Its not just about "CUTS" it should be about well being!

The release of the Legatum report today which attempts to define the World’s Most and Least, Prosperous countries in economic but also social-economic terms was timely to say the least.

Coming a week after the UK’s government CSR statement the Legatum index shows us that delivery of National benefits in this case, well being are not judged solely in financial terms but in terms of quality.

Writing in today’s Wall Street Journal former UK trade minister and European Commissioner Lord Peter Mandelson reminds us that:

“To use economic measurements alone to gauge the success of a nation would be equivalent to assessing the entire condition of a man simply by looking at his bank balance. True enough we may discover whether the man is rich or poor but we learn nothing about his character, his enjoyment of life, the state of his health, the quality of his education or his attitude toward the people around him.

The limitations of measuring a country's prosperity using economic indicators alone were explained by Senator Robert F. Kennedy in 1968, during a speech at the University of Kansas. He said this:

". . . Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage…It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl . . . Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials . . . it measures everything, in short, except that which makes life worthwhile."

The inadequacy of money as the lone transformative power for lasting national prosperity has been affirmed over the last 30 years by the failure significantly to reduce poverty in the poorest nations of Africa, despite record levels of financial aid. The message is simple: Financial aid on its own is not enough. A country needs more than just wealth to be prosperous. It needs to endow its citizens with basic human freedoms, for example those that come from a safe water supply, a roof over your head and the ability to hold politicians to account for these and other essentials of life. It needs to educate its children and take care of its elderly. It needs to develop a society in which people trust one another. It needs to foster a climate of entrepreneurship and innovation. None of these are achievable without the rule of law and strong, democratic governments”

Peter Mandelson quite rightly, (never thought I would ever write that) highlights the challenges of governments around the Worked how can we deliver financial savings but at the time ensure “well being” and service delivery.  This is classic benefits realisation modelling which escapes many governments, public and private sector organisations.

The concept of the conversation in the UK for the last 6 months has been about “cuts” Financial cuts with the consequence of the effects of those often not defined or if anything like most projects often ignored.  No one has actually started the conversation with “We are going to deliver services, better and cheaper and as a result meet our financial targets”  The reason being that it is easier to deliver the savings as you stop doing things, you stop recruiting staff, you stretch maintenance targets, you delay financial capital expenditure, but what are the long term “social” or unquantifiable benefits in the long term?  

Let take an example would be delaying a PFI School rebuild will have knock on effects on social well being, the quality of pupils, teachers and parents life and of course see an increase in “revenue” expenditure as you patch and mend the old fabric of a falling down school.

Leaders within the public sector have to widen their search of brave decision makers who can look beyond just “cuts” but be innovative in ensuring that service provision improves.  There are a number of ways this can happen, outsourcing, joint ventures and shared services are just a few examples of areas where big savings can be made and service quality improved at the same time.

I will however heap praise on two announcements in the past 24 hours which as restored my faith in measuring benefits and outcomes from a decision.  The first by Vince Cable  in outlining the new “UK state pension” proposals which come from a fully costed business plan in which both financial and social benefits have been outlined.  The second being the campaign called www.lighterlater.org for later daylight savings where a fully costed business case with financial, soci-economic and environmental benefits have been outlined.  Both great examples of change management business cases which would tick the boxes in Lord Mandelson’s criteria and mine for great benefits plans.

The leadership of this innovation and change is crucial.  From my own experience in the 1990s of being a senior manager in British Rail (BR) is that those who left BR under early redundancy are those who get jobs elsewhere.  The majority who remained were those denying change ever happened.  I heard one commentator suggest that those being made redundant could undertake the change management and benefits realisation.  This thought took me to Christmas or Thanksgiving and asking the Turkeys to prepare the stuffing!

I remember in 1994 when RailTrack was formed there was a dash to their door by my managerial colleagues who saw them as organisation whose management were broadly similar to BR who was a safe haven and a return to old BR days.   And look what happened to RailTrack!  The innovators, the people who embraced change went onto lead rail MBOs and lead prIvate sector railway companies.  

So when planning the change management process lessons can be learnt from those who have seen the change management fall apart because too much reliance has been placed on internal functions delivering change.   

The challenge for organisations undertaking change are:

• Drive out financial savings and enhance service provision
• Identify financial benefits as well as social benefits and plan to know when you get there
• Identify the resource need both internal and external to deliver sustainable savings and service improvement.

Peter Mandelson article can be read in full at :

http://online.wsj.com/article/SB10001424052702304388304575574000872990256.html?mod=WSJ_latestheadlines


Contact the arradvark at www.fifthconsultancy.com

Was the outsourcing of Call Centres to the Far East a 20th century return to the days of the East India Company?

No one likes a know all.  Least of all me.  But as The aardvark is one of the first animals in the alphabet I would like to claim credit to being the first to predict that India would go through the same cycle of staff churn and subsequent loss of quality that UK Call Centre’s went through in 1990s. 

In 2003 I had the priviledge to be global guest speaker at the African Call Centre Conference held in Johannesburg. 

I have to confess that my speech was very pro Africa in terms of its opportunities in the global market and it was there I predicted the demise of India as a sustainable outsourced call centre hotspot.  I felt that the expansion of call centres in the far east in particular India was a short term gain and the behaviour of those wishing to go offshore similar to that of the East India Company 200 years ago.

I held the contention that flimsy business cases and even poorer benefits realisation plans had hindered a true debate on this subject.  I also held the view the offshoring to India did not give sustainable benefits.  I am in danger of being proved right!

I was digging around at home and found the conference notes and associated with that a paper I wrote to accompany my speech.  What prompted me to make the search was an article from the USA Time magazine that said:

“Call centers are symbols of India's economic boom. With Anglicized names and feigned Western accents, Indians handle credit card problems and troubleshoot computers, collect debts and conduct customer satisfaction surveys. Over the past decade or so, relatively high salaries in the call center sector have attracted thousands of applicants across the country. But now the boom is going bust because India's college graduates and young job seekers just don't want to be bothered with the business anymore”

The report went onto to claim that the USA could now provide UK Call Centres more cheaply than India following the wage inflation that mirrored the UK in the 1990s,

There are some within the Contact Centre industry who believe that this is a unique business.  Well in some respects it is because every transaction is different.  Every customer problem/sale is different however like most commoditised business change happens.  

The history of the contact centre industry is following a similar pattern of say Ironworking.  Iron working was first introduced to Greece as early as 1200 bc.  Iron replaced bronze.  A metal almost exclusively in our minds as the lad/girl who comes third, better than 4th in sporting events.  In Britain the Iron age lasted from circa 800 bc until the 5th century.  

Iron was the backbone of metal production right into the 19th century and was claimed to be the there at the start of the industrial revolution.  Shropshire and Monmouth became known for iron workings and Iron was king.

The 19th century saw the onset of better and cheaper materials such as steel.  Mass production centres grew up taking away the smaller unprofitable elements and huge cities such as Sheffield grew big and rich on this change.

In the 20th Century Iron was a low grade product as in the UK we transported coal and iron ore to huge plants in Scunthorpe, Port Talbot and Llanwern.

These in turn realised that in 1990s the Global market Steel could be made more effectively, cheaper even when you include shipping costs in the far east.

Now full circle steel manufacturing is returning to the UK on a smaller scale as costs in the Far East reach natural post exploitation levels.

In 2003 I predicted that the Contact Centre market in India would follow a cycle similar to that of other industries.  Seven years on it looks likely that the days of India being a relatively cost effective option where staff turnover is low and quality is sustained becomes a thing of the past.

i share with you my paper of 2003 and invite your comments.

Forget India for outsourcing say hello to Africa!  This paper and presentation was made to the African Call Centre Conference in 2003.

Nigel Gooding, MCMI outlines his own unique view of the Global expansion of the Call and Contact Centre market and the opportunities for Africa

In 1991, as a bright new Graduate of the British Railways Management

Training Scheme I had my first experience of the Call Centre World.  Hoisted into the lofty position of Station Manager, British Rail at Brighton along with management responsibility of 12 railway stations, 40000 passengers a day, 200 staff and a turnover of £35 million I had the responsibility for what I now know as a Call Centre.  There were 24 seats, key and lamp telephones, no computers and reams of railway timetables that were well thumbed from overuse by harassed staff.  A steam Driven ACD which did not have the functionality to handle more than 22 simultaneous calls despite the fact there were 24 seats!  The centre lacked information on the abandoned call rates or the engaged tone statistics, which we could use to brow beat the over worked Telephone Enquiry Bureau Manager.  The staff who worked in the Telephone Enquiry Bureau tended to be misfits, staff who had been made

redundant, ill health employees or staff who had been disciplined and moved from more traditional railway roles with very little training, development or selection criteria being applied.  However, this TEB was a beacon for the railway industry and leader of modern customer friendly interaction.

 ‘In less than 4 years the Call Centre revolution was complete’

In 1995, I found myself back in the Call Centre World, as the National

Retail and Sales Manager of a Train Operating Company, now known as Virgin Cross Country. This was a company which outsourced it’s whole retail, sales and call centre operation to other train operators, travel agents and an internal British Rail outsourcer of Call Handling “RailDirect”.  My first  visit to RailDirect was evidence that Call Centre revolution had commenced, 250 seats in the heart of Call Centre land, Newcastle in the North of England.  Workstations had replaced desks, all with computers and modern telephony headsets.  The Centre boasted a state of the art ACD, 400 lines with the ability to stack calls and find the nearest available agent.

Computers and an up to date online database of timetable information had replaced paper timetables.  The centre utilised national numbers, which can route calls by dialling location.  The terms cross and up selling, inbound ticket sales & ordering and fulfilment had replaced answering the phone.

New assessment criteria for entrants had replaced the “sin bin culture” and a new training regime had swept through the industry.  I will never forget that introduction to the Contact Centre revolution.  In just 4 years the industry had moved from a passive “nice to have” to an important customer service and sales tool which every 1990’s company needed to compete in this newly emerging global marketplace, driven by the new global technology “the internet” and the need to reduce costs.

I now look back and applaud the pioneers of the 1990’s, the companies with vision to ensure that they were not left behind in the servicing of their customers through a dedicated contact centre network.

In just four years “key and lamp” had disappeared and;

· Call Centres had become an integral part of the sales marketing mix of many companies

· Contact by phone was cost effective and of course able to offer real time solutions to both customer and business and able to respond to the 24/7 culture we now take for granted.

· An example of this change was that British Gas Trading, the UK’s

largest energy provider was able to close its entire High Street retail

outlets and deal solely with its huge customer base by post or phone.

· The economies of scale of macro sites located in areas of high

unemployment and attractive relocation grants saw many businesses seize on the opportunities of relocation.

· There was a micro migration away from high cost locations such as

London to the North of England.

· Technology was available which allowed call routing and switching 

regardless of location.  Location was no longer a deciding factor on the siting of call centres.

· The third party outsourcer was born, with the skills, ability and

knowledge to deliver high quality call handling at a fraction of the cost of in house operations, initially handling low risk non regulated markets and progressing to dealing with the “tough end” of the marketplace, outbound telesales and telemarketing.  (These included Merchants, Sitel, EDS, ClientLogic)

· The development of the “Call Centre Hotel” concept

The growth of the UK in house and outsourced Call Centre industry throughout the very prosperous 1990’s and the early 2000’s was primarily down to the realisation that failure to keep pace with customer demands will see decreased levels of customer satisfaction and of course reduced sales affecting shareholder bottom line.  The 1990’s are history as today Call Centre World is dominated by fantastic opportunities, brought about by the communication revolution by high-speed voice and data connection and the universal adoption of the Internet to the marketing mix.  The Call Centre has given way, like it’s predecessor the Telephone Enquiry Bureau, to the Multi Channelled Contact Centre where agents are able to answer customer enquiries both in and outbound, web chat and answer e mails and correspondence during the course of their shift.

However, at the height of this evolution in the UK Call Centre industry was not all rosy.  The rapid growth in Call Centres saw quantity exceed quality as agent numbers were squeezed by a prosperous economy, high agent churn rates and the lack of an available work force as unemployment virtually disappeared.  In addition there was a major shortage of skilled middle managers and no formal coaching and training for these vital post holders.

It is my submission that the growth of the global market place, combined with the failure of the UK and other Western marketplaces to adequately deal with the problems created by their growth, has allowed a fantastic opportunity for the Global outsourcing of business to the New World.  The revolution in overseas outsourcing assisted by technology improvements, allows those Nations with a lower cost base to make a case for overseas outsourcing of not only calls, but also back office activities.

Since the late 1990’s the outsourcing of key customer service functions

overseas to Asia has been a key debating point in Boardrooms of Western

Europe and the USA.  The growth has not only been in the rush to enable in house call centre operations to service new homegrown markets but the huge growth in the outsourced contact centre.  In the European Economic Community Area (EU) not a week passes by without a story of a major EU company outsourcing elements of its back office or call centre operation overseas. 

Abbey National is considering plans to outsource its call centre and

administration operations to countries such as China and India.  19-Jun-2003

In recent weeks British Telecom has hit the headlines in closing a number of UK based call handling sites and relocating to India, joining Prudential & Orange.  Industry insiders love figures; the headline figures of £465 million worth of business will this year be outsourced to India.  The American Analysts, Gartner forecasts the Worldwide expansion of outsourced activities, estimated at $520 billion market in 2000, will reach $696 billion by 2005.  

Forrester the USA analysts claim in a recent report that some 3.3 million USA Call Centre Service jobs and $136 billion will be lost to overseas competitors which will include the likes of Barbados, Jamaica, Ireland, Malaysia, and South Africa all offering a real low cost alternative.

This expansion is currently attracting interest in many European and USA companies, primarily by the Financial Directors.  With total payroll costs making up 70%-80% of the total operating costs a potential cost saving of 60% on operating costs of a large contact centre is enough to ensure a healthy discussion in boardrooms across the Western World.   The attractiveness of a Country which can offer a low cost base, English speaking business culture, strong technology and educated labour pool thus, reducing operating costs, equating to higher profits and a competitive edge.

Any company who fails to realise that their operating costs can be slashed by 60% will not be in business for much longer as competitors seize on this saving.  This recent analysis by contactbable.com shows the cost savings that can be made.

INTERACTION TYPE AVERAGE COST

Automated email £0.17

Web self serve £0.30

IVR £0.70

Telephone agent (India) £1.60

Assisted email £1.70

Text Chat £3.20

Telephone agent (UK) £6.50

However, many boards would not only look at cost alone. It is a brave

company who invests its whole business strategy in one overseas location.

An example being India where tensions with Pakistan run high and the threat of a localised war would have a devastating effect for those who had put all “their eggs in one basket”

How can Africa benefit from this global expansion?

With cost being a predominate driver I have taken time to examine a key

contender in the global marketplace.  South Africa can now compete on terms with the best.  South Africa can offer Costs savings in the region of 60% of those in the UK.  Political business stability, high unemployment in some areas combined with low attrition, excellent first World national electricity and telecom, and an attractive exchange rate, all allied to a European time zone, a mature home grown call centre market place bigger than India, Scotland, Wales and the Philippines, and a deregulated telecom infrastructure, gives them a fantastic opportunity to develop in the New World.

However, to compete for this global marketplace, South Africa has a number of negative perceptions, which will be hard to shake off.  They include inflation, perceived high crime rates, though personal experience in Johannesburg shows this to be no different than any other major City, and a relatively small-outsourced contact centre market place dealing with overseas calls.  In addition the new laws on employment and ‘black empowerment’ pose some interesting challenges for Contact Centre operators. Whilst some may argue that the “reduced” costs in operating through lower wages is an ethical issue this argument will not affect the largest corporation in effecting significant costs savings, which can be passed onto

the customer and increase shareholder value.

Opportunities for the New World?

It is my contention that we are already seeing the effects in some countries of the problems that beset the UK Call Centre Marketplace in the 1990’s.

India is currently suffering the same problems as the UK in the late 1990’s, where the migration to the North of England from the South was driven by high attrition rates and reduced operating costs.  Agent churn was high and the available marketplace of available workers had dried up by the late 1990’s leading to localised wage inflation.  The skill shortage of middle managers was evident in the immature call centre economy.  In addition, the performance of some outsourcing providers in overseas Countries has mirrored the quality downturn experienced in the UK in the late 1990’s where quality was forsaken for delivery, after all can a company who previously owned a chain of garages be expected to successfully operate an outsourced contact centre? In addition staff in these countries where significant time differences occur have complained of shift patterns which are unfriendly to family life (12 hours difference in some cases)

In conclusion offshore contact centre deployment is here to stay and is a natural extension and organic growth to the mature homegrown marketplace, but be warned nothing ever lasts forever!  Seize the opportunity presented.

It is thin client time for local authorities as their BMI reduces - The new operating model for Local Authorities- it was our idea!

Suffolk council plans to outsource virtually all services

http://www.guardian.co.uk/society/2010/sep/22/suffolk-county-council-outsource-services


In the early winter of 2007 I was sitting in a pub connected to a hotel adjacent to Newcastle Race Course drinking a very pleasant of Black Sheep when I saw the light.  I was sitting discussing our days work with WSP Group's head of UK Local Government Consultancy John Nicholson.  Myself and John had been commissioned to work with North Tyneside Council to review its Highways and Open Spaces Services.  The project had a joint remit, the first being a best value review of the services and two a proposal and indication of the willingness of the private sector to undertake these services.  The reason I share this story with you is that it is the first time I really understood the concept of a local authority being a "thin client"

In our work we have determined that North Tyneside (NT) wanted to get themselves into a position whereby they became a true representative of the Customer (Resident, Business or Tourist).  With our proposal we were able to get the Council, Elected mayor and workforce to a position whereby NT would purely become a commissioning agent, "a thin client" NT would outsource the services, set challenging targets, qualitative output measures and reduce cost and improve service delivery.

This was the first time I had proposed a "thin client" the Customer representative in this case being NT being the commissioning agent.

It therefore came as no suprise when I read this morning that Suffolk County Council had seen the light and was looking to become a professional commissioning agent outsourcing many services.  As someone who has trawled through badly written local authority contracts whose outputs measures were limited and mainly quantitative and the contractor was running rings around the local authority I understand the concerns that many of the merchants of doom bring forward at this time.

The key to delivering a professional service via outsourcing is to get the contract right.  You do not need to have the brain of Carol Voderman to understand that the private and charity sector can deliver services at a fraction of the cost.  Whilst they can deliver services cheaper than "in house/DLO" type operations unless the contract is right, clearly specified and managed the customer experience will suffer.

The secret to good commissioning is ensure that the customer focus remains and one contract service outcome that should be included within every contract is to ensure "that every outsourced service provider ensures that their services spends more time with the customer"   This measure will ensure that by spending more time with the customer that customer experience and perception will increase.

The notion of the "this client" is one every organisation that has a high management overhead should look very carefully at.  The "low hanging fruit" which many claim does not exist in the public sector does exist.  This includes most of the transactional business on the front line.  I have advised many local authorities that this transactional business is best done elsewhere and retain the real skill in house if you have any doubt on the ability of the service to deliver.

One such example is Housing Benefits. Lets call this a 4 stage process (1) Customer Advice, (2)Data/Doc Collection (3) Assessment of the Claim and (4) Payment - It is clear that stages 1,2 and 4 are transactional some engineers would call this a commoditised element.  Looking at this four stage process it is fair to say that Council's area of expertise is the assessment and may wish to retain this process in house whilst they outsource the other stages.  Stick to your CORE service and expertise and outsource the rest!

Whilst I am on the subject of housing benefits there is massive scope for improvement is service and cost savings here as each English district council enforces a system which is generic against a set of rules which are generic regardless of where you live.  Its time for Housing Benefits services to be joined up!

The success of the outsourced National Pandemic Flu Service where the Department of Health was the "thin client" and private sector delivered the service proves that where competition exists amongst suppliers then outsourcing really does deliver.

Integrate, Integrate, Integrate

Whilst reading the Sunday papers I acknowledged commentators waxing lyrical on the failure of the Facility Management Group Connaught rapid fall from fame and eventual administration and loss of hundreds of jobs in the West Country.  It was very sad to see this fall from grace from a team that I held in the highest esteem.

Connaught were one for my former clients.  I also knew them well from my time as a National Executive Representative on the national Council of the British Institute Facility Management.

The Sunday newspapers gave many reasons for the failure of the Group, the final straw being the lack of credit and cash to purchase supplies in order to continue to do their jobs.

The failure of Connaught reminded me of the failure of property services company Erinaceous in 2007.  Erinaceous like Connaught was a darling of the stock market.  They grew quickly mainly through organic growth but through acquisition.  They acquired companies quickly, paid off directors, paid some in shares but others is cash then operated them as separate parishes with everyone having a structure of management and overhead .  It is clear that no effort of integration was made as managers were concentrating on the day job rather than the change management work required to integrate these companies, merge back office activities, people, process and technology.  It was far from clear whether leaders in Erinaceous were competent in the day job let alone being able to complete this change management and integration.  Eventually the servicing of debt of Erinaceous had run up buying companies and the failure to derive savings from integration and the gambling on organic growth brought them to their knees.

My work with Connaught highlighted and exposed a similar story though let me say I found Connaught management a competent team unlike those I met at Erinaceous.  My work in the responsive maintenance division showed that virtually every contract was being run in an entirely different way.  Each contract had its own management structure, own customer relationship management system, its own methodology of “getting the jobs” out to the lads/girls on the tools and its own set up of incentives for growing business.   My first finding was simply that the there was no customer focussed integrated pull off the shelf way for delivering good customer service at the right price.  Every contract had a overhead which I recommended early on should be shared into a simplified structure.

Connaught had developed at FM customer relationship management system which was top notch.  It integrated with clients CRM systems, allocated jobs based upon metrics and skill set of workers via PDAs.  However, this only was evident in 50% of the contracts, some of the acquired businesses, and large contracts still worked on a paper based system.  Contracts varied between 2 jobs per day to 4.5 per day.  This must of been impossible to manage from the centre, recommendation 2 integrate, integrate, and integrate quickly.

The output was simple integrate back office activities, share contract resources established shared service control centres to drive out costs of contracts and up the workforce productivity.  Our report was straight forward, integrate and integrate quickly but recognise its not someones day job, after all the old adage is where an empire is built they are hardly likely to want to give back the crown.

I can only judge by reports I have read from both Connaught and the Administrators is that this integration never took place and the winning and financing of contracts became a dark art of creative bidding, it was alas this bidding and failure to drive out costs through integration that brought Connaught down, as it brought down Erinaceous three years earlier.

It is more interesting to see the challenges of failure to integrate and perhaps pay too much for “dog end” businesses is the RBS/AM Ambro failure which has cost the UK taxpayers millions in bank bail outs.

My advice is always ask the question “what is the real cost of integrating this business and it is reflected in the purchase price, contract bid prices and do we have the skill sets in the business to deliver it.  The were many parish leader disputes in both Connaught and Erinaceous all of which did not add value to the bottom line so seek your integration resource carefully

Alas in the case of Connaught and Erinaceous the answer was no!