Vytra reduced its call center costs by over $500,000 (+16%) and improved numerous service quality dimensions. They now know the exact cost of each service, product and customer for accurate pricing, profit forecasting and product design. This case study explains the background, activities and achievements of their project.
James Karagiorgis, Chief Transformation Officer for Vytra, is responsible for determining the changes that are needed and leading Vytra's teams to achieve change results. Jim is a Six Sigma Master Black Belt.
Kerry Edwards is Director of Member Services and responsible for any interaction with members including inbound calls, correspondence and maintaining strong customer relationships. She is the Six Sigma Project Leader for member loyalty and a Six Sigma Green Belt.
AIM-Activity Information Modeling® is a tool that models cost and quality metrics so managers thoroughly understand their causes and can easily solve complex problems. It was developed by Gary Meyer, President of Orient Point Consulting LLC and is used by more than 400 organizations in the USA, Canada, Europe and Latin America to model service operations including call centers.
Why the Improvement Project Started
One of the biggest obstacles to implementing Six Sigma is determining the cost of quality, Jim Karagiorgis stated, especially when youre trying to determine the costs resulting from not doing something correctly and then re-doing it.
This is critical to Vytra, because we are a customer- intimate company, providing value-added services rather than being the lowest-cost provider. According to Jim, Vytra must provide excellent service to keep our customers. We have to balance adding value to customers experiences with the Six Sigma philosophy of not increasing costs. Under that system, every cost improvement must generate more than enough savings to justify the initial expense.
Jims focus was the voice of the customer call center handling of customer inquiries and problems. Some of the issues that made cost and quality calculations impossible were the result of multiple variations of plans issued under Vytras basic lines of business. While Vytra has about 30 basic lines, its hundreds of employer clients have created literally hundreds of variations of health benefit programs. The total number of different combinations and permutations is staggering.
Until we implemented activity modeling, all we could do was derive an average cost per call (about $3.00) with information from our Automated Call Director. But there was no way to determine if there were some calls and some customers that were more costly than others, and why, short of doing a (lengthy, disruptive and very expensive) full-blown activity costing process.
Using A New Tool to Discover New Knowledge
AIM provided the solution. It collected over 60,000 data points in four weeks. It only required Customer Service (call center) personnel to answer 3 brief questions per hour that randomly appeared on their computer screens. States Jim Karagiorgis, "Our result was a clear picture of costs per call- by call type, product, line of business and customer types. The time to complete the project was extremely short and the cost was minimal. We determined that AIM delivered its information at plus 99% confidence level.
Finding Cost Opportunities In Poor Quality
Kerry Edwards experience focused on customer service, mostly in the call center. She knows that customer service is constantly going through change, with the most successful organization being the one that adapts best. AIM was implemented in the Member Service Call Center because it is the largest part of customer service. According to Kerry, There was a great need to understand the costs of incoming calls and what caused those costs. We were relying on an average cost per call, and that was misleading us. We knew, for instance, that costs for claims calls had to be larger than benefits inquiries because of the relative length of the calls. This was very important to determine because 50% of the calls from our single largest group was for claim issues. We knew that quality problems raise costs so finding and understanding our quality problems was critical to finding our cost opportunities.
New Information Achieved New Results
After AIMs implementation, Kerry reports, the initial results were very interesting. We were able to identify, right away, which lines of business cost more than others and why. We also had some surprises. Certainly the models confirmed the areas we thought were costly, but they also showed us other high-expense areas that we either only suspected or had not even had a clue about!
Some of our biggest surprises were in the area of benefit inquiries. We were shocked to find that some simple benefit inquiry calls were among our most expensive. The cost came from the time staff needed to put a call on hold to get help from a more experienced or knowledgeable colleague. Jim agreed and added, AIM identified, for each line of business and call types, where these higher expense calls were occurring and why. By analyzing specific customers and their call types, it became clear that certain clients and client segments generated much higher costs. This pointed out the need to add specific content to the Vytra website that would allow these clients to find the information they needed quickly and eliminate the call.
Kerry added, We have made some corrections now, but many more are coming. Other information showed that some costs were not a result of Vytras actions, but our member employers' HR managers. Some employers weren't providing our HMO benefit information to their employees and this was causing lots of calls about basic benefits. We eliminated those by helping our largest clients provide better orientation programs about their healthcare benefit programs.
With AIM we now track inquiries, claims and complaints, for every one of our services and identify exactly the areas that need to be reviewed and addressed. We have real information so we institute re-training, new procedures and re-pricing strategies quickly and see results very quickly.
The Bottom Line
Jim Karagiorgis confirmed the projects value. Before, we had no way at all of knowing our costs for inquiries or claims for all of our different services, line of business, type of calls or by customer types. Now, because of AIM we know our costs for those down to the cent and we know what we can do to reduce them. Having the exact costs also means that we can align our pricing by customer and product segment - which we're doing now. Plus, by saving FTE expense on incoming calls, those resources are being used for outgoing calls to support the customer intimate/high value-added effort to create high customer loyalty.
Kerry Edwards summarized the benefits. By using AIM we have saved over $500,000 in our Call Center. Vytra now prices its services to accurately reflect what they really cost. We have been able to pinpoint training and support issues that have cut costs and improved service.
Ø AIM tells us what were doing thats not efficient and makes it possible for us to see, in time and
cost, where problems or mistakes are occurring and what's causing them.
Ø It's a great tool to learn more about everything in your business environment in depth. We can track and
trend quickly and make good business decisions.
Ø It only requires a minimal amount of effort, and its such an easy tool that we dont even document all the
issues that its allowed us to fix.
Customer Service & Six Sigma Metrics
Vytra collected, analyzed and measured these service and Six Sigma metrics in its Call Center:
Ø First call resolution (incidence, time and cost) of every call type in 22 quality dimensions.
Ø The quality metrics and process times of all 8 services the Call Center provides.
Ø The quality and process time of the center's 61 call type procedures.
Ø The quality and service metrics for each of its 31 customer segments.
These were metrics that Vytra needed for its Six Sigma effort but could not determine without granular activity information. Now they have models that show the cause and effect of quality and allow them to predict the impacts of changes theyre considering.