Cut Support Costs by Reducing Escalations

Three times in the last month I’ve had a conversation with a member company about escalation levels and cost per support level (Level 1, Level 2, etc.). I just wrote a quick research report on the topic that will be out in a few weeks, until then, I thought I’d share some of the data with a larger audience.

According to member surveys, incident cost increases at least 40% when escalated to Level 2, and 80% or more when escalated to Level 3. Where does that cost come from? Part of it is salary costs, and the other is just time involved. We began capturing salary costs in the benchmark last fall, so I have preliminary numbers I can share. These are averages for fully burdened employee costs by Level.

Average salary cost by Level or Tier are shown in Figure 1. Amounts are fully burdened costs for direct employees, not outsourced workers. Level 1 employees have an average salary cost of $43.58 per hour, with the average climbing $10 for Level 2, at $53.64 per hour. Level 3 workers earn an average of $58.27 per hour. Obviously there are B2B numbers. Salary costs for high volume, low complexity consumer call centers would be significantly lower.

Escalated incidents also cost more just because of the time involved. The longer it is open, the more time support techs spend on it, the higher the incident cost.

To reduce the number of issues escalated, support organizations should:

  1. Understand why issues are being escalated. Issues resolved by Level 2 or beyond should be classified to determine why it was not resolvable by Level 1. Typically this is one of two reasons: either the issue was too complex for a Level 1 tech to resolve, or the time required to research and resolve the issue was too long for a front line support tech, whose primary focus is productivity and keeping th inbound incidents.
  2. Identify which of the issues could be resolved by Level 1 with additional training and/or knowledgebase content. Though more senior technicians may be wary of documenting their expertise in the knowledgebase, if it allows front line techs to be able to resolve an issue faster, it lowers operational costs and improves the customer experience.
  3. Shift resources to Level 1. Over time, Level 1 should grow as a percent of overall staff, showing more issues are being resolved at a lower price point, as well as lower overall employee costs. As seen in Figure 2, currently 45% of support staff, across all TSIA members, is in Level 1. 31% of workers are in Level 2, with 24% in Level 3. Companies should target having at least 50% of employees in Level 1.

I’m hearing more these days about alternates to classing Level 1/2/3 organizations. Phil Verghis of the Verghis Group has done some interesting projects in this area, and I’m sure he will discuss his “no more tiers” thinking in the workshop he is doing at our Vegas TSW event in October.  The workshop, Transformational Leadership: Beyond Shiny Objects, will cover moving customers from a transaction-based-support model to a relationship-based one. For more information, check out the list of workshops.

If you have had a successful project to lower escalations, please chime in with your story! And as always, thanks for reading!

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11 Comments on “Cut Support Costs by Reducing Escalations”

  1. Haim Toeg Says:

    Interesting post John. I never liked multiple levels and still believe they are disruptive rather than beneficial. They create artificial barriers to movement and knowledge, extra bureaucracy and a fake sense of organizational exclusivity. My preference is to always push the knowledge as far out as possible instead of escalating cases as into the organization until they hit the person with the right knowledge.

    I am sure if someone researched the additional costs for escalated cases they would discover that a significant part of the extra costs were due to organizational mechanics: the effort associated with qualifying the case for escalation, case handoff and repeated work being done by the higher level.

  2. Roy Says:

    Good post and good metrics John.
    In the organizations I have seen its tiered service as well with levels 1-3 in IT and sometimes levels 1-5 for software/hardware makers.
    Obviously at levels 3 or up there are also indirect costs as you pull away folks from their day job to troubleshoot/fix things.
    Also, there are more and more automated Self Help/Service technologies today that can help deflect calls from tier 1.
    I’ve seen a few of these in the last TSW – Inquira (Now Oracle) and Softlib Software are the ones that come to mind.

  3. jragsdale Says:

    Thanks for the input. Haim, you or Phil V. need to sit me down and explain “no more tiers” to me. Having always worked in tiered environments, I’m curious about the balance between expertise and productivity, as well as career advancement.

    Roy, you make an excellent point that bears repeating. Self-service is deflecting more of the simple questions, meaning the average complexity of issues handled by Level 1 increases. So Level 1’s technical expertise is also evolving.

    • Roy Says:

      John,
      Thanks for repeating the point. What I liked about these new knowledge delivery solutions is that they allow you to achieve both – resolve repeat issues early with self help/service and increase the ability of each tier to resolve issues with fewer escalations.
      Some vendors offer solutions that require more manual labor and some offer automated “agents” that deliver these abilities. I’m especially excited with the latter as they can really help take the load off the different tiers, offer solutions automatically (“push”) and shift the economics of the tiered model favorably.
      Again I see many indirect savings and benefits, from shorter service cycles to better agent retention as they get involved with more complex issues and advance professionally.

  4. Haim Toeg Says:

    Happy to do so John, let me know when is a good time for you to discuss.

  5. Abhay S Says:

    Haim,
    The concept of layering has its advantages and helps us reduce the overall cost of operations, provide growth opportunity to the fresh graduates and under graduates. Knowledge absorption happens at a rate, where the rate is proportional to experience gained in the field dealing with products/technologies. In case of flat structure how do you distinguish between a level 1 fresh employee and tenured employee?. I disagree that flat structure is best way to deal in high complexity heterogeneous environments.

    I look forward to your comments.

    Abhay

  6. Haim Toeg Says:

    Abhay,

    When I read your comment, there is not a single word about resolving cases faster or any other customer benefit. There are six words on cost efficiency and numerous other words about challenges managing the people in your operation. This is exactly what I menat in “fake sense of organizational exclusivity”.

    In most organizations I have seen (yours may be different, and if it is, I’d love to hear how) extra tiers are created frequently exactly as you defined them: a way to distinguish between the experienced technicians and the new recruits and a way of ensuring that they do not ‘waste their time’ on anything that can be solved by a lower tier person. So far, so good.

    Here’s what happens in practice:
    – All cases go to tier one
    – Cases that tier one can’t resolve go to tier two,
    – Before they are escalated cases must be qualified, a template filled and an explanation of everything tier one has done must be documented
    – Tier two reviews everything with tier one
    – Tier usually repeats anything tier one has done
    – Tier two researches, may solve the problem, or needs to escalate to Tier three
    – Guess what happens now?

    So, the tier system places the time and availability of higher tier staff at a premium to the customer’s time, and by choosing it signals this preference to the customers through the behavior of its support organization. Additionally, as John’s post shows, the cost savings associated with escalated cases is, at the very least, not a straight forward proposition.

    The challenges you mention of recognizing skills and specialty are real and must be addressed. The way I advise organizations to solve them is by ensuring that the experts are recognized as such in a flat organization. This can be done by title, pay differential, participation in special projects, mentoring newer team members and ensuring they take cases that are related to their specialty as frequently as possible.

    The objective, after all, is to bring the knowledge as close to the problem as possible, and the tier system prevents this from happening.

    Haim

    PS – John, with your permission, I would like to link to replicate this on my blog as well and post a link here. Please let me know if this is OK with you.

  7. Phil Verghis Says:

    Hi John,

    Nice article. Abhay, your points make sense, but as Haim points out, is a very internal view of the world. An article I wrote on this in 2008/9….

    http://www.verghisgroup.com/wp-content/uploads/2009/02/verghis_sspa_reprint.pdf (oh ignore the photograph – reminds me of when I had hair)…

    I’ll look around for a more recent example of how this has been put in place… Stay tuned.

    Peace,

    Phil

  8. Phil Verghis Says:

    Here is the post – long, detailed by Sam on what was done at Red Hat on moving to a Savvy Support or ‘Intelligent Swarming’ model. It is an evolving journey but a very interesting one.

    http://www.managementexchange.com/story/designing-open-collab


  9. […] Ragsdale has an excellent post about the costs differentials between escalated and non-escalated cases across support tiers. The […]

  10. Haim Toeg Says:

    John and all,

    I made the case for reduced number of tiers in a post on my blog, it repeats most of the points I made earlier here and expands on them a little.

    http://wp.me/p1N3PR-5l

    Haim


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