Cost and Revenue – How WFM affects it. Part – 3

This is the continuation of my previous blogs which are divided into three parts.
For those who have missed Part 1 and Part 2, its worth reading first.
In Part 1, we saw the cost structure and in Part 2 we saw some billing models.
Let us look at more billing models and their calculations.
I’ve attached the file at the end which shows a simple calculations of cost and different billing models.

Please make sure to check the file.

Just to quickly recap, in Part 2 we saw the below models.
  • Per FTE per Month
  • Per Seat per Month
  • Per Hour
In this Part, we will further look into the below models.
  • Per Productive Hour(Including Avail)
  • Per Productive Hour(Excluding Avail)
  • Per Connect Minute
  • Per Transaction
  • Outcome Based
As explained in Part 2, we will consider the expected Profit as 20%.
  • Per Productive Hour(Including Avail)
Recently, this billing model is gaining popularity against others.
Below is the calculation.
  • Cost – $194887.34
  • Expected Profit – 20%
  • Required Revenue – $233864.81
  • No. Of FTE – 150
  • Payroll Hours/Month – 176
  • In- Office Shrinkage – 10.3%
  • External Shrinkage – 14%
First we calculate what is the productive hour per month per FTE by removing the shrinkage
i.e. 176*(1-10.3%)*(1-14%) = 135.76
This is then multiples with No. of FTE and then the Revenue is divided by the resultant number.
i.e. 150*135.76 = 20364
Rate Per Productive Hour = Revenue/20364
i.e. Rate Per Productive Hour = 233864.81/20364
Rate Per Productive Hour = $11.48

  • Per Productive Hour(Excluding Avail)
The only difference between this model and the previous one is the consideration of billed occupancy to remove the availability.
Some client’s prefer not to pay for the time spent on avail and that is when this model is used.
  • Cost – $194887.34
  • Expected Profit – 20%
  • Required Revenue – $233864.81
  • No. Of FTE – 150
  • Payroll Hours/Month – 176
  • In- Office Shrinkage – 10.3%
  • External Shrinkage – 14%
  • Billed Occupancy – 76.86%
For those who have not read the blog on Billed Occupancy, here is a link:

Occupancy – From Revenue and Cost Perspective

First we calculate what is the productive hour per month per FTE by removing the shrinkage.
i.e. 176*(1-10.3%)*(1-14%) = 135.76
Then, multiply the result with the billed occupancy to find out the actual productive time.
i.e. 135.76*76.86% = 104.34
This, 104.34 is essentially the time which an agent spends talking to customers.
When it is multiples by the No. of FTEs, we get the total time.
i.e. 104.34*150 = 15651.77
Further divide it by the Revenue to get the per hour price.
Rate Per Productive Hour = Revenue/15651.77
i.e. Rate Per Productive Hour = 233864.81/15651.77
Rate Per Productive Hour = $14.94

  • Per Connect Minute
The term connect minute essentially defines itself. It is simply the total minutes an agent spends talking to customers.
But, to achieve operational excellence, the total minutes is calculated with either actual or target AHT depending upon whichever is lesser.
Let us look at the below two scenarios to understand the same.
Scenario 1
Total Call Handled – 12000
Actual AHT – 294 Secs
Target AHT – 300 Secs
In the above case, the connect minute would be,
12000*(294/60) = 58800
Scenario 2

Total Call Handled – 12000
Actual AHT – 304 Secs
Target AHT – 300 Secs
In the above case, the connect minute would be,
12000*(300/60) = 60000
With this understand, let us look at how to calculate the per minute rate below.
  • Cost – $194887.34
  • Expected Profit – 20%
  • Required Revenue – $233864.81
  • Target AHT – 300 Secs
  • Volume Forecast – 200000
  • Call Capacity – 207728
The first step is to get the billable volume i.e. the minimum of volume forecast and call capacity.
Billable Volume = 200000
Multiply the Billable Volume with the Target AHT and divide by 60 to convert in Minutes.
i.e. 200000*(300/60) = 1000000
Divide the Revenue by Totl Minutes to get the Per Connect Minute Rate
i.e. Per Connect Minute = Revenue/Total Connect Minutes
i.e. Per Connect Minute = 233864.81/1000000
Per Connect Minute = $0.23

  • Per Transaction/Per Call

Again, the model name is self defining where the client is billed for per call which is handled.
Let us look at the below calculation.
  • Cost – $194887.34
  • Expected Profit – 20%
  • Required Revenue – $233864.81
  • Volume Forecast – 200000
  • Call Capacity – 207728
As explained in the earlier model, the Billable Volume is considered.
Billable Volume = 200000
The Revenue is then divided by the Billable Volume to get the Per Transaction Price.
i.e. Per Transaction = Revenue/Billable Volume
i.e. Per Transaction = 233864.81/200000
Per Transaction = $1.17

  • Outcome Based
This model was mainly designed to improve or drive the operational matrix such as CSAT, FCR etc.
The logic of this model is quite staight forward.
Let us consider the FCR target to be 90%, but the Actual is 86.37%
This means there is a gap of 3.63%.
Now these are applied the Billable Volume and removed.
i.e. Billable Volume = 200000
Gap = 3.63%
Actual Billable Volume = 20000*(1-3.63%) = 192740.
Now using this Billable Volume, the model can be either calculated for Per Connect Minute or Per Transaction.
Any of the above billing models can be used in a particular contact center, but however there are many factors which drives the decision.
I leave it to the readers to research on what parameters affect the decision of which billing model to be used.
PS: The above explained method is only for illustration purpose and for a basic understanding.
In reality the models used need more complex calculation, however I hope this gives you a good start.
Thanks for reading.
Stay Tuned!!

Disclaimer: The postings on this site are my own and do not necessarily reflect the views of my employer.

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