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Shrinkage refers to the time span during which employees or workers are paid even though they are unable to take or handle calls. This term broadly includes every activity that keeps an agent away from receiving calls or off the phone. These activities include offline tasks, holidays, leave entitlements, outbound calling, and breaks. Employees gather all the information about being away from the phone and calculate the total time spent on these activities against the working days annually. Companies and organizations where tele-calling is a significant part of the business, such as Business Process Outsourcing (BPO), generally consider shrinkage important.
Shrinkage refers to the process of calculating the percentage of employees unavailable to handle calls during a specific span of time or a particular time or day. It can be calculated in two ways:
Planned shrinkage consists of leaves and week-offs, whereas unplanned shrinkage consists of half-day and absenteeism.
Calculation of Shrinkage = Planned Shrinkage + Unplanned Shrinkage.
Planned = [Total number of leaves + Total number of week-offs] / Total headcount.
Unplanned = [Total number of absent + (Half-day/2)] / Total roster-count.
n the BPO (Business Process Outsourcing) industry, shrinkage is often calculated using the call center shrinkage formula. The number of staff required at a particular time or shift must first be identified.
After calculating the staff requirements, the number of workers who are unable to pick up calls during that interval should be estimated. This amount may vary each time but typically ranges between 10-40%. With this number, the base staff requirement should be divided by that result to arrive at the final number of workers that should be scheduled at a particular time.
An example can help in understanding this better.
With a shrinkage rate of 30% and the availability of 210 call center staff during the day shift, 210 should be divided by (1-0.3) for a total of 300.
Thus, a staff of 300 would be required, but 30% of the staff would be unable to answer phone calls for specific reasons. The remaining 210 people would be able to attend to the calls, ensuring adequate phone coverage.
This formula determines call center shrinkage for an individual agent’s performance:
Shrinkage%= (Total hours of external shrinkage + Total hours of internal shrinkage) / Total hours available * 100
External shrinkage refers to activities that prevent employees from answering phone calls and are outside the organization’s control.
These activities include lateness, sickness, holidays, and paid breaks (depending upon the shift).
Internal shrinkage refers to all internal factors that prevent employees from answering phone calls and can be controlled to some extent.
These activities include system downtime, meetings, coaching and training sessions, unplanned facility issues, etc.
It is necessary to always keep track of the shrinkage rate so that call centers can improve their efficiency. Appropriate measures should be adopted if the rate is continuously increasing. It is a sign of underperformance by the employees of an organization.
Now, the question arises, “How can the shrinkage rate be reduced?”
We have learned how to calculate the shrinkage formula, but it’s important to know the appropriate and acceptable shrinkage percentage. This percentage may vary from industry to industry, but in the BPO industry, the most accepted figure stands between 30% and 35%. We calculate the shrinkage percentage based on 12 months of data figures.
Reducing call center shrinkage is necessary to improve efficiency and enhance customer experience.
There are various measures that can be adopted to control the increasing shrinkage rate in an organization-
Someone has rightly said, “All work and no play makes Jack a dull boy”. The same rule applies in organizations also. Long hours of continuous working can negatively impact the performance of the employees. So proper breaks and activities should be scheduled during non-peak hours so their performance wouldn’t be affected.
This helps reduce the rate and improves the organization’s overall efficiency.
It involves monitoring various metrics to check employee performance such as call volume, handle time, and customer satisfaction. Based on these metrics training sessions and appraisals can be planned for the employees.
This results in a reduction of shrinkage rate and an improvement in efficiency rate.
Employees should be provided with proper training sessions to teach them practical communication skills and how to handle customer complaints on call. This training will eliminate unnecessary tasks, ultimately reducing the organization’s shrinkage rate.
Management should organize performance appraisals to motivate employees to perform better and achieve timely targets. Proper standards should be set according to which appraisals should be provided.
For example- The manager set the target of 200 successful calls monthly. If the employee achieves the target, he will be provided with a 10% increment in salary as a bonus amount.
To quickly detect and fix issues, call center managers should check call center key performance indicators. These metrics include tracking call volume, handling time and other metrics that lead to business decline.
By regularly monitoring these metrics, managers can spot problems early and take quick action before the situation worsens.