High employee turnover is hurting contact centers in even more ways than expected.
The Contact Center industry is known for having a notoriously high turnover rate between 35-50%, which is well above the average for other industries. The low retention rate directly affects the contact center’s profitability income as they spend hundreds of thousands of dollars on recruitment, training, and lost productivity. While turnover varies by wage, the role of the employee, and geography, the cost generally is between 16% and 20% of an employee’s annual salary.
This post will be breaking down the true costs contact centers suffer from due to low employee retention including:
- Underestimation Of The True Costs Of Turnover
- Hard Costs Due To Turnover
- Soft Costs Due To Turnover
1. Underestimation Of The True Costs Of Turnover
All contact center managers understand how costly employee turnover is, but they often only recognize a small portion of that cost. In fact, some contact centers underestimate turnover’s impact by up to 80%. The true costs include both hard costs from recruitment and training and soft costs like lost productivity that can directly or indirectly affect a contact center’s bottom line.
Some contact centers respond to the high turnover rate by deciding to mass hire relatively low-cost employees in order to minimize their employment costs. This only further speeds up a center’s attrition rate as undertrained and unprepared agents are forced to work on the frontline and often decide to depart as soon as they find better employment. The contact center cannot meet their client needs by providing low-quality responses from the agents’ lack of the necessary knowledge.
2. Hard Costs Due To Turnover
The tangible costs from turnover predominantly come from recruiting and training costs of new hires and are the main pain points for contact centers. In an inbound center with 300 seats, the hard cost of turnover per employee is around $20,000 USD with 18% of that coming from recruiting and 47% from training costs. While training costs vary among contact centers, a LOMA study found the average for a single employee was $7,500 USD but can range from under $10,000 to $15,000 USD. A full return on investment by an employee takes at least five months, and it is very common for it to take two to three hires until one stays for five months. This extends the true breakeven point to a full year or longer as the hiring and training process restarts.
Based on a model using contact centers with different retention rates who all hired 100 people on the same day, even a small increase in employee retention rates will save contact centers a significant amount of money. A contact center with a 60% retention rate only has 13 employees left by the end of the fifth year. However, a contact center with a 90% retention rate had 66 employees left by the end of year five. Clearly, each 10% increase in retention rate makes a huge difference in both the costs and performance of a contact center immediately and over time.
3. Soft Costs Due To Turnover
All managers understand the significant monetary costs for recruitment and training, however the hidden costs account for about 31% of the total cost of turnover. These soft costs are many and include: low staff morale and engagement, exit costs, orientation wages of trainees, lost productivity, vacancy costs during recruitment, customer impact costs from inexperienced agents, supervisor time to hire and train new agents, and agent overtime to maintain service levels.
Since training needs to be ongoing to ensure the highest quality of output from the agents, high turnover contact centers face a significant opportunity cost when they are forced to use their resources to train new agents rather than focusing on improving the performance of the existing workforce. Productivity is also lost from the existing team as they are faced with the distraction of having new people constantly rotating in and out and their managers solely focused on training new employees. Instead of creating an experienced collective group, team members are always doing introductions and helping new members with the job.
Low employee retention can cripple a contact center. While the monetary costs of hiring and training are important, taking into account the intangible impact of the soft costs is also vital as they can severely affect the company’s ability to operate efficiently. Customers, clients, and therefore the contact center itself will greatly benefit if the new hire training budget can be reallocated to upskilling existing agents. In turn, the agents improve their skills and become a productive, cohesive group to better meet customer needs. This is significantly more valuable than being stuck in an endless cycle of onboarding many new employees each year.