Contact center compensation represents a big chunk of operating budgets. So great are the costs of staffing these new age repositories of customer interactions that off-shoring, a term formerly used to describe bank accounts of the rich and famous, has become the mantra of U.S. corporations looking to reduce labor costs.

Although salary costs are lower across an ocean, contact centers that manage compensation in close alignment with business objectives will still be more profitable than ones that do not. With costs for contact centers on the rise as the industry matures, what goes around will come around, and the same compensation issues that keep U.S. management up at night will have the same effect in India.

While moving operations to another continent may provide near-term relief for rising salaries and benefits, it's important to consider some fundamentals of compensation within the context of sales and service delivery in a high volume, labor intensive environment.

If millions of dollars are spent on compensation and reward systems, how aligned are the expenditures with the overall objectives of business?

A leading computer maker asked my firm to help their outbound and inbound sales reps to better integrate product knowledge with selling skills. For each instance of successfully selling product leasing services versus product purchase to small business customers, the company increased revenue by 30 percent. The client contact responsible for outbound sales recognized the opportunity cost of not providing the tools necessary to achieve the increased sales on a consistent basis.

Logic versus management
After conducting extensive research interviews and observations with employees and management in the outsourced contact center, a new fact came to light. While employees were expected to use new relationship-selling tools to increase revenue on each call, they were rewarded only on the basis of getting a customer off the phone in four minutes. To the outsider, the logic seems elementary.

But after more than 20 years in the business, I know that employees pay attention to what management thinks is important. To the computer maker, the obvious had been staring them in the face for years. The impact of what was happening had been lost on them and showed a resulting loss of market share and position. Within the next year, the company made a great expenditure in bringing contact centers in-house.

Another example of opportunity cost is the prevalence of contact center management to focus on internal and external rewards. Sales staff is rewarded. Service staff is not. Customers placing an order press "1" and are rewarded with an immediate response. Customers needing service press "4" and hear that all representatives are busy now.
These types of thorny issues are faced by American bricks-and-click commerce and are larger than the scope of one article. They require a lot more digging to get at the roots of the issues that drive performance management and compensation systems.

Linking pay with performance has been a compensation tool, but it is often not well delivered. As in the case of the computer maker, what employees expect and deliver and what management expects are all too often two different animals. Whether contact center reps are paid by individual incentive or on merit:

Make the plan simple:

• Develop realistic objectives that not only can be measured but which also have meaning to all involved (reps and management.)
  
• Clearly tell reps what is expected. In other words, what great performance looks like in relationship to each objective.
  

Employees who take responsibility and commit to each objective achieve higher results through strong personal commitments to company success.

Rather than "throwing the book" at employees, pick the key things that must be accomplished in any given quarter, season, year (you provide the measure).

Communicate about reward systems often, and consistently find ways to tie reps into the bigger picture of how aspects of their jobs tie to that bigger picture. Help each person understand and be able to calculate his or her impact on the bigger picture—and the impact of the rep's performance on individual compensation and company performance.