Information, Betting and Investing

Hello Again!

Information can cost money, as can lack of information. This is an important principle in management and particularly in engineering. In this post I want to cover this ground quickly, and then look at call centres and the use of information in decision making in subsequent posts.

Suppose I can invest $1,000 tomorrow to improve the fuel efficiency of my car by 25%. Pay the mechanical person, and instead of getting 10km per litre I’ll get 12.5km per litre from now on. Isn’t that a great deal?

Well, it depends. If fuel is really cheap, I’ll be nuts to spend anything to improve fuel efficiency. At a cost of $0.01 per km, one cent, my investment will only save me $0.0025 per km travelled. That means I’ll have to travel 400,000km before I break even! I’m unlikely to own a car for that long, so whoever buys the car from me will be better off, and I’ll never recoup my initial investment!

If on the other hand fuel is really expensive, I reckon I’ll be nuts NOT to invest. At a cost of $1 per km, I’ll recoup 25c per km travelled, and I’ll start showing a profit after only 4,000km – a few months travel for me! My investment will keep paying me back as long as I keep the car AND I get to feel superior and brag about my great deeds around family and friends, no extra charge (though there might be hidden costs for the latter).

But what If I don’t know what fuel is costing me? I risk either blowing my cash or missing out on a good opportunity. That’s not a problem if I just don’t care about fuel efficiency.  I’ll pass up the opportunity and buy a new super duper pocket protector instead. Nor is it a problem if I happen to have $1,000 to spare, and I decide this is a good thing to do regardless of the bottom line.  You know, for the environment …and the bragging rights. After all, if I bet wrong, it’s my money and I get to claim environmental kudos. And if I’m right I get to let Mom know she’s right, her sonny boy IS indeed a genius!

But notice that without information I’m no longer ‘investing’ but have started ‘betting’. Without actually knowing what my fuel is costing me per kilometre, my decision to bet or not will be based on my opinion, my gut feeling.

While I can bet my own money to my heart’s desire, I can’t bet with other peoples’ money, which is what I’m playing with, I mean ahem engineering with, at work. When it’s the company’s or shareholders’ money it had better be a sound investment. (I know this concept is alien to the current denizens of Wall Street and The City, but it’s been a fairly well accepted principle elsewhere in the business world since, about, the start of time ) This is why business directors control budgets – particularly the FD – and why I’m usually required to make a business case before I can get my hands on the cash. A smart FD might even check up on me after I’ve spent the cash to see how close to the business case the reality turned out.

At last we get to the point of this post: How do I make an investment decision, supported by a business case that will stand up to scrutiny, if I don’t have the right information? The simple answer is I can’t.

In my next post I’ll look at this problem with regards to call centres, and some consequences.

TTFN

Why call centres?

Hello there!

I’m in the business of helping call centres work properly. I’m also an engineer, so I always have to try to get back to first principles before I’ll feel happy tackling any problem.  As you can imagine this drives my wife nuts, and my kids won’t let me near their Lego any more, but it really cuts down on the time I have to spend pretending to choose curtains.

In the case of call centres, contact centres – whichever you prefer – the starting point for me has to be: Why bother?  After all it’s not as if Joe Public admits to liking them, even though he should!  When you read the complaints in the media you sometimes have to wonder how a company could be so crazy as to build a call centre in the first place!

I’ve taken to asking this question as often as I can with execs and managers, and their answers almost always surprise me. First of all, I’m often surprised at how uncomfortable people get being asked this question. If my company was spending the kind of money it takes to run a call centre, I’d have a damn good reason on the tip of my tongue as to why we’re doing it!

Second, the actual answers can be surprising. “A single point of contact”:“A central point of control”:“A way to offer better service”. Yes, all these answers contain an element of truth, but to my mind they miss the real point.

Call centres are built to save money.

Now if serving people is your LIFE, and NOTHING makes you happier than a compliment from a customer whose problem you have just solved, don’t get upset. That’s still what customer service is all about, sort of, and I don’t for one moment propose to change that. But guys like me have gathered you and your colleagues into a group – physically or virtually – with one purpose in mind: To save money.

It’s OK if you don’t believe me.  Confrontation ain’t my thing and I know I’m right and your wrong.  So there.  But if you need further proof, consider this.  There is nothing done to serve, support, sell or collect in a call centre that can’t be done without a call centre.   The only problem will be it’ll cost more to have a bunch of people serving customers out of individual offices.  Remember when that was how the world worked?

One flavour of this approach was called a bank branch.  The customer would wander in, hoping that nice young man  with the bad hair would be available to ….well you get the idea.   It involved queuing, disappointment, spotty service and lost paperwork.  Pretty much the way it is today!  But not quite because today it’s costing the bank, and you, less.  Less time, less money, less effort.

Which is why Joe Public should stand up and admit that  he LOVES call centres – though he probably won’t – and why call centre professionals should never, EVER, forget why we build call centres:  To save money.

“Wow!” I hear you say. “Did ya figger this out all by yesself big feller?”

Yes, it is pretty obvious.  After my next cup of tea, I’ll tackle the facinating question of what call centres cost.