Seven Tips for Building a Business Case for Better Contact Center Reporting & Analysis

From the moment the first call rang through at the first agent’s desk, your call center systems started logging data that told the story of how your new organization was performing. The story was relatively simple in those early days, and the standard reports generated by these operational systems answered your basic questions. If they didn’t, you simply fired up a spreadsheet and did a little cutting and pasting of data from various sources to answer more complex questions as they sprang up.

But then your contact center itself started getting a lot more complex — more agents were added, then more call center sites. New applications for handling agent scheduling and customer information were brought aboard. Then e-mail and web interactions swelled from a trickle to a torrent. Suddenly, your call center is now a multi-channel contact center, with half a dozen major systems generating reams of data.

No wonder contact center managers, supervisors and analysts are getting overwhelmed. According to Ventana Research, less than a third of companies in a recent survey could produce a scorecard showing all the key metrics needed to assess how well their contact centers were performing — just at a time when the contact center is taking center stage in many organizations.

At first glance, it may seem like an investment in better contact center reporting would be an obvious sell to senior executives; after all, the management mantra is “if you can’t measure it, you can’t manage it.” However, no IT investment can claim to be a “no-brainer” in these shaky financial times. If you’ve hit the wall in your reporting and analysis efforts, it’s worth the time and effort to build a simple but compelling business case for adopting a contact-center-wide strategy.

It’s All About the Money, Honey

The most important thing to remember about building a business case is that it’s a business case — it needs to express its conclusions in financial terms. Senior executives think about almost everything in bottom-line outcomes. Non-financial reasons for a project — efficiency, better infrastructure, and so forth – should only be mentioned in support of a conclusion that’s expressed with a dollar sign.

Costs are King (or Queen)

There is much (justifiable) excitement about the contact center’s potential for driving revenue, market share, and brand awareness. However, these “top-line” benefits, while desirable, are not guaranteed to appear if the investment is made. Costs, on the other hand, are concrete, quantifiable, and well-known (because they’re being paid regularly). Cutting an existing cost can have an immediate bottom-line benefit. A business case for an investment that eliminates costs is thus a safer bet for the executive suite to make.

Labor Lost

In management accounting terms, contact centers are considered cost centers, and their biggest cost is labor — the wages, salaries, and benefits of their employees. Thus, the easiest way to quantify the impact of an investment in better reporting and analysis is by showing how it can “save” the labor it “loses” to inefficiency.

To do this, first identify each category of employee affected by your current reporting and analysis practices, from agents and analysts to managers and supervisors. Then calculate an average hourly wage rate for each category; usually this is a “modal” average (ie. a typical hourly rate) for wage-based employees and an arithmetical average for salaried personnel converted to an hourly rate. You should also estimate the cost of employee benefits — paid lunch hours, holidays, health plans, sick days, etc. One quick-and-dirty way to do this is “topping up” the hourly wage rate by 20 percent.

Don’t Try to Boil the Ocean

The purpose of a business case is to show that an investment is worthwhile because it’s likely to deliver a positive return. It doesn’t have to incorporate every single possible benefit, financial or otherwise. Thus, the best business cases limit their focus to their most critical key performance metrics — the information which determines their particular contact center’s success or failure. Making the case on this basis alone is far more compelling than an everything-and-the-kitchen-sink plan.

Go With the (Work) Flow

The reason most contact centers invest in better reporting and analysis is because their current analytical processes are too labor-intensive. Typically, this is because they are spending inordinate amounts of time collecting data from several different systems, reconciling differing measures, error-checking, and generally spending many hours doing the work that software could be doing automatically in seconds.

A useful way to quantify the effect of these laborious processes is to map them visually in a simple workflow diagram; you can use a fancy tool like Microsoft Visio to do this, but Excel or even PowerPoint will do just fine. Break down each stage of the reporting task, noting the time in minutes or hours for each task. Then build a comparable workflow for processes after a better reporting and analysis solution is in place.

Using your hourly rates, compare the labor cost of both these scenarios. Don’t worry about the cost of new software and services at this point; the will appear when you calculate return on investment. Executives think about capital costs (new software, etc.) and operational costs (in this case, labor) separately, as they are expensed differently for accounting purposes. Workflow diagrams literally help you illustrate how these operational savings will accrue over time.

ROI — It’s Payback Time!

Calculations of return on investment (ROI) are what separate a real business case from a mere memo pleading for new software. Executives are responsible for making every capital investment pay off, so spell out the expected returns in terms they understand – ROI.

There are three kinds of ROI calculations, and you should plan on using all three:

Payback Period: This is the simplest method to calculate. Basically, it relates how long it will take the expected savings from the project will cover the project’s costs.  It’s handy if your organization likes its projects to cover their costs and begin paying off within a given period, say 24 months. The formula is simply:

So, an $85,000 project (software and services included) yielding an expected savings of $5,300 per month would have a payback period of just over 16 months. So if your organization likes its projects to pay off within 24 months, then this one passes the test.

Net Present Value (NPV): If you really want to win the hearts and minds of the executive suite, this is the ROI method to use. Put simply, NPV relates the value of a project as an investment, in terms every executive understands — dollars. It takes into account not only the cost of the project and the incremental (monthly) savings, but also any minimum target return or “hurdle rate” the organization may have for capital spending over a fixed period, in our example 24 months. Executives are not likely to invest in anything — a bond, a stock, or a project — that will return only one percent per annum, but they may feel that a 10 percent return is worthwhile. Ask around the finance department to see if your organization has a hurdle rate.

To calculate NPV, you simply add up all the savings over the period in question (in our case, 24 months), discount them by 10 percent per annum (being careful to use an adjusted monthly rate, in our case 0.797 percent per month), then subtract the cost of the solution from that total. If the result is above zero, the project will be deemed worthwhile, because it will return more than ten percent, our hurdle rate. Here’s a simplified way of expressing it:

So, if your company has a ten percent hurdle rate, then here’s the NPV of our project over 24 months:

Or:

Put simply, our project will return $30,358 above and beyond our hurdle rate of six percent, so the project is definitely worth doing.

Internal Rate of Return (IRR): Now, merely beating a hurdle rate (especially one as low as 10 percent) doesn’t turn many heads in the boardroom. It’s also useful to estimate what the actual rate of return will be in percentage terms. That’s where IRR comes in; it’s essentially a restatement of NPV in percentage terms. You find that percentage by calculating what, in the equation above, the hurdle rate would have to be for the NPV to equal zero. For illustration:

Now, if you’re not following the math, don’t worry — IRR is almost impossible to calculate by hand. Good thing there are dozens of spreadsheet templates and web sites out there to do it for you. (If you’re so inclined, you can use a trial-and-error method by plugging larger and larger hurdle rates into the NPV equation above until NPV is reduced to zero, but who has the time?)

Whatever method we use, we see that over 24 months an investment of $85,000 yiedling $5,300 a month in savings and an NPV of $31,604 will yield an internal rate of return of 31.66% — definitely a rate of return that will get some attention at a capital budgeting meeting.

Keep It Short, Silly

The beauty of building an ROI-based business case is that the numbers discussed above speak volumes. Resist the urge to add a lot of flowery technical rhetoric or academic-sounding “research” — it’s not a term paper. A concise business case should be four or five pages at most, including diagrams and tables. Better yet, consider personally presenting the case in PowerPoint (or your favourite slideware app) and an accompanying one-page summary. Brevity is the soul of wit, and of capital budgeting.

Finally, if you’re worried that your concise, tightly reasoned and quantified business case will lead to laying off of staff who heretofore filled their time cutting-and-pasting call center data into spreadsheets the old fashioned way, don’t worry – or at least, <em>try</em> not to worry. Executives don’t automatically convert labor savings into headcount reduction; they’re likely to be satisfied that a better reporting and analysis solution will offset the need for future headcount, and reallocate existing personnel to more strategic and valuable tasks.