Get the Metrics Right

Many less-successful companies approach cost reduction with blinders on. They may look at only one part of the P&L, such as general and administrative (G&A) expenses. Or they may confine their efforts to individual business units. They fail to view the business as a whole, often because they rely on metrics that reflect part of the business rather than the entire P&L.

Consider an Asian telecom company that was trying to contain support costs while maintaining high levels of service. When the company benchmarked its cost per call and cost per truck visit in the field, it found that both numbers were within a reasonable range—$8 to $15 for a call and $120 to $150 for a rolling truck. The problem was that the two service channels operated separately and were measured independently. To reduce call-center costs, supervisors encouraged customer service agents to keep calls short. Agents often dispatched a technician to resolve a customer’s problem whenever a quick phone diagnostic failed. To fix the problem, the company integrated the call centers with the field unit, giving one executive responsibility for the entire service chain; it also changed the incentive metrics to include first-call resolution and the number of trucks sent out unnecessarily. Those moves helped the telecom increase the number of issues resolved in the initial call by 15 percent, saving the company millions.

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