Offshoring call centres: a balancing act?

Simen Munter, group general manager, global shared services, ANZ

Offshoring call centres is an important strategic decision for any company, and getting it right requires careful consideration of a number of factors, writes Leon Gettler

In a globalised economy, more companies are sending finance back-office and call centre jobs offshore to improve access to technology and cut costs. This has become critical as more companies struggle with Australia’s high cost base.

Companies that have outsourced their call centres include AAP, Air Australia, Visy, Brambles, Perpetual, AGL, Transfield Services, QBE, Worley Parsons, Bancassurer Suncorp, American Express, Bank of Melbourne, Bigpond (Telstra), Citibank, Energy Quotes, Energy Watch, Foxtel (billing and support), iiNet, Jetstar, GE, GoSwitch, Optus, P&O Cruises, Readers Digest, Tiger Airways, Telstra, Virgin Broadband, Virgin Mobile, Vodafone, and Wiley Publishing.

Because in many cases it means local job losses and is loaded politically, companies are reluctant to discuss the issue. HR managers at GE, Perpetual, AGL, Telstra and Transfield all refused to discuss how they went about best practice in offshoring when approached by Inside HR. However, other companies were willing to share details on how they went about it.

ANZ: balancing capability with capacity
Simen Munter, who runs ANZ’s global shared services, says the bank has hubs in Australia, New Zealand, Manila and Bangalore but all the staff are ANZ employees, offshoring without outsourcing. It’s a deliberate strategy, he says. “It’s all ANZ employees serving ANZ customers,” Munter says. “There is value in having ANZ people handling ANZ activities.”

Munter says chances are someone calling from Australia will go through to the Australian call centre. Much of the stuff done in the other hubs is not customer facing; however, the hubs have specialties. The Manila hub, for example, puts in outbound calls (chasing up people, for example, who might have overlooked paying their credit card). The hubs, he says, are built around talent pools and expertise.

“Capacity is the main driver,” he says. “It’s about where we have the right specialist to handle your call. Effectively what we do is we try to service people from the easiest, closest location first and we will leverage that. It’s like you are coming to the checkout cashier and there are multiple queues – we always try to send you to the shortest queue.

“We are looking at the ability to use the talent pool in those countries because there is a lot of expertise and experience in those markets in customer service, in HR, in processing, gained through years of sourcing from other countries. We want to tap into that in a way in which we lower the cost for us whilst ensuring that we deliver better and better quality for customers.

“By leveraging people who have knowledge and experience in how to run activities more effectively, take things like payroll and accounts payable, we have 33 countries to run it for. To find someone who is experienced at running that kind of diversity is actually very difficult in Australia, whereas it’s quite easy for areas where we have hubs. That’s our pool of skillsets in running multiple locations. It’s not typically found in Australia, but it’s widespread given what’s happening in the hubs.”

This has produced massive cost savings with the hubs producing economies of scale and lower unit costs contributing to a three per cent drop in operating expenses. Operations expenses growth in Australia is running at minus 10 per cent, while volume growth has increased globally by 12 per cent. “Instead of running it as 33 different banks, we want to run as one bank with scale across 33 different markets,” he says. “Instead of having 33 different systems we have only one system; instead of 33 management teams, we have one management team. That’s the point in reducing costs – it’s partly process, it’s partly a level of salary arbitrage, although we are also servicing low cost countries like Vietnam. It’s about getting that process efficiency and using that knowledge to drive quality improvements.

“There are two golden rules: quality cannot go down and price cannot go up. We don’t believe we need to compromise on quality to get the cost benefit out when we do this right.”

He says this is part and parcel of the ANZ’s culture that seeks to position it as Australia’s major global bank. And it has improved customer service. “What we are looking to do is deliver those Asian cost structures into our delivery of low customer fees. Our capabilities here enable us to invest in customer service because the operational model is cheaper than our competitors,” he says.

In terms of jobs shifting offshore, the ANZ seeks to redeploy as much as possible, and in cases where people are retrenched, the ANZ works with the union for retraining.

Driving customer service: Citi
Deepak Jain, head of operations and technology at Citi, says the bank had offshored its customer service from Sydney to the Philippines to achieve sustainable cost savings and, at the same time, raise customer service levels. To do this, he said, Citi assessed the attitudes and competencies of people in key roles, improved the recruitment processes, increased compensation and aligned variable incentive upside to success in service, included customer satisfaction in incentive structures, and simplified call centre metrics, moving from 64 scored items to 10, to focus on customer satisfaction. The leadership team was also closely involved with monthly visits, quarterly town hall meetings and shared staff recognition programs.

All this had a positive impact on customer service. Customer satisfaction for servicing increased from 65 per cent pre offshoring to 82 per cent, and customer satisfaction for collections increased from 44 per cent pre offshoring to 67 per cent. “Citi achieved material cost savings to achieve a better cost to income ratio,” Jain says. “This supported reinvestment into improved digital and customer services and product development.

Any redundancies, he says, were well flagged. “Some staff were redeployed to other areas of the business whilst others were offered redundancy. All were offered a full suite of outplacement services,” he says. The changes enhanced the organisational culture of Citi, which has a presence in 121 of the world’s top 150 cities.

“Citi has a truly global outlook when it comes to organisational culture centred around execution, accountability, and staff and customer engagement. We are proud that our staff in Australia and offshore see themselves as one team and not siloed by geographical boundaries. They share successes, recognise each other for great work and indeed support each other through difficulties.”

QBE’s global approach
A spokesperson for QBE said the insurer had to offshore its operations because of the rapidly accelerating costs in the industry. There was a clear business case around building economies of scale for a company that operates in 48 countries.

“It was clear to us that the speed of change within the insurance industry had accelerated during the past couple of years, and in order to remain a leading, competitive insurer, we needed to make some material changes,” the spokesperson said. “We made this decision in order to reduce our operating costs to sustainable levels and significantly improve our service, providing a more effective service for all our partners and customers.

“In establishing our group shared services centre (GSSC) in Manila, we have streamlined our processes through reducing administration activities and improving documentation, to produce faster turnaround times and better handling of high-volume activities. We have also implemented a variety of new metrics to consistently measure and continue to improve our performance. Our transformation is part of a global QBE program, which includes a number of projects across the globe. It enables us to position QBE Australia for the future, ensuring we can provide affordable and sustainable insurance to Australian and New Zealand people and businesses.”

The spokesperson would not indicate how big the savings were, nor would they indicate how many jobs had been cut to make the transformation. But they said redundancies were carefully handled and job losses minimised through redeployment.

“As we reviewed our processes and decisions were made, we communicated first and foremost with our people affected by the changes. We consulted with them on the changes throughout the program and continue to do so,” she said. “We have always been focused throughout on redeployment and retaining as many of our people as possible, and this has always been the number one priority. We have made every effort to minimise the impact on our people throughout, and have achieved this through a combination of natural staff attrition and high levels of redeployment. Where we have been unable to redeploy our people internally, we have provided them with dedicated and specialist professional support to assist them in finding new roles, as well as redeployment and notice periods in which they are encouraged and supported to identify new opportunities.”

Offshoring call centres is an important strategic decision for any company. There are pros (reduced costs, more streamlined services, positive company culture) and cons (job losses and morale issues, separation of the team). But clearly, the companies that say they have done it well have based their decision on more than just price alone. That is what makes it so important strategically.

Call centre facts

  • Subcontractors: two thirds of all call centres in-house operations, serving a firm’s own customers. Sub-contractors operate the remaining third.
  • Customer segmentation: 75 per cent of call centres predominantly serve mass market customers, while 25 per cent serve business customers.
  • Service versus sales: The largest proportion of call centres provide customer service only (49 per cent), while 21 per cent provide sales only and 30 per cent provide sales and service.
  • Inbound versus outbound calls: Most centres primarily handle inbound calls (78 per cent) rather than outbound calls.
  • Organisational and workforce characteristics: The typical call centre employs 49 workers. However, the majority of call centre agents (75 per cent) work in call centres that have 230 employees or more.
  • Compared to in­house centres, subcontractors are more likely to focus exclusively on sales and outbound calls. They make greater use of part-time and temporary workers, offer lower discretion jobs, have higher levels of performance monitoring, pay lower wages and are less likely to covered by unions.

Source: The Global Call Centre Report, Global Call Centre Network