Low salaries, high costs—The financial side of seniority in customer support
Customer support typically represents one of the highest cost components in a software company, second only to product development. Add the fact that around eighty percent of the costs of these companies are represented by labor, and you’ll see many people trying to reduce customer support costs by reducing personnel salaries.
Although the above seems to be a logical measure, a more careful analysis show us that the best approach is exactly the opposite: higher salaries can easily promote lower costs!
Perhaps you already connected the dots, but we want to make sure this is clear to everyone. In our post Junior people in customer support—Something to avoid for complex products we discussed why having junior people providing support for complex solutions is usually not the best approach for operational reasons. Now let’s discuss three financial elements of why junior people should be avoided.
The first element is the total cost of an employee, something that’s not addressed by many customer support managers and human capital managers. This cost not only includes the employee’s salary and bonuses, which are related to the employee’s level of experience and knowledge, but also elements that tend to stay the same regardless of the employees’ pay grade or role. These may include benefits, the cost of a workstation (office space, equipment, software, etc.), and travel.
The second element is training. People with lower salaries, usually more junior professionals, will typically require more time dedicated to training, incur additional costs from course fees, and demand more time from senior professionals and supervisors for training and coaching.
The third and most important element is related to productivity. Complex solutions require understanding the problem, identifying root causes, composing solutions, and instructing customers. All these activities are time-consuming, so the more experienced and knowledgeable a professional is, the faster they can get through these steps and resolve a customer request. This part seems obvious, but the lack of proper metrics often blurs the numbers and information that could help managers make the right decisions. In this case, many customer services managers—and most of the inexperienced ones—don’t realize that a senior customer support agent is easily three times more productive than an inexperienced agent.
To put all this in perspective, one may be surprised to find out that:
- a senior agent with a salary 80% higher than a junior agent may cost only 50% more;
- new hires demand a significant amount of training. They are also less likely to adapt to the job than experienced professionals, causing turnover that, in turn, generates new hiring and training costs;
- higher-salary agents need less help from their peers and cause less interruptions, reducing wasted time; and
- the usual 2-to-3 times higher productivity of a senior professional creates exceptional savings.
After calculating and analyzing the above elements, one may be surprised to find just how much can be saved by paying higher salaries to customer support agents—and, by doing so, also having a more senior team with better retention.
On top of the cost-related benefits, there are also the all-important quality benefits. One should take into consideration that senior people provide a faster and more pleasant experience to customers, with much higher rates of first-contact resolution, far fewer interactions to close tickets, less incorrect information given to customers, less liability, fewer escalation issues, and fewer business disruptions.
So, the next time your boss, your CFO, or human capital asks you to reduce salaries, make sure to ask them and yourself: do we need to lower salaries or costs? Because in doing one, you may not be doing the other!
Agree with the above? Have a different opinion? Have a particular issue with it and would like to exchange some ideas? Please leave a comment! We’ll be happy to learn or share more information and insights about the topic.