Inside the Quality-First Contact Center

Creating Effective Customer Service Outsourcing Contracts

A good customer service outsourcing contract spells out what success looks like, but can also become more flexible as customer support needs change.

Callzilla President Neal Topf talked about the challenges of creating good service level agreements with Jeremy Hyde, who manages relationships with outside contact centers for UCare health plans. Both tend to agree that no matter how well an outsourced partner and inside manager might get along, they still need a written service level agreement that spells out the commitment in detail.

In their first conversation about vendor management, Topf and Hyde talked about how the engagement between a and client is a lot like a dance, with two partners trying to smoothly execute a lot of intricate steps. The two have never had a working relationship, but agree that It takes a lot of cooperation to make it a satisfying experience for both sides. 

1. Balance Autonomy and Control with your Outsourcing Partner

When it comes to writing the formal contract, each side has its own interests. A contact center outsourcing partner typically tries to get as much autonomy as possible, while a client typically wants to retain as much control as possible. No matter how friendly the pre-negotiation talk may be, hammering out a formal contract makes those interests clear. This level of scrutiny helps to ensure both sides are not leaving any support channels or responsibilities unaccounted for. Hyde had this to add, "I think as you are first initiating the conversation and starting the negotiations, you can probably find out a lot about the philosophy of the person sitting across the table from you." A client should ask for everything it wants, but an outsourcing partner needs to keep a clear head and not promise too much.

Ultimately, we do have to come to the table and be prepared to assume a very serious level of responsibility. But we've seen situations where we are asked to commit to so many different things, and lots of times they're just not feasible. So you have to be very vocal and clear in making sure that the expectations are fair.                                                                                                       -Neal Topf

2. Understand the Services Your Outsourcing Partner can Offer

The client also has a responsibility to understand what it wants and make sure the vendor is really set up to deliver it, as Hyde points out, some vendors get the contract because their strength is to handle simple transactions at a low cost. Others are skilled at handling a lot of variables and complex instructions.

You have to understand what the outsourced partner is and what they're not. What you're looking for and what you're not. You need to figure out what it is that you are outsourcing to the vendor, and gauge whether that is their core competency. You've got to figure out how to dig into that and find out if they actually have the capability to do what you are asking them to do. If their costs are very, very low, and what you want to leverage them for is very, very complex, that's a red flag that they're not going to be able to do it. -Jeremy Hyde

3. Identify the Key Performance Indicators (KPIs) for your Outsourced Partner

A good service level agreement needs to define success. Both sides need to agree on how key performance indicators will be measured, and both sides need to be able to see the numbers. One aspect of fairness is defining what happens when the vendor performs poorly or performs well. Listing penalties is easy to do, but it's easy to go overboard. Sometimes Topf meets a prospective client bent on making sure that the vendor doesn't "get away" with the slightest misstep.

There have been times when we had to pull back and say, 'You know what, maybe this isn't the right relationship for us.' And then there are other times when we explain that we don't want the relationship to be punitive. -Neal Topf

4. Build in Rewards and Punitive Components

In other words, a good contract prepares for successful and poor performance. A vendor should face some sort of penalty for not meeting the service level agreement, but should see rewards for delivering great performance. If the best a vendor can hope for is lack of punishment, the whole relationship will get off to a rocky start.

Hyde agrees, though he acknowledges that he sometimes has to persuade his colleagues that too much focus on penalties is off-putting.

I kind of laugh, because it's like — again, using that dirty word 'partnership' — if we're truly trying to establish a long-term partnership, are we going into it doing this? -Jeremy Hyde

5. Acknowledge that Problems May Arise

Topf and Hyde agreed that, while the contract needs to have guidelines and structure, there should also be a period of time — at the client's discretion — to remedy a problem and work through it operationally before the written contractual terms step in.

The goal, after all, is to provide good service and strengthen the partnership. Neither side goes into the relationship planning to scrap everything and start over with new partners.

If a vendor is consistently not meeting the framework that was initially agreed upon, the client always has the ultimate penalty available:

What are the terms of the contract? Thirty days and we can walk. So, then, how am I holding you accountable? Well, that $60,000 that we pay you every month? If you don't get your stuff together, that's going away.


About the Customer Care Outsourcing Series

In a series of 3 blog articles, industry pros disuss the ins and outs of managing a relationship with an outside contact center:

Also see these Callzilla case studies:


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Topics: Customer Service Insights