Avoid Breaking The Bank In The Age Of ‘Wageflation’

Avoid Breaking The Bank In The Age Of ‘Wageflation’

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Nick Cerise is the CMO at TTEC Holdings, Inc. (NASDAQ: TTEC), an end-to-end Customer Experience as a Software (CXaaS) provider.

Like it or not, $15 an hour is the minimum wage in today’s labor market. As the economy reopens across the U.S., there is a wave of available jobs without the same supply of available workers. At the same time, the cost of living has risen dramatically, with gas prices, health care, child care and food costs continuing to climb.

According to the Labor Department, there were 9.2 million unfilled jobs as of May 2021, a record high. Job seekers can afford to be selective, thanks to factors like unemployment benefits and remote work options that expand their prospects. Meanwhile, inflation rose to 5% in May 2021, the largest jump since the 2008 recession. Gas prices are up, used car prices rose 29% and lumber costs three times what it did last year.

This confluence of inflation, labor shortages and immediate need for workers has resulted in “wageflation” — a precipitous, unexpected and immediate rise in wages based on unique market forces. With wageflation, employers pay more for the same job and the same level of productivity.

Before the pandemic, major brands had committed to raising starting salaries, effectively raising the minimum wage through competition. This trend accelerated substantially in the past few months. Notable examples include:

Amazon, Starbucks, Target: $15

Costco: $16

JP Morgan Chase: $16.50

Charter: $18

Bank of America: $20

In addition, some companies are offering incentives such as $1,000 signing bonuses, enhanced health care and vacation benefits, free mobile phones and other perks previously unheard of for low-wage workers. 

Three Ways To Balance Wages And Costs

The contact center industry is vulnerable since most centers operate with high turnover rates and they continuously hire workers to provide customer support and related services. This challenge has gotten even more intense as the need for phone and online contact center staff jumped when stores and in-person support channels shifted to virtual environments.

So, how can firms that operate on razor-thin margins increase wages to attract, hire and retain workers without breaking the bank? Change how you think about the work. Don’t think of how many employees you need, but instead think of how much work needs to be done. By shifting to outcome mindset, opportunities emerge to leverage new ways of doing business.

At my company, we call it the “effective rate” — a metric that calculates total cost of ownership on a per-employee level based on the outcomes produced, like issue resolution.

In my experience, there are three levers to maintain or increase the effective rate and reduce total cost of ownership with a mix of employees, enhanced technology and streamlined processes.

1. Geo Strategy 

Optimize your geographic footprint by placing jobs in the most cost-efficient locations around the world, based on skill or language required.

Nearshoring and offshoring aren’t new for contact centers, but there are untapped opportunities to incorporate global support in industries or interactions previously off limits. In health insurance, offshore agents can serve as the first step for members or prospective members to field simple questions about information or accounts, and forward more complex questions and sales to a smaller group of licensed U.S. agents.

Within the U.S., the successful shift to remote work over the past 18 months means that companies are no longer hamstrung by physical locations. Remote workers can be recruited from areas of the country with lower costs of living.

 2. Attraction & Retention Of Great Employees

Get, keep and grow great people with flexible, supportive, employee-first environments with career potential value for employees. Look to recent advancements among diversity, equity and inclusion efforts as one example of ways companies are focusing on positive employee cultures.

Encourage and empower employees by streamlining processes and deploying tools to simplify how employees work. Things like a single sign-on to all systems or an AI-enabled knowledgebase help to make each customer-facing task more efficient while boosting employee satisfaction.

3. Automation & Deflection

Self-service, digital channels, call deflection and automation reduce costs and employee effort, improving productivity and efficiency without skimping on service. Fewer people can leverage technology to do more work.

Automation and deflection technologies such as chatbots, automated IVR and SMS messaging vastly improve the effectiveness of customer interactions with fewer employees and more satisfied customers. For example, in my experience, one contact center associate can handle up to four concurrent SMS text messages compared to one phone call.

These three levers help brands lower the total cost of ownership by preventing customer calls, improving internal efficiencies and adding more value to the customer and employee experience. They bring down the effective rate across the employee population even as wages increase to meet market demand.

In the contact center world, let’s say you have 1,000 customer service associates who make $12 per hour and your costs are $66 million. The effective rate is $36 per agent. Deploying the three levers above, you move some simple calls offshore, deflect password reset calls with automated customer self-service and add SMS messaging options for customers. Now, customer support agents are more productive and serve more customers. Even with a wage increase from $12 to $15 per hour for U.S employees, contact center costs drop to $54 million. This represents a 30% reduction in TCO, which lowers the effective rate across the employee population from $36 per hour to $29.40.

You can be as or more productive with a different employee landscape than you are with your current workforce, freeing up budget to increase wages. When employees’ needs are met and they feel valued, their happiness will translate to happy customers without sacrificing the bottom line.

So, while wageflation may have a negative connotation, it could also lead to a better way to do business.


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