Want to Change the Game with Contact Center Vendors? Contract With Them Differently.The Accenture Vendor Management Framework

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To deliver a consistent, multi-channel customer experience, companies must emphasize both simplicity and clarity in the contracting process. Anything less puts them at risk for customer dissatisfaction and churn.

Since many companies outsource customer care to contact center vendors as part of an overall workforce strategy, they must pay special attention to creating strong collaborations with their selected vendors. Through these transparent strategic relationships, companies can build trust with their vendors and contract for targeted business outcomes, which in turn helps vendors to provide a reliable and branded customer experience in every interaction. (The alternative is to take a more traditional approach to outsourcing; however, these approaches leave the tone and delivery of the direct customer contact “up to chance,” and greatly decreases the likelihood that the vendor will provide the desired customer experience. Examples of more traditional options include the “subordinated vendor” model, which typically includes a highly complex “straightjacket” contract with specific service demands; or the “vendor of choice” model with a less complex but still relatively strict contract that prescribes actions vendors should take).

Companies that strive for the more advanced strategic relationship-building approach will need to take an active role in the vendor management game—changing the way they do things by selecting, contracting, managing and executing with vendors differently. (See sidebar on Accenture Vendor Management Framework). The second step in this four-part process, and the focus of this point of view, is contracting with vendors differently.

Contracts are typically written in structured legal language to protect the parties entering into an agreement. As such, they are the defining framework for how companies and vendors work together to achieve a result—in this case, serving customers. Taking a fresh approach to contracting with vendors provides companies with the opportunity to establish the groundwork for a strategic relationship; shift thinking from a transaction-based to a business outcomes-based payment structure; and focus on a few consistent, high-priority metrics. Once again, simplicity and clarity are pivotal principles—this time in the contracting process.

Contracting differently also opens the door for flexibility, creativity and innovation in the strategic relationship between companies and their selected contact center vendors. Altogether, these qualities can result in top line growth, such as sales or margin lift, and/or bottom line performance outcomes, such as increased customer satisfaction, improved first contact resolution and reduced cost to serve. Accenture experience shows that this approach drives mutual benefit for leading companies and top-performing contact center vendors, who welcome the opportunity to be measured on outcomes.

Introduction

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As companies progress toward high performance, they can play the game to win or to lose. Winners change the game by developing collaborative and transparent relationships with their contact center vendors using a four-step process that requires them to do things differently: select the appropriate vendors, contract for outcomes, manage them effectively and execute correctly for results. (See Figure 1).

Contracting differently, in conjunction with the other three aspects of the Accenture Vendor Management Framework, is an important phase in creating strategic collaboration—a step that can boost the potential benefits for companies, vendors and customers alike.

For more information about selecting or managing vendors differently, see these Accenture point of views, “Want to Change the Game With Contact Center Vendors? Select Them Differently” and “Want to Change the Game With Contact Center Vendors? Manage Them Differently.”

Accenture Vendor Management Framework: Select, Contract, Manage and Execute Differently

Figure 1: Companies should do four things differently to help establish and maintain strategic relationships with contact center vendors.

Select Differently… Contract Differently… Manage Differently… Execute Differently…

•Aimtobeproviderofchoice

•Incent/rewardplayerswithbetter cost-per-resolution (cost and quality)

•Keyselectioncriteria,vendorsshould be able to team strategically

•Leveragescaleandnicheplayers to round out network

•Biggerincentives(withhigher thresholds) and lower penalties

•Balancedmixofeffectiveness,qualityandefficiencyKPIs

•Reducedvolumecommitments

•Focusonoutcomes,adherence, adoption, and greater visibility and control

•KPIgraceperiodsduringramp

•Performanceandsitemanagement

•Innovationmanagement

•Globalagentmanagement

•Strategicsourcing

•Workforcemanagement

•Businessintelligence(BI)andchannel analytics

•Self-serviceautomation

•Technologysupport

Drive Consistency and Reward Delivery

•Customerexperienceblueprint

•CreateCentersofExcellence

Eliminate Waste

•30/60/90-dayforecastingof network and intra-day call management

•Priorityroutercallmanagement

•Hourly/daily/monthlyopportunity to gain/lose volume

Source:AccentureLLP

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Levers/RisksCost Structure

Emer

ging

Anti

quat

ed

Per full time equivalent/payroll hour

Pay for seat charges and utilization offers lowest risk, but fewest levers. Labor rate includes benefits, paid time off, pyramid, training and attrition. Can be difficult to hire and retain staff, especially if they have language requirements.

Per available hour Relatively low risk. Must address same challenges as above, plus increase focus on employee schedule adherence to maintain productivity and minimize shrinkage.

Per productive minute Standard high-volume costing approach. Must address challenges above, while optimizing agent time spent working. Method to minimize idle time requires solid baseline, accurate forecasting, and real-time processes.

Per call/per interaction

Must address challenges above, and develop good understanding of average handle time (AIIT) benchmarks and drivers to leverage appropriately.

Per customer/subscriber

Offers the highest risk/reward combination, but must address the challenges above, understand input rates/calls per customer baseline, and develop ability to influence each lever.

Per outcome (i.e., first call resolution, customer satisfaction, money collected, sales made and close rate)

Manages risk from elements of issue resolution/outcome that are not under company’s control. Best to use in contracts that offer a large bonus for performance. Must address the challenges above (except for input rates), plus issue resolution rate and transaction effectiveness.

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Issueswithoperationalexcellence,revenue growth, competitive positioning and differentiation, along with changes in technology, have compelled companies to seek more value from their contact center vendors. At the same time, the cost structure for outsourcing customer care has evolved along a continuum as these companies push to continually improve business results. (See Figure 2).

Redefining the Contracting ApproachWhen outsourcing was a new concept inthe1990s,manycompaniespaidforcall center agent support on a full-time equivalent(FTE)orpayrollhourbasis.Intheyears2000-2010,thepaymentmodelevolved to a per available hour and then to a per productive minute structure. Currently, many companies pay on a per call or interaction basis with a few moving toward paying per customer or subscriber. These types of arrangements have relatively

equal bonus and penalty structures that are meant to encourage vendors to improve key operational metrics, such as reducing average handle times or minimizing transfers. Unfortunately, since the majority of vendors’ compensation is based on the calls or minutes that they handle, this will betheirfocus.Littleattentionwillbepaidto achieving specific business outcomes for the company, or on delivering a consistent and branded customer experience agenda.

Are you contracting with selected contact center vendors to build strategic relationships? Do you properly incentivize them to achieve desired business outcomes?

Figure 2: Leadingcompaniesareadoptingaper-outcomepaymentmodelfor outsourcing that focuses on business outcomes.

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Starting now and looking to the future, Accenture recommends contracting differently, which has the dual objectives of helping companies achieve targeted business outcomes, while giving preferred vendors the flexibility to achieve these outcomes using creative and innovative methods. Contracting differently is an essential component of building strategic relationships in which companies can clearly communicate business objectives to their vendors and modify contract language to incentivize the vendors to achieve specific outcomes.

A key factor of this emerging approach is to adopt a per outcome payment model. For call center vendors, this might equate to earning a certain amount of money for each resolved call; for sales vendors, it could be money per sale. Additionally, we recommend simplifying and enhancing the bonus/penalty structure for vendors. Offering larger incentives—for example, upto20percent—forachievingthetargeted business outcomes and imposing smaller penalties when goals are missed creates a more positive and collaborative environment. This approach is much more likely to inspire vendors to achieve the specified goals and deliver the company’s desired customer experience, which is a win-win for both sides.

Contracting differently is also about balance. Companies must strive for the right mix of effectiveness, quality and efficiency key performance indicators (KPIs).However,quantitydoesnotequalquality. Too many metrics or over-engineered measurement systems may result in vendor confusion or workarounds to optimize pay. Companies are better served if they streamline the number to two or three core metrics to which the vendors can adhere—such as increasing first call

resolution, improving customer satisfaction scores and reducing transfers. This also allows for greater visibility and control on both sides.

Another important aspect is to include an initial grace period during ramp up. This will help smooth the vendors’ transition to the new compensation model, and allow them time to establish a baseline and achieve theKPIs.This“grandfatherclause”inthecontract would be followed by periodic self-adjustment cycles as the vendors work to continuously improve. For example, if a company contracts with multiple vendors on a per resolution basis, they can specify a targeted percentage improvement and lock in the preferred payment per resolution for a time period, such as six months. During this timeframe, some vendors will be operating at or below the targeted resolution rate so their pay will be higher; others will need to work toward the target, but will have adequate time to do so. At the end of the time period, the company can set a higher target resolution rate and allow the vendors another six months to self-adjust.

Lastly,companiescancontractdifferentlyby adding a clause that rewards vendors who are meeting or exceeding goals. One option is to make call volume contingent ondemonstratedsuccess.Ifaparticularvendor is consistently delivering on business outcomes, the company can discuss redirecting more calls to the vendor. This

is another win-win situation, in that the company can potentially achieve even greater cost savings, while the top-preforming vendor has a larger piece of the pie in a multi-vendor model and more opportunity to earn associated bonuses.

One note of caution: Contracting differently requires companies to be highly disciplined and trust their selected vendors to meet desired business outcomes. Defining the parameters for a strategic relationship in the contract is one thing; carrying it out consistently day after day is another. As discussed further in Accenture’s Managing Differently point of view, companies and specifically vendor managers must resist the impulse to micro-manage preferred vendors.Likewise,theymustavoidadjustingKPIsormodifyingmetricsonamonthly basis. Quarterly or semi-annual metric reviews are better, giving vendors the time and leeway they need to be effective. For example, when moving a specific vendor’s first call resolution rate to a higher threshold, it is respectful to give them a reasonable period of time to achieve the new target.

Contracting differently is focused on helping companies achieve targeted business outcomes, while giving preferred vendors the flexibility to achieve these outcomes using creative and innovative methods.

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Accenture helped a large US-based telecommunications company successfully progress through the four stages of the Accenture Vendor Management Framework—selecting, contracting, managing and executing differently—to achieve high performance results. The contracting process was particularly important in that the company established the groundwork for a new, more collaborative and transparent way of working with its vendor ecosystem.

The company also clearly articulated specific business outcomes for its preferred contact center vendors to meet, along with an outcomes-based compensation model. Now the company and its vendors are setting the bar even higher by incorporating other Accenture Vendor Management Framework innovations into the way in which customer service is provided.

Communications Provider Improves Customer Satisfaction Through Strategic Relationships with Vendors

Emerging Practices for Contracting Differently Of course, this advanced approach to contracting and new compensation model must be documented in a legally binding contract on which both companies and their selected vendors “sign on the dotted line.” At a minimum, companies will need to simplify the language in the payment terms section to outline the new bonus/penalty structure over a defined time period, and clarifythespecificKPIsandmetricsthatare the basis for the per outcome payment model. These modifications can be done during the regular contract review cycle by issuingnewrequestsforproposal(RFPs)or at a time that companies choose by distributing contract amendments.

Additional guiding principles to keep in mind as new contracts are drawn up include:

•Develop strategic relationships to work collaboratively and build upon business knowledge: Set the stage for treating preferred contact center vendors as trusted advisors. Establish access to appropriateexecutivesattheC-suite,VPand direct report, and vendor manager levels on both the company and vendor side. Define an issue escalation path.

•Create trust-based relationships and maintain vendor visibility to the business: Keepvendorsapprisedofoperationalorpolicychanges.Includevendors in communication about major decisions or responses to market conditions.

•Engage with vendors and provide them some control over processes that affect the business outcome: Establish communication to understand vendor issues that can be improved by the company.

•Establish a clear understanding of what constitutes a successful outcome:Buildflexibility into the agreement through simplicity to revise criteria as needed and maintain contract continuity. Ensure requirements, escalations and scope/change management processes are well defined and managed. Mitigate against agents gaming the program (i.e., cherry-picking easy call types through transfers).

•Work with vendors to define and share risks: Calculate risks at each stage of the engagement and work to reduce risks outside of a vendor’s control.

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Conclusion To compete in a highly demanding, consumer-driven environment, companies must closely evaluate if they are paying their contact center vendorstodeliveraconsistentandbrandedcustomerexperience.Ifnot,it is time to engage preferred vendors in a conversation about building a transparent and collaborative strategic relationship and working toward targeted business outcomes. At the very least, contracting differently realigns the energy and effort for how companies and vendors can do business together. At the utmost, it fosters a mutually beneficial level of flexibility, creativity and innovation in customer service that can generate even higher levels of performance for both parties.

Byfollowingamoreadvancedapproach to contracting, companies can develop strategic relationships with their contact center vendors and achieve numerous benefits, including:

•Decrease costs and/or increase revenues:Payingvendors,forexample, primarily to increase first call resolution will reduce overall call volume for the company. Likewise,payingpernumberofqualified leads or completed telesales can improve revenues.

•Align goals and improve performance: Working toward achieving shared goals and business outcomes can increase performance for both parties.

•Enable better customer service and more efficient operations: Focusing on outcomes can increase customer satisfaction levels, while decreasing cost to serve for contact center vendors.

•Build collaboration and transparency: Companies can share tools, standards and resources to analyze and discover underlying customer service issues. Vendors can share ideas and solutions to help achieve desired business outcomes.

Contracting Differently Creates Opportunities

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Accenture, its logo, and HighPerformanceDeliveredaretrademarks of Accenture.

ThisdocumentisproducedbyconsultantsatAccentureasgeneralguidance.Itisnotintendedtoprovidespecificadviceonyourcircumstances.Ifyourequireadvice or further details on any matters referred to, please contact your Accenture representative.

Contact Us To learn more about how Accenture can help you select, contract, manage and execute contact center vendor relationships, please visit www.accenture.com/managementconsulting or contact one of the authors:

Dwayne Norton dwayne.e.norton@accenture.com

Andrew Boernke andrew.d.boernke@accenture.comm

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with approximately 289,000peopleservingclientsinmorethan120countries.Combiningunparalleledexperience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenuesofUS$28.6billionforthefiscalyearendedAug.31,2013.Itshomepageiswww.accenture.com.

About Sales & Customer Service (CRM)Sales&CustomerServices(CRM)helpscompanies acquire, develop and retain more profitable customer relationships. We offer a broad range of innovative capabilities that address every aspect of the customer experience, including pricing strategy and profitability assessment, customer analytics, direct and indirect sales force execution, customer service, field support, customer contact operations, and retail/branch operations. We use these combinations of skills to help our clients accelerate growth, improve sales productivity and reduce customer-care costs—helping increase the value of their customer relationships and enhancing the economic value of their brands.