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Business Journal

Paying for Performance

Don't compensate your agents for the wrong things

by Glenn Phelps

The current labor market poses seemingly insurmountable problems for many call center managers. After all, qualified agents are few and cost-based competition among centers is fierce. Centers can't pay employees top wages and stay cost-competitive.

The tight labor situation -- and the wage spiral created by current pay structures -- paints a bleak picture, but a closer looks reveals a more nuanced story. Within a given labor market, there are centers that keep every seat filled, retain the best agents, deliver outstanding service, and control payroll costs. What is their secret? In part, it's a performance based pay system.

Pay for performance is a key feature of The Gallup Organization's centers. At Gallup, an agent's pay is wholly contingent upon performance -- the quality and quantity of completed surveys. Results there are impressive. Gallup's centers are twice as productive as similar centers in the market research industry. Still, other centers have pay plans that include incentives, but they don't achieve similar results. Why? They miss key factors.


Correct measurement is the foundation of a performance-based pay system and, from Gallup's experience, few do measurement well enough to support a viable performance-based pay scheme. The first challenge is to understand the value of a call. Usually, call value is composed of three parts -- cost to complete a call, customer impact, and call quality. These are the direct responsibility of the customer services representative (CSR) and must be measured in order to understand value. Frequently, however, Gallup finds agents measured solely on productivity, creating an inaccurate view of CSR impact on value. It's one of the reasons many performance-based pay systems fail. Without a balanced scorecard, it's easy to wind up paying CSRs for the wrong things.

  • Cost: Call centers know how to measure the cost of a call, and their systems are usually good. However, managers do make the mistake of over-reliance on this class of measures in determining center performance. Lower costs are not always aligned with corporate value, particularly when low costs are achieved by degrading service levels.

  • Customer impact: These measures have two parts -- the money the call brings in (immediate revenue), and the money a customer is likely to spend in the future (future revenue). The first factor measures productivity and efficiency. This is the one family of measures most centers know well. Managers find them readily available and, in most centers, these measures usually dominate a manager's evaluation of CSR performance.

    The second factor -- future revenue -- is best estimated by the level of customer loyalty on Gallup's Customer Engagement 11 questions. The CE11 questions are designed to measure post-call customer attitudes that predict future customer behavior. If you choose to make a balanced scorecard part of a performance based pay system, it must contain customer impact measures at the individual CSR level. Without customer impact measures, centers cannot accurately estimate or evaluate the value of an agent's phone performance.

  • Quality: The best quality measures evaluate whether or not the CSR is following the rules during a call. The greatest temptation and the most common mistake centers make, however, is substituting quality scores for missing customer impact ratings. If at any point the quality evaluation tries to rate customer reaction to the service received on the call, centers make a serious mistake. Frequently, though, Gallup finds quality evaluation processes that allow raters to score the quality of service given to the customer. This leads to a misconception of how well customers are being treated. It also creates misconceptions about which agents are doing the best job creating value.

    When quality ratings are plotted against customer loyalty scores for individual agents, centers find that some agents have high call quality but low customer ratings. Managers typically view such agents favorably because of their high quality ratings. Once agent-level customer loyalty data is available, centers are able to see the damage these agents do to corporate value. Focusing the quality measure on call process and representing the customer's voice with customer impact measures reduces a manager's temptation to generalize incorrectly about individual agent performance.

Agent talent

After measurement, the most important component of a successful performance based pay system is making sure the right people are on the phone and the right people are managing the people on the phone. This is a significant challenge. It's tempting to fill an empty slot with anybody who will take the job, but nothing could be more detrimental.

In a well-run performance based pay system, every agent is a potential source of value to the business and a poor agent or manager is an under-performing asset. The best agents and managers make money for the company by making money for themselves, through performance based pay. This pay plan encourages and rewards agents and mangers whose behavior and attitudes (talent) enable outstanding performance on the job.

Supportive work environment

Managers make a performance-based pay plan succeed by creating a work environment that fosters exceptional agent performance. Two mechanisms help a manager build a great agent work environment: goals and accountability.

  • Goals: Agent and management performance targets must align perfectly. One way to accomplish this is to pay each manager based on his team's performance. This technique quickly focuses the manager on the most important aspects of his job -- supporting the performance of the agents on his team.

  • Accountability: Managers need to be held accountable for the quality of the agents' work environment, as measured by Gallup's Q12 Employee Engagement questions. Why? Because workplace engagement is a leading indicator of job performance. Agent teams with high Q12 scores produce more value. Failure to consistently achieve high Q12 scores indicates an under-performing manager and, ultimately, an under-performing team.

Pay systems are an underutilized management tool in CSR workforce management. Shifting a call center's pay structure to a pay for performance system immediately impacts center performance and changes its culture. The question is, of course, will the new culture ease the current pay crisis and create more value for the company? It will -- if the fundamentals of the pay system are solid, and the performance based pay system is part of an environment that makes agent performance the number one priority.


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

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