You’re thinking about outsourcing your customer service but aren’t sure where to begin. You know that outsourcing is an option for growing your support team but haven’t heard great things about the industry. You want to grow your team efficiently but don’t want to give up on high quality customer service.
We built this guide to help you navigate the fragmented and frankly confusing world of outsourcing. To build this guide we interviewed customer service directors at established technology companies, at fast growing startups, as well as a few people who work in the outsourcing industry to get the full download on how to pick an outsourcing company (BPO) that can deliver on quality.
What is outsourcing? What are the benefits? What are the downsides?
A good outsourcing company should be able to tackle a part of your business more efficiently than you could internally.
Think about it in the context of building a house: you could build your own house but it probably makes more sense to hire someone who has done it before to build it for you. It’s going to be more efficient to find someone who knows how to do it well, has connections to the best construction workers and tools, and can run the process smoothly. All you need to do is move in and put your furniture in place.
Similarly, if you are thinking about outsourcing it's probably because your business is growing and teams unrelated to your core value proposition need investment: you could build these functions in-house but it might be a tall order given what your true expertise is. Building the functionality might take important resources away from building the core features of your business. Finding an outsourcing company allows you to pass that part of the business off to a partner. Of course you will need to put some effort into getting them trained-up and share your vision for how that part of the business will scale but ultimately the relationship will take a lot of work off your plate.
When it comes to customer service in particular, a good outsourcing company should be able to build you a robust model that includes headcount, training, management, tools and quality assurance based on the volume of work that you forecast. You will need to share your key requirements (which we’ll get into later) and volume and they should be able to project what it will look like to scale your support function as your business grows.
Mary, Director of Vendor Programs at a large, publicly traded e-commerce platform that has millions of users has managed multiple BPOs over the years and has seen a lot of benefits from outsourcing. She has set up internal systems to control for any downsides. “Outsourcing can enable your business to do things you wouldn’t otherwise be able to do. At our company we have a small team, yet by working with outsourcing companies we have a huge, global footprint with a ton of capacity. And now we have a portfolio of outsourcing companies so we can play to each outsourcing partner's strengths. For example, if we need 100 people really quickly we can turn that on in Manila. If we need something more complex we have that capability too. Being ready when those needs arise is really helpful and is not something we would be able to do without outsourcing partners.”
On the flip side she says, “the biggest challenge of outsourcing is the separation and the distance. The agents don’t report to me, they don’t ladder up to me and they aren’t sitting near me. They don’t go to our company all hands so they don’t hear directly from our CEO about mission / vision / strategy. As a result, we’ve put a lot of intention into translating what’s going on internally to our partners. This involves building communication channels, feedback loops and accountability systems.”
How will I know when it is time to outsource my customer service?
If any one of the five signs below apply to your business, it may be time to consider outsourcing:
Answering tickets is taking you away from other responsibilities that will have a bigger impact for your business
If you are finding that more resources than you would expect are going toward managing and growing a customer support team, it could be a sign than outsourcing will be a more efficient way to grow that team. Even if you are a customer service manager, taking tickets and worrying about queue coverage may not be the best use of your time - you could outsource that responsibility so that you can focus on improving customer experience and sharing customer insights with your broader team.
Josh Magsam, Director of Program Operations at PartnerHero (previously Director of Support at Discogs) sees this point as the biggest benefit of outsourcing, ”To do support well requires knowledge, people, tools and resources. Outsourcing it can really help businesses tackle more fundamental tasks like product development and sales. By outsourcing, you are buying time, particularly on the management side. “
You have grown a small but mighty customer support team at your headquarters but you are running out of space in the office and/or it is increasingly hard to source new hires where you are located
Maybe you’ve built a really strong in-house team that does an amazing job talking to customers and leveraging insights but it is becoming increasingly hard to fill those roles: the budget you have to pay the team does not allow for you to hire the caliber of people you’d like to, your recruiting team is already overburdened and doesn’t have time to do the type of outreach needed to hire the right people. Or maybe there literally isn’t enough office space to house the hires you’d like to make. When you get to this point, outsourcing probably makes sense. You can still keep a small, extra knowledgeable team in-house to support experiments and manage the BPO.
Dane Barry, Head of Customer Support at Rachio (formerly Quality Assurance Manager at FCR) thinks that recruiting, hiring and maintaining talent is the most crucial value that outsourcing companies bring, “The primary benefit of outsourcing is recruiting and staffing. Anybody who has worked in HR knows that hiring and staffing take a huge amount of time and effort. By working with an outsourcing company you remove that entire burden from your plate.”
Your team has grown but you do not have the expertise in house to pick the most efficient tools, the best workflows and track the most important metrics
When people think about outsourcing they often just think of a lot of people in a building. The truth is that a high quality outsourcing company will also help you pick the right tools and workflows to scale your team efficiently and accomplish the customer experience goals you have in mind. They will be able to benchmark where you are in your industry and set goals for key customer service metrics like average time to first response, CSAT and handle time. A good BPO will have a point of view on systems and processes that can help your team scale efficiently.
You’d like to support customers in new languages and time zones
An obvious moment for outsourcing is when you realize you have customers who speak different languages or use your product while you and your team are sleeping. If you are a US-based company it might be hard to find the right hires for customer service in other parts of the world. And unless you want to have a graveyard shift on your team, you should hire someone who is awake and working while your customers are reaching out.
You want to offer a new channel but don’t want to take on the risk and expenses associated with it
Let’s say you’ve been offering email and chat support but realize you need to offer phone support too. You’ll need to figure out the best phone system to use, how to set up an IVR system, get headsets for your team, and make sure the people you hired to do email and chat support are up for the challenge. Or you could hire an outsourcing company that has the processes and people to bring it to life on your behalf.
Mary from the large ecommerce platform put it this way, “outsourcing makes sense when you need capabilities that your company doesn’t have in-house or you need to scale up and down really quickly. We first decided to outsource because we needed phone support but we didn’t want to set up the infrastructure for it in-house. We had an internal team focused on email support and needed a partner that already had the headsets and phone experience ready to go so we could quickly scale that channel.”
How can I tell if I’m talking to a good BPO?
Maybe you’ve already gotten a ways down the road of this process and have had sales calls with five or six BPOs. They all sound good and maybe even two or three stand out as really exceptional. How do you know if they can deliver on what they’ve promised in the call? Below are four ways to tell if you are talking to an outsourcing company that can deliver on quality.
The best way to understand if you are talking to a high quality BPO is to ask for their references. They should be able to quickly provide you with at least two or three references to speak to who can tell you the pros and cons of working with that particular company. If you know of other companies working with that outsourcer but not on the reference list, definitely backchannel with them as well. In terms of vetting a potential partner, there is no replacement for talking to people who have already worked with that outsourcing company.
If you hear different things from their existing customers than what you heard on the sales call that is a sign that the company may not be everything they told you they were.
Don’t be afraid to ask for detailed information about attrition. A BPO that is focused on quality will have voluntary attrition rates between two and four percent a month. Anything more than that raises questions. High attrition could mean employees are underpaid or there is a bad culture at the company. Either one of those things will ultimately impact your customers. Also, high attrition means there will likely be turnover on your team which will also impact the quality of service your customers receive (not to mention cause additional headaches for you).
Mary counts attrition as one of the most important data points to look at in the sales process. “if you see there are really low attrition rates it means people are feeling engaged which is a good indicator of things behind the scenes. I always come back to attrition, it's such a marker. If you see a high attrition rate that’s not good.”
Digging into an outsourcing company’s recruiting strategy can teach you a lot about what it will be like to work with them. You should ask about a number of things:
- What is the profile of typical hires at their company?
- How many years of experience do employees at different levels typically have?
- How do they evaluate the language skills of candidates?
- How long does it take to bring on new team members?
- How will the outsourcing company match candidates for your specific company?
- Can you look at writing samples and the background information of candidates that will be placed on your team?
- Can you see the assessments they use for front-line agents and managers?
A BPO’s ability to quickly hire great talent is one of the main reasons to hire a BPO in the first place, so pay close attention to their ability to do it well.
Meet the Team
If you get close to signing a deal with a company you should ask to meet the management layer that you will be working with. These are the folks you'll be meeting with on a weekly or monthly basis for reporting, performance and training purposes. Make sure you like and trust them. Do they seem like accountable managers that you’d actually enjoy working with? If not, pass on the company. A mismatch with management will cause a lot of headaches for you down the road.
Don’t stop at the management layer. Ask to meet with some frontline employees. They likely won’t be the ones assigned to your team but it will give you a good sense of what to expect for the ones who will join your team. These are the folks that will talk to your customers day in and day out so you should have the experience of talking to them too.
Mary watches out for a couple of things during these calls. “There’s a lot of generic customer service jargon that people can say back to you like ‘yes we ensure quality and CSAT is important.’ It's easy to talk in a generic way but just knowing how to run a contact center is not enough. You need to be more specific about what you are looking for. Specific data points and use cases are important to dig into. For example, in a recent RFP we were really specific about needing non-english support in these exact languages or complex finance support. You need to get in a room with the team and push with follow-up questions.”
Mary spoke about the leadership/management layer being as important, if not more, than the frontline associates when it comes to quality. “Leadership is one of the biggest lessons learned of outsourcing. We originally thought it was all about the frontline agent. We’ve really built out a whole perspective on coaching. The manager is going to have the biggest impact on quality and it's much harder to find good leaders. We find that leadership capabilities is the smartest place to invest. You really need to build a leadership team that you can trust.”
She also emphasizes the importance of “local leadership,” the BPOs commitment to growing leaders in the locations where they employ people, “a good sign to look out for, once you get into more detailed conversations with a BPO, is whether or not there are local site leaders on the call. If they are serious about local leadership and involving people at this level of the conversation that’s a really good sign. I’m looking for companies that really try to be transparent, that tailor their presentation to my company’s mission and values to show that they’ve done their homework.”
Outsourcing Company Size
One other thing to consider: the size of your program compared to the size of the BPO. A ten person team is likely not going to get a lot of attention at a 20,000 person company.
If you’re running a team of 20 or fewer agents, you’d be best-served by a smaller BPO (150 to 1,000 employees). There are BPOs that start as small as 1 agent or a pool of shared agents.
If you’re running a team of 21-100 agents, you could work with a large BPO, but you’ll get more attention from a firm with 500-2,500 employees (assuming they can meet your operational needs).
If you’ll be scaling to hundreds of agents in a short period of time, that is when you would want to limit your search to a large BPO with 2,500-20,000+ global employees.
Matching candidates to brands
Does the outsourcing company make an effort to match their employees to customers based on product knowledge and interest? Companies that do the research on your product and their employees to ensure a good match will go a long way in terms of quality of service and employee retention.
How much money can I expect to save?
The savings you can achieve by working with an outsourcing company are substantial but the amount of savings will depend on where you decide to locate your outsourced team. When it comes to where, there are a few options:
Onshore: This is exactly what it sounds like. When you hire a BPO to do onshore outsourcing you hire a team of people based in the United States, usually outside of expensive metropolitan areas. The benefits of onshore outsourcing are accessibility of native english speakers, time zones that match a US customer base and ease of travel to the contact center. The downside is that it is more expensive than nearshore or offshore options and you will likely see little to no savings by choosing onshore outsourcing.
Nearshore: Nearshore outsourcing means working with a team that is in a nearby country. For US based companies, nearshore options are Central America (Mexico, Costa Rica, Honduras) or Canada. Benefits include near native-level English, a high degree of cultural understanding with a US customer base, ease of travel to visit the contact center and, compared to onshore, better pricing.
Offshore: Offshore outsourcing means hiring a team pretty far away from where you are located. For US based companies, offshore outsourcing refers to anything outside of the Americas (India and the Philippines are popular options). Benefits include the ability to support nighttime hours in the United States with an employee who is working during their day. (ex. 2am in Chicago is 4pm in Manila). Other benefits include prices that are further reduced from onshore and nearshore options. Also, the outsourcing industry has been developing in these markets for many years so there are a lot of options when it comes to companies to work with and the availability of labor.
The savings don’t only come from hiring people in lower-cost markets. A big part of the savings comes from the overhead and other costs associated with employing people directly. These things include: hiring, taxes, IT, learning & development, training and facilities.
Let’s break this down in a chart in terms of how much you can save by outsourcing by location:
Mary doesn’t see outsourcing as a cost-cutting measure but more as a way to scale with the resources that they have. “We keep support costs as a percentage of sales. I then allocate that budget across the organization as I see fit. Price is certainly a criteria when evaluating BPOs but it's something we negotiate on after we’ve made sure they can deliver on all the things we need them to be able to do.”
I’ve heard really bad things about outsourcing from an ethics perspective. Are the rumors true?
Darnell Witt, VP of Business Development at PartnerHero, former Senior Director of Support and Community at Vimeo says, “The rumors you heard are true AND they aren’t true across the board. If you do a Google search for the world’s worst employers, call centers and outsourcing companies will be among what you find, and they are there for a reason. The business model of many outsourcing companies is to increase profitability by churning and burning through low level employees and always widening the gap between what they charge customers and what they pay their employees. They have an incentive to pay as low as the market allows. That being said there are plenty of outsourcing companies that have chosen a different approach. These are companies that want to build long-term relationships with their customers and employees.”
But how will you know the difference when evaluating different companies? Below are the key indicators you can use to determine if a company is treating employees well and in it for the long run or using a “churn and burn” approach. The good news for you is that being able to differentiate between the two will also help you determine if the vendor you are talking to can provide quality service or not.
Indicator Number 1: Employee Retention Rates
You should ask each vendor that you speak to about employee retention. Vendors should be able to provide you with a report that shows monthly and annual numbers for both voluntary and involuntary attrition. Ideally attrition should not be above 4% on a monthly basis. You should also ask for average tenure across their different teams. If the numbers look high that is a bad sign. Of all the indicators you can use to determine if a company is good or bad, this is the most important one.
Indicator Number 2: Talk to Employees
Don’t be afraid to ask to speak with frontline employees. These are the same people who will be talking to your customers so it only makes sense to have a conversation with them ahead of time. Ask them how long they’ve worked at the company, what their experience was before, and to describe their job. This will give you a sense of whether the company has hiring and operating standard similar to your own.
Indicator Number 3: Price
Price and employee treatment do not always track linearly. That being said, if the companies you’re looking at all seem pretty similar, but one or two have dramatically lower pricing, that should be a red flag. You should ask questions to better understand how they are able to provide a quality service at that price and, specifically, if that is coming at the expense of providing a living wage to frontline workers. In our price chart above, companies that are offering prices on the lower end or below likely are paying employees less and you may see burnout and attrition.
Indicator Number 4: Pay Rates & Benefits
Don’t be shy to ask the outsourcing companies you’re looking at how much they pay, what benefits they offer, and whether your agents will be employees or contractors. Be wary of companies that over-rely on contractors and don’t offer a solid benefits package.
Indicator Number 5: References
We spoke about references earlier - if there is one thing you do to vet an outsourcing company it is to speak to references. And the topic of employee welfare should be on your list of questions. What has their experience of employee turnover been? How adept are the program managers and team leads?
How should I evaluate the different outsourcing companies that I talk to?
Before you even begin talking to BPOs you should make a list of all the qualities that are most important to you in a partner. Below are some questions you can ask yourself and other internal stakeholders to get a sense of what matters. Other stakeholders you might want to involve are your marketing team, your IT/Security department and your operations department.
- What are our values? What values am I looking for in an outsourcing partner?
- How do I want to work with the outsourcing partner? Will I be meeting with them weekly? Monthly? What tools and systems will we use to keep everyone in the loop?
- How much am I going to lean on the partner to ensure quality vs. doing that in-house?
- How much am I going to rely on the partner for training new agents vs. doing that in-house?
- What level of technical expertise do agents working for our company need to have? How will I have an outsourcing partner test for that?
- How will scheduling work?
- If DEI is important at our company, how will that be reflected in an outsourcing partner?
- What level of privacy/security/confidentiality is important to us? How can we guarantee that in a partner?
- How does our ticket volume fluctuate throughout the year? What are the peaks and valleys? How can a partner scale up and down to meet our volume needs?
- What languages and time zones do we need covered?
- What other types of work do we do besides taking tickets? How important is it that an outsourcing company is flexible in what they can deliver on as we grow?
- Where do we think we’ll be as a company in 1 year? 3 years? How can I be sure the outsourcing company we pick can scale to meet our needs as we grow?
Once you’ve decided on all the qualities you are looking for in a BPO you can assign each a level of importance so that as you talk to BPOs you can grade them on each quality and multiply it by the assigned weight. If you consistently do this for each company that you talk to you will have quantitative data that can help guide your decision.
What about language proficiency?
A high quality BPO will have multiple layers of language evaluation as part of their hiring process. This is something you should ask about during the sales process.
At an absolute minimum, every employee should take one of the three major standardized language tests (Efset, TOEFL, IELTS). These tests will put people into categories based on their proficiency level. The categories range from A1 to C2, C2 being the highest level of proficiency. A good BPO will only hire people who rank in the C1 or C2 range. While someone in the A or B range may be somewhat proficient they will likely struggle in a fast paced phone or chat conversation with a customer and won’t be a good fit.
In addition to the standardized tests, a good outsourcing partner will do phone screens that evaluate oral language skills as well as a written portion of the application as a final check.
Getting into the specifics of language ability is important. Below is a list of questions you can ask to make sure you know what you are getting when it comes to language proficiency:
- What standardized tests do applicants take to show language proficiency?
- On the A1-C2 range, what is your threshold for hiring?
- What other mechanisms do you use to evaluate language proficiency?
- Can I speak to a “typical” hire to get a sense of their language skills?
OK, I found a good partner and I’m ready to move forward. What can I do to set the partnership up for success?
In the process of finding an outsourcing company it can be easy to overlook the preparation that needs to happen internally to set the relationship up for success. The first weeks and months are critical for the future of your new team and putting in some extra work in the beginning will pay huge dividends as time goes on. But what does this actually mean?
Mary says, “try thinking about it from their perspective. Do they have resources they need? Were they adequately trained? Do they have access to the permissions that they need to take action on the backend? It can be difficult when you are 10+ years into building a company and the tools have been built up over time for an internal team. The tools and systems may not be made for an outsourced agent. It depends where you are in the lifecycle of the company, but most companies probably need to go back and figure out how to make their systems simpler and more streamlined to optimize for an outsourcing company. What I like to say is ‘we can’t hold vendors accountable unless we know we’ve done everything possible to set them up for success.’”
First make a list of all the types of tickets and workflows you are asking your outsourcing partner to take on. Evaluate your training materials for these processes. Are they up-to-date? Are they clear? Are they engaging? Is there a test component to make sure agents have understood the material? Does the training include how to handle edge cases and how to escalate issues that come up? If the answer to any of these questions is no you have two options:
1) Update your training to make sure the answer to all the questions is yes
2) Any good outsourcing will have dedicated training resources that you can work with to ensure your trainings are ready for prime-time
The worst option is to share inadequate training with your new team which will lead to disappointment and more work for you down the line.
To make sure agents are ready, Dane from Rachio likes to do mock phone calls and tickets. “The best way to test if an agent is ready is through mock support interactions. You can also set up quizzes as part of training so you can quiz and make sure they understand material they were trained on.”
Dane from Rachio sums it up well, “a lot of your success is dependent on how much you put into it. Make sure you are always engaged and that there’s plenty of face-to-face (or Zoom) interaction. It's so important that you treat your new partner like a partner. Make sure you are incorporating them into your internal structure. The last thing you want is to create a silo.”
What should I expect in the first week, month, six months of working with an outsourcing partner?
Josh Magsam, Director of Partner Operations at PartnerHero, formerly VP of Customer Success at Discogs has a lot of experience ramping up new partners. “The first week should feel like you are bringing a lot of people into your own office for their first week. You should be joined at the hip. The managers from the outsourcing company should be getting to know your process and they should be asking a lot of questions. They should be running through training. There should be a lot of interaction and communication.
The first month should be an extension of the first week though you will see the team beginning to handle a lot more. By the end of the first month you won’t be a full capacity but you should see it trending toward 70% of full capacity. That trend will continue.”
At the end of the first year you should be able to answer a lot of questions about the success of the program. It should feel like you are doing an annual review with any department within your company. Questions like, “How well did we ramp up? Did we hit our target KPIs? Did we stick to the budget? What was the employee retention rate?” should be answered, helping you plan for the next year.
Dane from Rachio echos Josh’s thoughts on the importance of the first few weeks, “In the first month it should be very hands-on, very interactive between you, your internal team and the BPO. Put as much effort and energy into the first month as you can, it will make a big difference down the road.”
What if things aren’t going well? How do you deal with disciplinary issues?
Dane from Rachio emphasizes how important it is for your outsourcing team to feel like an extension of your internal team. “I’ll go back to how important it is to treat your partner like the member of your team that they are. When there are performance issues it will be important to coach and develop through the problems. When performance is not where you want it to be typically it's the result of a knowledge gap so understanding the root cause is the first step.”
Mary takes a scientific approach to evaluating BPO partner performance, “We have a monthly scorecard which is basically all the KPIs outlined in the contract. For each KPI we give it “green”, “yellow”, or “red” score with the expectation that a certain percentage will be green every month. These metrics keep us grounded and get discussed at monthly business reviews.”
Hopefully you’ve picked a BPO that has strong leadership (see Mary’s advice above) that you have a regular communication cadence with. With these two elements in place it should be easy to bring up any issues as they arise and make a plan for how to tackle them, including dismissing people who turn out to not be a good fit for your team. The important thing is to have good communication channels set up so issues can be brought to the table and resolved quickly.
There are BPOs of all shapes and sizes out there. To find the right one for you look for a company that can thoroughly and honestly answer all the questions you think are most important. Investigate their references, their retention rates and their training + quality programs. Find a partner whose leadership you genuinely enjoy meeting with because you’ll spend a fair amount of time talking to them. Most importantly, find an outsourcing company whose values align with yours. When you find that, you’ll see better outcomes from day one forward.