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Shrinkage

Definition

What is Shrinkage?

Shrinkage is a call center term for the period that people are paid for when they are not available to answer calls. Shrinkage is the difference between the actual amount of working employees (budget) and those required to perform the primary duties (work) by which they are employed.

Several reasons can induce shrinkage. This includes some unknown ones that are not as apparent as some that are outside your reach.  Make consideration about shrinkage percentage scheduling the number of agents required to manage incoming call volumes. Call centers that regard shrinkage as a major predictor of labor-management (WFM) while recruiting and scheduling strive to reach a high quality of operation at a lower rate.

Why is it necessary to measure shrinkage?

Calculating the shrinkage predicts the average number of employees who would not answer calls over the interval. This volume can vary, but the normal range is between 10% and 40%. For this figure, you should now split your base personnel requirement by the consequence of arriving at the number of employees you should schedule.

Call centers that take shrinkage criteria into account of their planning and scheduling reach higher service levels at lower operational costs. They also do this by incorporating all call-related tasks in the forecasting and scheduling process.

How to calculate call center shrinkage

To get the shrinkage, add the total hours of external shrinkage to the total hours of internal shrinkage. Then, divide it by the total hours available. Then, multiply it by 100.

During slow times, agents can take longer breaks or spend more time talking with their colleagues. And if these extended periods of unavailability exist at times when your company does not accept a lot of consumer requests, you will need tests to assess the degree of shrinkage.

 

What is Shrinkage
What is Shrinkage?

How to control shrinkage in the call center

Shrinkage can be tracked manually or using cloud-based call center software. This helps in examining when and where shrinkage occurs. 

In addition, the software can help decrease shrinkage in your call center. It’s important to remember that shrinkage is uncontrollable or unavoidable.

Here’s how to control shrinkage that will assist you in maintaining a solid strategy for shrinkage reduction and regular monitoring.

Make use of Workforce Management (WFM) tools

Workforce management features are now included in almost all call center software. The software can automate the shrinkage monitoring process, making it far easier and more efficient than the traditional spreadsheet method.

You may schedule agents and even allow them to create their schedules within a defined boundary using WFM tools. Skill-based routing is available in a few WFM solutions, which can improve the agent’s job experience.

Measure shrinkage continuously

Rather than being an annual or monthly effort, shrinkage monitoring should be a continuous process. Since shrinkage is a characteristic that adds to your call center’s overall efficiency, you won’t be able to improve performance without keeping a near-constant shrinkage rate. 

This is only feasible if you measure it regularly, which new-age call center solutions may help you do. Shrinkage may be measured using various criteria such as call volume, service level objectives, and average handling time. 

Variations in these measures have a direct impact on shrinkage. However, tracking fluctuations can help you pinpoint the elements that influence shrinkage.

Address absenteeism

One aspect of shrinkage that you can manage is absences. Managers can recognize agents who take frequent vacations and handle the problem. Managers should interact with agents regularly to learn about their problems and frustrations.

Absenteeism is generally caused by dissatisfaction with the work they’re performing, which you may address by providing them with suggestions on how to improve it.

Keep your agents competitive

Dealing with customers’ repetitive questions might exhaust your employees, so it’s critical to keep them engaged. You may set up a rewards program to recognize them for their efforts in addition to offering training and mentoring.

Another approach to keep them competitive is to offer incentives. Recognition on leaderboards, badges, or actual presents such as trophies is all possible rewards for achieving a goal.

Outsourcing FAQ

What is What is business process outsourcing?

What is Business Process Outsourcing BPO?

Business Process Outsourcing (BPO) is the delegation of business processes to an external service provider to a nearby or farther location. BPO uses various technology-enabled services to optimize the delivery of services.

Some of the usual outsourced business functions are the following.

Payroll Accounting Human resources Customer service Sales Marketing

In the case of content providers, these could mean hiring writers, remote editors, or virtual assistants.

BPO speeds up processes and enhances efficiency. Companies that outsource some of their business processes use their time on core services and competencies.

With this shift in focus, companies improve their current processes which may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies.

Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so. Outsourcing services can also help them save costs and resources in hiring suitable employees.

How does Business Process Outsourcing work?

Business process outsourcing happens when a business taps a third-party service provider to operate some of its internal processes. Such ‘processes’ include customer service, accounting and finance, or sales.

It is different from hiring an agency to do specific tasks, as the outsourcing provider (BPO) is more concerned with the ongoing production of labour-intensive tasks, instead of the higher-level strategy and guidance.

Now, business process outsourcing has broadened and is more akin to staff augmentation, or staff leasing.

What are the benefits of business process outsourcing?

There are many benefits to outsourcing, as well as some downsides and risks. The common benefits include:

Cost savings

Companies can enjoy savings of up to 70% by leveraging the salaries and costs in countries such as the Philippines and India.

Global market

Businesses get to access a bigger pool of talent that can fit their requirements. They can have better options in hiring employees since they are not limited to what is available in their home countries.

Global presence

At the same time, business process outsourcing opens clients to global trade opportunities. They can establish their global presence and expand more easily to other locations since they already have operations in the area.

Flexible workforce

BPO reduces internal local compliance obligations including providing additional office spaces to employees. Instead, organizations can hold their business operations on a remote setup, most usually having their teams in an office provided by the BPO firm.

Leverage skill

Companies cannot always do everything on their own. BPO enables them to leverage the skills of other specialist companies on more complex tasks such as accounting and IT.

Focus

Lastly, BPO enables organizations to focus on their core business functions. This is since most of their non-core business operations are done with the help of a reliable service provider.

Business process outsourcing examples

The business process outsourcing sector is a vast industry, generating over $200bn annually, and employing millions of people worldwide.

BPO can be seen in different forms and contexts, from hiring single staff to getting an offshore team. Some examples of BPO include:

Big enterprise

Facebook and Uber outsource many of their operational functions, including content moderation for Facebook, and customer service for Uber

Medium-size businesses

A medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines.

Small business and entrepreneur

It is common for small business owners to have a Virtual Assistant (VA) working for them full time and remotely from the Philippines.

What are the different types of BPO?

The type of business process outsourcing can be characterised by their specialisation, location, and size.

Generalist or specialist BPOs

Business process outsourcing is in the human resources and professional services sector. However, their services extend across all industries. The majority of BPOs are generalists, in that they offer a full range of professional services.

Meanwhile, some specialise in certain verticals such as the following.

Legal process outsourcing

Legal process outsourcing deals more with delegating legal processes and compliances to legal firms in another area.

Knowledge process outsourcing

Meanwhile, knowledge process outsourcing enables companies to outsource knowledge-related work including research and development, innovation, and creatives.

Location

Business process outsourcing typically operates from developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost-of-living and bigger populations. Different locations offer different advantages.

Size of BPO

The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people.

Functions of business process outsourcing

Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:

Finance and accounting

Outsourced finance and accounting services help businesses manage their books, monitor cash flow, and keep up with corporate income tax compliances without fuss.

Healthcare

Healthcare outsourcing, meanwhile, organizes various back- and front-end functions done for the healthcare and insurance industries.

Creative and content

Creative services outsourcing covers everything from post-production of Hollywood movies to newspaper and website content.

Tech, IT and development

IT outsourcing involves delegating network management, web and app development, and cybersecurity protection to IT firms in different countries.

Sales & customer support

Some BPO providers specialize in sales and customer support for pre- and post-sales transactions. This helps companies meet the expectations and demands of their customers, keeping them satisfied even after their purchase.

Marketing

BPOs and marketing firms can help in ongoing marketing, communication and branding activities for their clients. This helps them attract more suitable leads in a cost-efficient way.

Talent and HR

Businesses can delegate HR, recruitment and compliance to professional employer organizations to maximize recruitment and workforce management.

Administration

Generalist BPOs help organizations accomplish general business administration and operational activities. This includes data entry, appointment setting, and other related functions.

Supply chain management

Lastly, e-commerce stores benefit from outsourcing supply chain management to manage warehouse and delivery processes.

Top BPO companies in the world’s top outsourcing hubs

A wide range of business process outsourcing companies in different parts of the world provide utmost services to their Western and local clients. Many of them even earned recognition by award-giving bodies due to their performance in both their roles and their level of care for the employees.

Check out the top BPO companies in several outsourcing destinations below.

Top BPO companies in the Philippines Top Indian BPO companies Top South African BPO companies Business Process Outsourcing (BPO) services

With the rise of new offshore outsourcing locations, companies can have better options in terms of location and services they can delegate. However, finding a suitable BPO company can be a daunting task to be done on their own.

Good thing advisory services such as Outsource Accelerator is there to help them.

Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,500+ BPOs from different locations.

Outsource Accelerator's offerings make it easier for clients to learn about, and engage with, business process outsourcing companies worldwide.

Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!

What is Idle Time?

What is Idle Time?

Idle time, sometimes comparable to waiting time, is the period of time when an employee, machine, or commodity is ready and available but is unproductive. Minimizing idle time is crucial if a company wishes to optimize productivity and efficiency over a long time.

Companies should learn and track down idle time to figure out the difference between the current productivity levels. Simply put, any minute the computer or employee is idle is a minute of wasted productivity. Idle time is costly because the company needs to pay its staff, who are at that point, did not make any profit or income for the company.

Types of Idle Time

There are two major types of idle time, Normal Idle Time and Abnormal Idle Time.

Normal idle time.  Normal idle time is the gradual shortage of productive working hours in the course of business. In any job setting, it is inherent and can not be removed. Normal idle time is inevitable, and the company must also pay the labor expense of this time. Yet, there should be every attempt to minimize it to the lowest extent possible. Abnormal idle time. Abnormal idle time is the time loss that is possible to reduce by using precautionary measures. For example, the time wasted as a result of excessive waiting for instructions.

What is Agent Occupancy?

What is Agent Occupancy?

Agent occupancy means that the percentage of time spent on answering inbound calls by a call center agent is against the available or idle time. It can be measured by dividing the workload time by staff time. It is a statistic used to measure the efficiency of a call center agent.

The agent occupancy is sometimes confused with the utilization of agents. Both metrics have the same numerator but they have different denominators. The agent occupancy denominator is the cumulative time the speech, text, or chat agent logs into the framework, far different from agent utilization. Meanwhile, agent utilization indicates the overall time consumed by an agent through chat, voice, and email.

How to calculate the agent occupancy?

Agent occupancy is a standard and significant service desk indicator for monitoring and trends. This is because it gives an example of how active agents are when logging into the system. However, for the reasons outlined. The Occupancy Rate and the Service Level will inform you whether the personnel level is set correctly for any given period.

Here is the formula for agent occupancy rate:

Agent Occupancy Rate = Handle time (talk time + after call work time) / time signed into a queue.

What is Staff Leasing?

What is staff leasing?

Staff leasing is where companies partner with a 3rd-party that will handle the administrative aspects of employment, such that the 3rd-party is the legal entity that employs the staff. This is similar to seat leasing where a company that already has the infrastructure in place, will lease the use of that infrastructure to other companies. In the case of staff leasing, that infrastructure is the HR, payroll, and other employment-related processes; in the case of seat leasing, the infrastructure is the IT and telecommunications equipment only.

Depending on the need of the client, staff leasing companies can either provide the employees using their pre-existing pool of candidates, or the client company can handle the recruitment efforts while the staff leasing company handles the compensation and other sundries. Thanks to the scale of staff leasing outsourcing companies, they are in a position to offer more competitive benefits, such as lower-cost healthcare plans, to which smaller companies would not have access to. In turn, clients not only save on administrative costs, but the cost of an employee turns into a single line-item for easier accounting.

Staff leasing in the Philippines

Staff leasing is arguably the most popular type of business process outsourcing, where both employee and infrastructure is provided by the outsourcing company. Lessening the financial risk to the client should they decide to scale their outsourced team in the Philippines.

Outsource Accelerator's directory lists over 700+ outsourcing companies in the Philippines. All of these are carefully selected for innovation, expertise, and technology that will benefit our clients. We also provide you with guidance on the best staff leasing options you can get in the Philippines for your business.

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 3,000+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.