Avoid the Pitfalls of Call Center Site Selection
All of us should accept that the call center industry will continue to grow. Just as the economy remains strong and businesses continue to grow, the Internet has advanced; new technology continues to service call centers, and more e-commerce fuels the call center need. These facts are part of what makes it difficult to expand a center within a current market and makes it even more difficult to find new markets that are not already saturated.
* Many companies that use larger call centers -- those with 500 to 1,500 seats -- face two main problems: First, the call centers' attrition rate is 30 percent or more, and exorbitant incentives must be employed to ensure agent retention; and second, the labor market is too tight to find qualified agents. This has forced many large companies to use two or three call centers with 200 to 400 seats each in several different labor markets. The additional facility costs are far outweighed by a reduction of 20 percent or more in turnover and by lower wage rates. Multiple sites also provide greater immunity to regional power or telecommunication outages.
On a recent project, we reduced a client's risk of being offline because of inclement weather by locating a new site in the Southeast. Its existing centers were in Snowbelt regions, as a result of which they were offline for 11 days last year alone.
* Smaller call center operations may employ the opposite strategy to reduce operating costs. Companies with multiple call centers of 15 to 25 seats each may realize a tremendous increase in performance and a reduction in operating costs by consolidating these small centers into one or two larger centers with 100 to 200 seats each. It is difficult to realize any savings or achieve any economies of scale with multiple, 15- to 25-seat call centers.
For example, a large public utility company recently analyzed its portfolio of 23 two- to 10-seat call centers. By consolidating its 23 locations into two call centers with 125 seats in each, the company calculated a projected savings of more than 40 percent in operating costs.
* Historically, call centers have sought to locate new facilities in large labor pools -- cities with populations of 250,000 or more. However, with the economy as strong as it is, these large cities provide a new user with three key factors, each of which can lead to disaster: stiff competition, high wage rates and low unemployment. Current site selection models prove that in today's market, it is more common for the call center user to locate in communities with populations of 50,000 to 200,000. If the user -- or its site selection service provider -- did ample and qualified research, it would find that locating in a smaller market can lead to huge success and favorable savings.
For example, a third-party service provider recently located in a labor market in the Central time zone. This market had a population of 150,000, a civilian work force of 63,000 and 4.8 percent unemployment. There were only four other major call centers located in that market, none of which were in direct competition with one another. The community embraced the new employer with sales tax abatements, training incentives and guaranteed labor. Both the community and the landlord guaranteed the community's labor pool by allowing the new user to walk away from its lease should the community not be able to provide adequate labor. Additionally, temporary space was granted for recruitment and interviews as construction on the permanent space was completed.
How can you ensure your success and find a guaranteed labor market? While no one will find a 100 percent, money-back guarantee, you certainly can take steps to ensure a qualified labor pool and reduce your chances of disaster.
Start early: Time is your biggest asset. The biggest problem facing most call center users today is planning. Without proper planning, many companies approach call center site selection from a reactive position rather than from an active one. To remedy this problem, incorporate call center site selection into your firm's annual planning strategy. Forecast your growth, project the expected hours and, when possible, anticipate upcoming contracts. Even if you cannot anticipate your next big client or growth surge, get a site selection firm working to pull up a list of potential cities for your next center.
When you work with a qualified firm, there is typically little up-front cost to begin the site selection process. Remember time is of the essence. With time on your side, you can bid out each city you are considering, maximize available economic incentives and ultimately choose a community that best fits your needs. Too often, inadequate planning forces companies into site selection decisions based solely on available buildings rather than on crucial economic and labor factors.
Do not let the real estate drive the site selection. When companies allow real estate considerations to overshadow critical labor and infrastructure factors, they often end up losing more money than they save.
For example, a company that needs to open a 40,000-square-foot, 200-seat call center that will operate 24/7 and will employ 400 agents may narrow its site selection search to two communities based on real estate considerations. Community A offers a building at $4 per square foot. Community B's call center facility is $12 per square foot. By choosing Community A, the firm saves $320,000 in annual facility costs. However, if the company has not adequately researched area unemployment rates, wage rates and competition, it may lose two or three times that amount because of higher labor costs. For the same 200-seat call center, a $1 increase in agent wage rates will cost $832,000 or more per year.
Research the labor, competition and telecommunications infrastructure first. Identify the top quality labor markets you want to consider and then examine available real estate. There may be a few unturned vacant "turnkey" or "spec" call centers in various markets, but those should be easily identified by the site selection firm with which you work.
Find a qualified site selection firm. Most companies go about site selection in one of three ways: assigning an employee to make calls to economic development agencies and to sift through the information; working with a local real estate agent and implementing a "this-site-looks-right" method; or hiring a qualified site selection firm.
While employee input is critical to determining your firm's site selection criteria, charging an employee with the entire site selection process places your organization at a disadvantage. Unless your firm employs a full-time site selection professional, the employee assigned to your firm's site selection initiative will have other primary responsibilities and job duties to which to attend. As the call center industry continues to grow, companies need a professional with considerable site selection knowledge and the ability to focus exclusively on choosing the right site in order to maintain a competitive advantage.
Though local real estate brokers know about every building in town, they may provide limited knowledge of current site selection strategies and are rarely sources for unbiased comparisons of their community's infrastructure and demographics. If the local broker represents both landlords and tenants, be sure you are not swayed to one building vs. another. And if you are considering five different real estate markets, you will have to work with five individual brokers.
Hiring a qualified site selection firm will help ensure your success and will reduce your chance of error. In selecting a qualified firm, make sure that firm has a national presence.
National site selection firms track hundreds of economic development agencies and a multitude of labor and community information. Do not limit yourself to working with a local firm. Ask the firm how it makes money. Some firms will charge large nonrefundable retainers. Others may reduce your costs by collecting real estate brokerage fees that are often inherent in the transaction.
Finally, select a firm to assist you in all phases of the site selection process, from researching the initial demographics and preparing labor studies and competition surveys to identifying available space, properties or build-to-suit opportunities. The firm should help you negotiate economic incentive packages as well as assist you through the finish-out process, including space planning, construction oversight, telecommunications, cabling, furniture and move coordination. Make sure you select an established and qualified site selection firm to create a successful team.