Chilean call centers are losing customers and jobs to less expensive Peru and Colombia.
In 2005, the Chilean call center market was expected to keep growing each year at a rate of 20 percent. The number of companies in the sector was expanding at a dizzying pace, and they were competing to offer specialized services for telesales, marketing, building customer loyalty and bill collection. All of these initiatives were supported by sophisticated technological tools and a labor force that seemed ready to satisfy the most exacting needs of its customers.
Five years later, the situation has been changing radically. Chile’s Federation of Call Center Workers is warning that Chile’s higher costs are making the country less competitive, leading many Chilean companies to move their call centers to other Spanish-speaking countries in Latin America such as Peru and Colombia, where the cost of the labor used in these services is lower.
A report by the 2009 World Economic Forum supports such concerns. It shows that Chile has dropped two spots in terms of competitiveness from 28th to 30th worldwide, while Peru and Colombia have risen five positions in the rankings. As a result, Chile has already lost 1,500 jobs in the sector since last year, according to the Federation of Call Center Workers. Hiring telephone operators in Peru is up to 25 percent cheaper than in Chile, and up to 17 percent cheaper in Colombia.
“An hour of work at a Chilean call center operator is more expensive. The average wage rate is $4.82 per hour compared with $1.10 in Colombia, and US$1.03 in Peru, according to local media reports,” says Juan Fernando Guzmán, professor of human resource administration in the department of economics and business at the Andres Bello University. These figures clearly show why platforms for customer service are moving from Chile to neighboring countries, notes Guzmán, a Chilean specialist in strategic personnel management.
What’s more, in his view, there is a great similarity between this phenomenon and what happened some years ago in the U.S. call center industry. There, numerous multinational corporations moved their call centers to Mexico, India, the Philippines and South Africa, incentivized largely by those countries’ lower wage levels. According to data published by Call Center Magazine in 2003, a U.S. company could save up to 40 percent of its personnel costs if it ran a call center platform in those countries.
QUALITY OF SERVICE AT RISK
It’s not just higher labor costs that could be determining the off-shoring of service from Chile to other countries in the region. A wide range of factors are responsible, such as the quality of services offered, the training level of the labor force, and the quality of corporate management. All of these factors could be having a negative impact on Chilean competitiveness, notes Eduardo Barros, professor of organizational psychology at the business school of Catholic University in Chile. Barros is a partner in EMB Consulting, a Chilean firm that specializes in organizational process and personnel management.
Just as U.S. firms saw a business opportunity to move their call centers abroad, the same thing has been happening in Chile lately. However, the U.S. call center industry has continued to deliver good service, explains Barros. “In contrast, in Chile, the quality of service [at call centers] is no longer up to international standards, which is reflected in the high levels of labor absenteeism, which is something troubling,” he adds.
According to the Chilean Federation of Call Center Workers, labor absentee rates at call centers in the country are 50 percent during weekends, compared with only 15 percent during weekends in Colombia and Peru. Whenever there is a high rate of labor absenteeism, “It is never the exclusive responsibility of one of the parties; it is the responsibility of both the labor force and the company,” says Barros. He notes that absenteeism generally occurs in those companies that have invested very little in the professional development of their own employees. According to Barros, “There has not been any consistent commitment in the industry to choosing appropriate personnel, training those people and helping them develop as professionals in charge of customer care.” The logical result of this omission, he adds, is that employees lose motivation. They are less committed to the company. Absenteeism rises, as do employee turnover rates. Ultimately, this leads to service that is inadequate.
LOW INVESTMENT IN HUMAN RESOURCES
Some companies in Chile’s financial sector are an exception to the rule because they run their own call centers in-house. Those firms have invested in training their workers to work more effectively, notes Barros. Employees in those call centers are properly chosen and trained to skillfully manage incoming calls from annoyed customers. Chilean banks have learned that their business depends a great deal on the telephone service they can offer. To achieve higher levels of profitability, experts say, a company absolutely has to invest in improving the specialized skills of its work force.
Companies also need to comply with special conditions for equipping their customer service platforms, says Sergio Rivera, professor of sales management in the business department of Andres Bello University. Companies have to consider that their employees are working in telephone booths that have narrow dimensions, and their working hours are usually quite long. Yet very few companies in Chile manage to comply with the minimal requirements of a good working environment; the minimal physical space of a telephone operator should be at least 2.3 square meters. Workers also need proper systems for illumination, ventilation, and isolation from outside noise. Their equipment must also be in proper working order. The problem is that “when companies meet these standards in their call centers, their [overall] cost [of doing business] tends to shoot up.”
In addition, very few companies in the sector offer extra pay for overtime work, offer other incentives, or provide salaries that are appropriate for local conditions. “This has created an unfavorable working environment for Chilean call center employment,” Rivera says. “It winds up de-motivating them, harming the quality of the service that they provide to customers.”
IS QUALITY A COMMODITY?
Another factor related to service quality in Chile is the weaknesses of corporate management -- its inability to offer greater value added to customers. This is an area where Chilean companies have a lot of room for improvement, notes Juan Pablo Forno, academic director and professor of customer intelligence at the University of Chile. Forno is a founding member of Formulisa, a Chilean company focused on sophisticated information models about consumer behavior.
“Here is an interesting question: What do call centers sell?” Forno asks. “If your answer is that it’s ‘minutes of attention’ or ‘selling a product or service,’ then your focus is very limited; you’re talking more about the sort of product that is a commodity.” Business should be directed, instead, toward entirely satisfying the customer, and generating a value proposition, he says. That means doing advanced analysis of the data, starting with the information obtained from your customers. After that, companies should generate reports that enable them to optimize the business results of their telephone operators and anticipate future scenarios by applying models that predict how customers will behave in each scenario.
In other words, the industry must incorporate business intelligence into its approach to management, Forno says, if it wants to improve the quality of its service. While it’s true that technology is available in the local market, Forno recognizes that investing in business intelligence involves a complex strategy over the long term, since the company that provides the service through its call centers must hire qualified IT professionals; it must invest more in software; and it must redesign its business model. “I have seen how some call centers that have embarked on such initiatives have not had happy results, largely because managing their business is getting more intense every day, and the company has not left any room for rethinking its business model.”
For that reason, Forno recommends that those companies that operate call centers create alliances with other firms that specialize in providing business intelligence services, so they can optimize and differentiate their businesses more quickly.
IMPACT ON UNEMPLOYMENT
According to estimates by the Chilean Federation of Call Center Workers, the country could lose about 15,000 jobs between January and June of this year because of new contracts won by operators of call center services in Peru and Colombia. “Atento Peru, a subsidiary of Atento, one of the world’s largest operators of calls centers, is winning of the contracts, and this is going to mean they will let go of about 2,000 workers in Atento Chile,” Tamara Muñoz, president of the Chilean federation told the local press.
Clearly, this will have a negative impact on the Chilean job market, and it will mean lost job opportunities for some workers who have technical training, but not university degrees, says Gerson Volenski, professor of human resource management at the business school of Adolfo Ibañez University. Volenski adds that most employees who work in this sector have a technical background.
The impact will also be felt in related sectors, including companies that supply training services to employees who work over the telephone, and companies that offer special equipment for operating call centers, notes Eduardo Torres, a professor of marketing on the economics and business faculty at the University of Chile.
Torres anticipates that those Chilean companies that decide to outsource their call center services to Peru and Colombia could even suffer some damage to their corporate image and the quality of their services. When a Chilean customer calls, the person who answers the call “could be a foreign operator who is unable to communicate the spirit of the local [Chilean] company or figure out exactly when a Chilean customer is upset, since the tone of voice and idioms differ a great deal between one Latin American culture and another.” If that happens, he warns, it is very likely that the Chilean customer will wind up being unhappy with the service provided by the company’s call center in that foreign country.
This situation has already occurred in Chile. Some time ago, Movistar Chile, which provides local service in mobile phones, digital TV, and broadband, decided to move its customer service platform to Colombia, recalls Rivera. “In the beginning, Chilean customers couldn’t manage to identify themselves with the Colombian operators, and they were calling back the company, requesting that they be cared for by a Chilean operator” rather than a Colombian one.
Barros takes a different view, arguing that initially, many customers in the U.S. did not like the idea of having to deal with a call center operator who was Mexican or Indian, “even if he answered them in perfect English. But this cultural difference was not a sufficiently large reason for U.S. customers to decide not to call the contact center, and over time they got used to the situation.” Nowadays, the market is moving more and more toward the globalization of services, Barros notes. Customers are going to care less and less about whether the person who answers their calls is a foreigner, or where in the world that person is actually located.
LESSONS FOR CHILEAN INDUSTRY
For Chile’s call center industry, there are several lessons to learn from the migratory phenomenon it is now experiencing. For Forno, the main lesson is that the market must improve the value of the service that it supplies by incorporating business intelligence into the way it manages the business. In his view, this strategy would help to increase the competitiveness of Chilean call centers in the region.
Chilean companies also need to think hard about key issues, so they can understand how “investing more in training their personnel brings extra value, which differentiates [your company] in the eyes of customers and means higher profits for the company,” says Barros.
According to Guzman, there is another major lesson: It really is possible to improve working conditions. Strategic personnel management brings greater wellbeing and comfort to the worker. “Over the long run, that translates into less absenteeism, greater professionalism, and a higher degree of commitment to the company. If all that happens, [call centers in] Chile may not need to look beyond the country’s borders.”
Republished with permission from http://www.knowledge.wharton.upenn.edu -- the online research and business analysis journal of the Wharton School of the University of Pennsylvania.