

The “owner” of the Balanced Scorecard is the oftenoverworked and unappreciated support manager.Implementing the BSC Service Model does not, andwill not add to the support manager’s workload,rather it has the potential to focus and streamlinehis/her efforts by drawing attention to problems in aclear and consistent manner.

This kind of focus comes from a quarterly supportcenter-driven Operational Review. Monthly reviewsmay be too frequent and tend to cause moreproblems then they solve, but it depends entirelyupon the nature of the organization. Yearly reviewsare too infrequent; a quarterly review providesenough time to implement and assess changes madeto the support operation and to identify any trendsthat need attention. How often a review is heldshould be a decision made by the Support managerand the manager that he/she reports to. The followingitems should be covered in each Operational Review:

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Figure 7Operational Review Agenda

To be effective, the Operational Review meeting musthave a cross-section of attendees from the entireorganization (suggested attendee list provided on thefollowing page). Many support center managers aretroubled by this requirement and are oftenuncomfortable having such a large audience presentwhen the details of their support operation arediscussed. We encourage support center managerseverywhere to look upon the OR meeting as anopportunity to market the support center and show itsvalue to both its internal and external customers.

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Frequently, we assume that our leaders and colleaguesunderstand the purpose, value, and capabilities of asupport center, but all too often they do not. Unless wetell them and show them, this will never change, so beprepared to formally and informally tell your supportoperation’s story.

Operational Review Attendees

• Support Center Directors

• First and Second-Level support managers

• IT service delivery managers or businessanalysts that work with the support center

• HR managers for the support center

• Training managers that work directly withthe support center

• Product planning representatives

• Product planning engineers

• Financial managers that work directlywith the support center

Chapter 4

Case Studies on the Useof the Balanced Scorecard

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The Balanced Scorecard as aManagement Tool:

CASE STUDY ONE

The Cleveland BankImplements the

Balanced Scorecardin the HR Department

The Cleveland Bank serves over ten millioncustomers across the 48 contiguous states andAlaska. It has over 20,000 employees from

grounds keepers, to tellers, to stockbrokers. TheHuman Resources department maintains a staff of 212personnel, including twelve people in the HR callcenter that handle over 100,000 telephone calls peryear. The calls cover the usual HR and payroll functionswith the Average Talk Time being approximately 12minutes. The HR call center is the single point ofcontact for all bank employees for all HR and Payrollproblems, questions, and complaints. The call centerstaff is supported by payroll specialists, HR generalists,recruiters, recordkeeping staff, and training andorganizational development specialists. In 2002, theleadership of the bank began planning to implementthe concept of the “paperless” office and embarked

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upon a multi-year project that began with the HR andPayroll departments that focused on implementing self-service HR and payroll functions that would allowemployees to perform a multitude of tasks themselvesover the bank’s intranet site from home or the office.

Phase one of the project began with the creation of aBalanced Scorecard and the establishment of goals andKey Performance Indicators (KPIs) that identified abaseline of performance and goals to be met at the endof the project. The gathering, analysis, and evaluationof data and information was placed in the BalancedScorecard for the entire HR and Payroll departments.The analysis of the current-state of the operationindicated that 85% of the HR call center’s telephonecalls and 95% of its e-mails had to do with routinequestions on how to submit time cards, apply forvacations, reset passwords, workplace complaints,transfers to HR generalists, questions about medicaland dental insurance claims, family leave, andretirement programs. The HR call center also answersquestions about federal W-2 Tax Forms and manuallyprocesses changes to health benefits during openenrollment periods.

As the information grew, it became obvious to theproject planners that the largest number of routine

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questions that the HR call center received dealt withpayroll problems and questions. The second phase ofthe project was to identify, purchase, customize, andimplement an automated payroll and time-keepingsystem. After eighteen months of searching, coding,in-house testing, and beta tests, the payroll system,dubbed “Time OnLine” from Kronos, Inc., wasrolled-out to the entire workforce. After the usualincrease in calls during and immediately followingthe rollout, the number of telephone calls and e-mailsrelated to payroll dropped by 50% during the nextpay period and 75% for the pay period after that.Employees had quickly become successful atcompleting their timecards online and in utilizingonline tools to disburse their pay as they saw fit.

Phase three of the project dealt with migrating all HRfunctions from a paper-based and HR department-assisted system, to a completely online system. Usinga PeopleSoft product called “HROnLine,” bankemployees at all levels were the recipients of a month-long educational program that familiarized them withthe new system. Each subsidiary, each department, ineach region of the bank’s operation was introduced andtrained on the system. The results of the familiarizationprogram were intensely studied by examining theresults of post-training user-satisfaction surveys, beta

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tests, focus groups, and individual interviews. Wheredeficiencies were found, they were corrected andremedial actions were taken.

When the rollout began, the HR call center experiencedthe usual increase in telephone calls and e-mails, butthe volume proved to be 37% less then the contacts thatwere received during the rollout of the payroll system.The increase in contact volume lasted approximatelyfive working days and then declined over the course ofthe next five days and returned to normal by thebeginning of the third week after the rollout. Theimplementation went so smoothly and end-users wereso satisfied, that the HR call center staff was able todevote more of its attention to complex issues such asFamily and Medical Leave Act applications, workmen’scompensation claims, and orienting new employees tothe bank’s benefits program.

Over two dozen members of the payroll staff wereshifted to other tasks and departments as a result ofemployees handling tasks themselves that werepreviously performed by numerous HR and Payrollpersonnel. The cost savings from the project areprojected to be over $5 million in 2005 and $6 millionin 2006, with a dramatic increase in effectiveness andefficiency for the bank’s employees.

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Lessons Learned from the ProjectThe success of the project was based on several factors:

• Strong executive commitment and leadershipthat went beyond lip-service and took andmaintained an active role in the project;

• The collection of massive amounts of datathat was analyzed to identify information thatcould be useful to the project implementationstaff. The HR call center has its own call centeranalyst and trainer and she, along with thecall center manager, spent literally thousandsof hours analyzing data and preparing reportsfor the project team;

• The decision to adopt the Balanced ScorecardService Model and the selection of KeyPerformance Indicators with first monthlyand then quarterly review meetings tomonitor and assess progress;

• Focused attention on the monthly andquarterly results of each BSC meeting andimmediate action to address problems;

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• Leaders that were not afraid to call a problema problem; the word “issue” was banned fromall meeting rooms and the executive leadershipdemanded candor when their direct-reportsmade presentations;

• An intensive and extensive training programon the features of the new software for alllevels of the bank’s employees with middlemanagers taking the lead in promoting andteaching the value of the project;

• The HR call center staff attended six differenttraining sessions on various aspects of theproject and was supplied with over 2,000 pagesof documentation and reference material. Partof their training was to identify and reinforceto callers and writers of e-mails, what taskscould be performed online as opposed to atelephone call or an e-mail message.

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The Balanced Scorecard as a Management Tool:

CASE STUDY TWO

Using the Balanced Scorecardas a Decision Tool 7

Amultimillion dollar consumer goods companywanted to estimate the costs of setting up threecustomer support centers for its many

international IT users. To develop proof of the concept,the company assembled a Balanced Scorecard using costdata from the best of its six help desks. Management wassatisfied that this help desk, designated “Alpha,” hadsuperior performance in meeting customer, employeesatisfaction, and organizational maturity goals. It wasonly in the area of Cost/Productivity that the companyfound its performance wanting.

The Balanced Scorecard revealed this information andit must have come as a shock to service managementand was the impetus for major strategic changes. Thecompany found that direct labor time per event was 26.1minutes—fully twice the industry average, at the time.

7 Adapted from Using Service Goals and Metrics to Improve help Desk Performance,Mark Ellis, Colorado Springs, CO: Help Desk Institute, 1997, Page 22

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After plugging in other cost and workload metrics,the cost per event turned out to be a whopping $52,far above the industry average of $18 to $25.

For this company, even its best help desk operationwas not a good model for extending its servicenetwork worldwide. Flaws in the basic cost reportingsystems introduced some inaccuracies in individualmetrics, but not enough to explain costs so faroutside industry norms until the BSC wasestablished. In this case, clear action was required toreduce costs; perhaps after a “settling” period theaggregate costs of the three support centers may bebrought to an acceptable level when consideredagainst revenues. If not, then outsourcing may be thesmarter alternative, provided that outsourced servicelevels will equal or better the service provided by thecurrent help desk.

By using the Balanced Scorecard this company wasable to identify weaknesses that it did not know thatit had. That’s the power of the Balanced ScorecardService Model, it brings to light murky problems andsuggests answers that can improve efficiency,effectiveness, control costs, and improve productivity.

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The Balanced Scorecard as a Management Tool:

TIPS AND TECHNIQUES FOR MANAGINGTHE SUPPORT CENTER’S COST PER CONTACT

BY COMMUNICATION CHANNELS

Understanding Warning and Success Signs

1. Cost per Contact is a high-level metric andappropriate for all communication channels,provided that complete costs can be captured.Care must be taken in analyzing costperformance metrics; a climbing cost per callcan be a sign that process improvements haveresulted in fewer calls, spreading fixed costsover fewer calls and driving up cost per call;

2. Upward cost trends should be closely examinedto determine the number of contacts and thesupport center’s costs for each contact channel.The most likely relationships are as follows:

a. The greater the number of calls to thesupport center, all other things beingequal, the higher the costs will be, but thelower the individual Cost per Call will be;

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b. The greater the percent of IVR handledcalls, all other things being equal, thelower the total costs should be. This is aresult of the IVR handling calls that areshorter and do not require the attentionand cost of an individual staff person;

c. If the number of calls decreases dramatically,while fixed support center costs remain thesame or increase, the average Cost perContact will increase. This suggests thatcosts should be examined for possiblereduction; non-peak staffing may be toohigh, the support center staff may need moretraining, and new staff may be extendingtalk times due to their inexperience. If this isthe case, close supervision, job coaches, andadditional training may be needed.

3. Operational costs are high visibility financialitems that support managers need to observe,track very closely, and analyze to determine if theyare going up, staying the same, or going down;

4. Support Center Cost/FTE (Full Time Equivalent)is a “must have” measure of efficiency thatshould be a part of the Balanced Scorecard;

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5. Consider dividing costs into direct and indirectexpenses and remove variable costs fromyour calculations and review the results withthe organization’s finance staff and seniormanagement. Solicit their opinion as to theusefulness of this method of calculations tothem and to the organization;

6. Toll-free calls should be calculated on a Costper Contact basis to justify personnel increasesand to reduce telephone expense costs;

7. The recommended method for calculating Costper Contact is to use the Total Cost methodthat was presented earlier. It requires that anyand all costs associated with the support centerbe identified. The advantage of this methodis that it takes into account that there aremore things involved in the cost of a contactthan just the salary multiplied by the numberof staff in your support center. For example,staff ’s benefit packages, telephones, PC costs,equipment depreciation, and physical plantcosts, all need to be assigned a realistic cost andadded to calculations. Minimize unallocatedcosts to increase your degree of accuracy;

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8. Some support costs are easier to measure thanothers. Indirect costs occur when supportstaff must handle preventable problems.The common example in this context has to dowith software rollouts. Poorly planned andimplemented software upgrades for largegroups of end-users usually mean more supportcalls and other contacts for higher-level supportstaff. New product releases and installationsthat are installed globally and without availableuser training also tend to drive up the number ofsupport contacts that a support center receives;

9. Collect statistics related to software, hardware,product releases, and upgrades to gain anunderstanding of how these critical eventsmay impact the support operation. Hint: Ifthe organization does not have a formal,documented release process, it is anindication that the support center may wellbe deluged with support contact requests;

10. Balanced Scorecard Service Model programsshould be completely documented in bothpaper and electronic formats and should bemarketed to the organization’s leadership andinternal customers.

Chapter 5

Selected Industry Standardfor the Metric and Sources

of Information

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Industry Standard

The term “industry standard”is one of those authoritative-sounding sets of words

that suggests a complete lack ofambiguity, statistical error, andbias, either human or survey.The reality, however, is that asurvey is only a snap-shot in

time. Surveys are valuable because they provideinformation that enables a support manager to takethe first step in assessing the performance of a supportcenter. Surveys are important, but they should not begiven more value then they deserve; it is not advisableto build an entire management structure around asingle survey or even multiple surveys.

For benchmark and discussion purposes, we haveprovided basic performance data for your use. Theresults of the 2004 HDI Practices Survey reveal thefollowing cost-related data in Figure 10:

Chapter 5

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Figure 10HDI 2004 Practices Survey Cost Data

Chapter 6

Implementation Checklistfor Determining Cost byContact Channel and

Their Application to theBalanced Scorecard

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Implementation Checklistfor Determining Cost byContact Channel and

Their Application to theBalanced Scorecard

q Determine what your support center’s contactchannels are.

q Identify what Key Performance Indicators (KPIs)are generated from each contact channel byexamining the reports provided from the ACD,IVR, e-mail, problem management, knowledgemanagement, and e-mail systems.

q Determine how much data can be generated fromeach contact channel and how far it goes back intime. Note: Ideally there should be a year’s worthof data, if that is not available, seek to generate sixmonths worth of data, or at the least, the previousquarter’s performance data.

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q Identify the total costs for the support centerby identifying the costs for the following areas:See Figure 1 – Formula definitions.

• Hardware• Software• People• Accommodations• External Service• Transfer of Costs

q Using Figure 2 – Total Cost Worksheet, breakdownthese costs as indicated in Figure 2.

q Use Figure 3 – Total Cost Worksheet and theaccompanying formulas to generate the costsassociated for each contact channel.

q Use the spreadsheet example shown in Figure 5 –Sample Balanced Scorecard Trend Report. Thisallows you to analyze this data over time and tosearch for significant trends.

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q The Trend Report is the key document that willbe reviewed in the Operational Review meeting.Is the Trend Report complete? The results ofequipment, software, and utility disruptions cancause gaps in data. Are any anomalies identifiedin the Trend Report?

q Distribute the Operational Review Agenda (SeeFigure 7 – Operational Review Agenda) at leastfive working days before the meeting.

q Review the information that has been gathered andidentify any trends.

q Review the information that has been gathered andcompare it to the support center’s published goals forperformance. Note: Use the methodology discussedin Chapter 3 – “The Impact of Cost per Incident onthe Balanced Scorecard” and Chapter 4 – “Tips andTechniques for Managing the Support Center’s Costper Contact by Communication Channel.”

q Take corrective action where costs exceed goals.This action may require further investigation, datacollection, and analysis. Each corrective actionidentified, should have an owner and a date whenthe action was implemented.

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Conclusion

Calculating the cost for each contact channel ismerely a starting point for the monthly, quarterly, andyearly monitoring of a support center’s operation.The calculations themselves are straightforward andthe process for gathering the data to perform thecalculations can be with a minimum of effort. Whatmakes the difference for a support center is how thedata is translated into information that can be used totrack performance trends over time; that’s the hardpart. The forward thinking support manager will usethe information to monitor costs for each contactchannel and use the cost trends to identify problemsand take corrective action.


Special thanks to our HDI members that tookthe time to assist us in producing this book.

Bob Barnes, JP Morgan-ChaseJohn Custy, The JPC Group

Mark Ellis, Kronos Inc.Rich Hanke, Lockheed Martin

The Support Center Balanced Scorecard Service ModelThe KPI's featured in this graph are samples and not meant to be all inclusive.

www.ThinkHDI .com

Customer Satisfaction Goals

n Total Calls Received

n Customer Satisfaction Rating

n Total Response Time

n First Call Resolution

Costs/Productivity Goals

n Average Cost Per Service Request

n Average Cost Per Customer

n Average Cost Per Customer/User

n Cost Per FTE

nced Scorecard Service Modelare samples and not meant to be all inclusive.

m I (800) 248-5667

Employee Satisfaction Goals

n Employee Satisfaction Rating

n Training Hours

n Turnover Rate

n Total Performance Evaluations Completed

Organizational Maturity Goals

n Visible Executive Support

n Time To Employee Proficiency

n Formalization of IT Processes

n Industry Recognized Certifications

102 South Tejon Street, Suite 1200

Colorado Springs, CO 80903 USA

U.S. and Canada: (800) 248-5667

www.ThinkHDI.com

Documents

METRICS CATALOG SERIES: VOLUME 2/media/HDICorp/Files/Books/... · 2019-06-04 · the expectation that they will be able to contact a support center in a manner that meets their needs