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Business Journal
Equal Pay for Equal Work?
Business Journal

Equal Pay for Equal Work?

An equitable pay system rewards your worst performers, but discourages your best

by Glenn Phelps

Trouble and call centers -- these two terms are interchangeable, according to the people who have to deal with call centers. As customers, we've all had experiences with call centers that we'd just as soon forget. Call center managers also have their share of center-inspired nightmares, because managing a center is a bear. And call center employees can recount plenty of stories about frustration and boredom on the job.

Perhaps each group's disenchantment stems from a deeper common root, a fundamental management failure: a system in which all the employees working the phones in a given center make about the same amount of money.

How could that be a problem? It means that a center's best agents make about the same as its worst. And I don't need to tell you that there is a huge gap between the best and worst agents in a center. If you've phoned a call center more than once, the chances are you've experienced the difference. And objective data confirm that there are major differences in how agents interact with customers.

When the best and the worst agents in a center make about the same amount of money, it creates headaches everywhere. The best agents feel undervalued and often leave in search of other work, while the worst agents believe their performance is acceptable, even though it's truly bad. So managers, employees, and customers have to put up with the consequences of disgruntled employees -- a lousy situation all around.

So what's the answer? Pay agents based on the value they create for the company. In other words, pay for performance, so the best agents make the most money and the worst make the least. And the best need to be making a lot more than the worst: If an agent is twice as valuable to a center as an average agent, they should be making twice the average salary.

Within the call centers operated by The Gallup Organization, the best agents make approximately three times the salary of entry-level agents, not because they have seniority, but because they generate value for our company. They earn more money for Gallup, so they make more money themselves. Pretty straightforward.

So why don't all call centers use this type of pay system? Because most center management-structures can't support it.

In most centers, pay for performance systems fail because the incentive portion of the pay plan isn't significant enough to sustain real performance gain. The most common argument directed against large incentive programs is that centers must control payroll costs, an argument based on a perception that a pay-for-performance system would cost more. But the role of a pay-for-performance system is not to increase the size of the pay pool. Instead, its purpose is to skew pay distribution to reward the agents who create the most value for the company.

This brings us to the heart of the problem: Very few call centers can quantify how an agent's performance contributes to overall company value.

That may seem hard to believe, but it's true. Most centers measure productivity effectively, and managers know precisely how much a call costs to handle. Frequently, centers use those same productivity numbers to measure agent performance. Most centers also monitor quality assurance by listening to an agent's call performance. Yet these two measures are disturbingly inadequate when it comes to understanding how an agent creates value for the center, because they don't address customer reactions to a call.

Another common measure -- supervisor ratings -- also adds to the problem. Supervisors typically don't have a clue who is doing a great job and creating value for the company by interacting with customers, and who isn't. Lacking effective measurement data, supervisors are forced to rate agents on the things they can directly observe, such as "promptness," "follows the rules" and "able to get along with others." These factors only reflect whether an agent is "easy to manage."

Unfortunately, customers don't give a fiddle if agents are easy to manage. Customers want agents to understand the products they sell or to solve customer problems -- they want agents to focus on what they need. Any pay or promotion system that relies on supervisor ratings instead of value measurements will reward agents who are easy to manage; it won't focus on rewarding agents who sell products, solve customer problems, or create value for their company.

Rewarding agents for value requires a third measurement in addition to productivity and quality -- measuring the agent's impact on the customer. The best measurement reflects the customer's post-call loyalty -- whether the customer is more or less likely to act in ways that will benefit the company after the call. Without that impact measure, centers can't assess how agents influence corporate value.

Some centers attempt to assess customer impact in their quality assurance process by measuring such things as "agent used an appropriate tone with the customer." These efforts are doomed to failure. Only one person can assess how effectively an agent interacted with a customer, and that is the customer. No single standard can be applied to all calls, because the standards that matter are in the heads of the individual customers. A great agent picks up on those standards during each call and tailors his or her interaction accordingly. Agents who can individualize their interactions with callers essentially render most attempts to measure customer impact through quality assurance meaningless. As a result the customer must be asked directly about the service delivered by the agent making the call; no internal tricks can substitute for direct measurement.

Given all of this, a seemingly simple task -- measuring agents in a way that links performance to corporate value -- can go dramatically wrong. It's easy to find call centers that use a system to evaluate agent performance that is in fact counter-productive to the company's best interests.

So most centers lack objective agent measures that link directly to corporate value. As a result, these centers can't implement a pay-for-performance system that significantly rewards the best agents and encourages better performance from the rest.

This leaves most centers striving to reach performance goals with good reps who are frustrated, bad reps who are encouraged to continue their wretched ways, managers who feel the center's performance with customers is out of their control, and customers who wish they had never called. All because one of the most powerful management tools available -- pay -- is too evenly distributed among agents. Go figure.

Glenn Phelps, Ph.D., is a Senior Consultant with Gallup.

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