A Case Study in Build vs. Buy Decision Making

Every business with any sort of programming staff on hand has been faced with a build vs. buy decision. The company in this particular case study has a propensity for building everything stemming primarily from a cash flow problem in combination with a tendency for the management team to prefer intangible vs. tangible costs.

Building was the right choice:

In many cases over the years the decision to build many of their in-house tools has proven advantageous. One of the divisions has many hourly workers, and they needed a time card system of some kind. At the time, open source was not what it is today, so they had the choice of paying monthly for ADP's software, or using their own. This proved to be a great opportunity to create a simple tool that later grew as demands changed. Today they have a nice little application that handles the time card functionality as well as all the other HR data they need to collect and with a click of a button they can generate fully customized reports.

Another success story is in their telemarketing department. They needed to find a way to take calling lists in from the clients they serve, and then contact those customers and report back the changes. Software for telemarketing applications is typically geared toward large firms and costs thousands and thousands of dollars which they really didn't have to spend. Instead they plodded through the development of their own, customized solution and over the years have refined it as needs arose. They were well served by the ability to change things on the fly as clients' needs changed and today, they have a solution far better than anything commercially available since it is designed for their unique situation.

Building was very wrong:

This same organization later decided to branch into another area and needed to create a CRM solution. The new venture would be a much more traditional telemarketing situation and was intended to scale much larger than the other side of the business. Having seen success with the last CRM-like solution created, they decided to build yet again. Rolled in with this CRM though was a large need for reporting capabilities, as well as accounting, billing, and invoicing functionality. Despite the much larger scope, the decision was made and off they went.

Unfortunately, it was an ugly thing to watch. Delay after delay caused high tensions and missed deadlines as they tried to create things they had never dealt with before. No one on staff had any experience with accounting, and since there was no one defining specifications, the developers were just stabbing in the dark. This whole project just went horribly wrong.

A couple years into the business, they were having many problems and finally decided to buy a new solution for thousands of dollars. Unfortunately, undeterred by the cost, and wooed by the sales person that told them how easy the migration would be, they pressed forward, signed the deal and started implementation. That's where they met insurmountable challenges that they simply were not equipped to handle. To this day (about 3 years in), they are still struggling to fix the system that is handcuffing their growth.

What's the right answer?

Of course, the right answer is “it depends.” I also believe though that some simple principles can be employed to maximize the chances for success. Firstly, a real cost-benefit analysis HAS to be run on both scenarios. Intangible costs can be astronomical and can really cripple companies who underestimate it. The firm in this case study was bitten by a lack of analysis quite badly. They had an opportunity to be very early to the market, and could have grown very rapidly, but due to a severe underestimation of the resources required to build and maintain their CRM system, they have been struggling just to stay alive.

A company should seriously look into building, or obtaining open source solutions that they have sufficient staff to maintain when they are looking at building single task tools. If they are looking at a time card tracking tool, then it makes sense to build it. This is especially true when there are unique needs surrounding the situation. I cannot stress enough though the importance of looking ahead and not underestimating the resources needed to maintain the software.

The decision to buy comes in when looking at complex systems. Something such as a CRM can be very complex indeed. When combined with needs for invoicing, billing and overall accounting, it is extremely complex. At that point it will span several departments including sales, marketing, accounts payable, accounts receivable, procurement, and advertising. All of these departments will need to be stitched together in order to make the CRM of any value. The company in the case study had success in the first CRM-like application because it was focused on outbound tele-sales and had nothing to do with any other departments. Fundamentally, if your firm does not have substantial in-house experience with the type of application you need to develop, then buying it is probably your best bet.

The Value of Proper Evaluations

A past client was having trouble with office morale and communication. They were what I would consider to be the typical small to medium sized office with all the normal problems. They had been growing over the last several years at a healthy but manageable pace but they had not addressed some of the growing pains that were occurring.

While the management had a stated goal of providing as much information to the staff as possible, the staff still seemed to feel left out. There was a significant disconnect between the view from the top down and the bottom up, which was leading to issues festering at the lower levels without management's knowledge.

When I started to work on this problem, the one thing that seemed the most lacking was structured feedback. Some of the IT staff had expressed a discontentment with the evaluations they were receiving, citing that they were created for other departments and never properly adapted to the IT roles. Other departments felt that the evaluations did not go in depth enough, or define specific metrics for them to feel that they were helpful.

This all lead me to the idea of implementing both a new evaluation system, as well as 360 degree evaluations.

Evaluation Overhaul:

I started with the revamping of the existing evaluation documents. I decided to make them modular, so that each department would have one section of common questions, so that everyone was rated on a common set of standards. This section is also used for the 90 probationary period evaluations, giving it dual purpose. After the initial section, the next several modules are interchangeable based on the department the employee is in, making the evaluation completely customizable to the individual workers' roles, with little effort on the part of the evaluator.

Most importantly, this evaluation results in a numeric score. Each question is given a score of 1-5 where 5 is basically unattainable perfection, and 1 is absolute abominable performance. The scores are then averaged at the end and a single numeric score then represents the employee's performance, allowing for the greatest degree of objectivity.

Ushering in the 360 Degree Evaluations:

The 360 degree evaluation, for those unfamiliar, is given to superiors, peers, and subordinates so that a wholistic (or 360 degree) picture can be painted of the person being evaluated. Again, I used the concept of numeric scores, but this time a scale of 1-10 was used in order to capitalize on the familiarity of a base-10 system of grading. I assigned each person an alpha-numeric code that was then used on the evaluations. This way they could be handed out to the evaluators, and anonymously returned to the person who was to tabulate the results.

The results were keyed into spreadsheets that automatically tabulated categorical scores, as well as an overall score. Once completed, the person could see how their work was perceived in areas such as leadership, business acumen, teamwork, communication, etc.

Results:

The results of this simple revamp was astounding. The most remarkable impacts were seen where people who expected very positive evaluations, received the opposite. This honest and anonymous feedback had profound effects on those individuals.

Communication has improved dramatically as management is now informed about the needs and expectations of their staff, and the staff now understands management's roles and obligations better. The past resentment is now completely gone, replaced instead with a collaborative environment from top to bottom.


It is truly wonderful to see such a transformation. Many of the people have expressed gratitude for the changes made as they are now receiving helpful and specific feedback. They say they are better informed about the individual failures and successes they had throughout the year and are now able to have the top-down and bottom-up expectations and opinions be properly aligned.

Proper Metrics and Focusing on Your Niche

I have been working with a business whose customer contact center has been hampered by corporate downsizing. They were having trouble getting through the volume of work needed to produce the revenue the corporation was used to seeing.

My assessment of the situation was that they were truly standing on the precipice of elimination from either replacement by inexpensive outsourcing, or corporate implosion from the downsizing.


The Task:


Tasked with staving off both of these I began to look at the information at hand. This contact center was built over the last 5 years, and had clearly found the right answer to their niche's problem. They could take a large portion of the credit for taking business over and over again from their main competitor. When the cash was plentiful, and budgets were plump, the performance was top-tier. But once the budgets became razor thin, the weaknesses began to show.

I learned that over the last few years, the metric used to evaluate the customer service reps' performance was minutes on the phone per day and the past management had found ways to effectively double this metric over the last 12 months. The problem that still remained was that they were still leaving massive amounts of revenue on the table due to an inability to contact sufficient quantities of leads in each market area. What I determined was that they were breaking a fundamental rule, which is that the employees have to be compensated and evaluated in such a way that their goals naturally become the company's goals.

The Tools:

The assets in place were 2 of the 4 original managers, and 6 of the original 12 customer service agents. Fortunately this left a core of knowledge and group of dedicated employees to draw from. The corporation had already decided to outsource the distribution aspect of the business, which cut costs and should also reduce the man-hours needed to handle that operation.


The Solutions:

I took these bits of information that I'd uncovered, and started doing some digging, followed by reflection. I started to formulate a game plan that consisted of cutting any non-core functions, and focusing on that which they did best. I needed them to view the corporation as a customer, and for them to understand that they needed to provide a world-class service to that customer.

They were duplicating efforts in the contact center in NY that were being done in the corporate headquarters in VA. There was no reason for the NY office to be doing any HR, since the HR department was in VA. I simply spoke to all HR related parties, and worked out a streamlining of efforts to avoid duplication. The time freed up by this was then allocated to the supervision of the customer service agents.

The next step was to outsource the "night shift". They are contractually obligated to staff the call center from 8am - 8pm EST. The staff hated working the 5 - 8 shift, and the numbers all pointed to it being a waste of 3 man-hours. By outsourcing this shift, I was able to cut the per-hour cost from $12 to $5.50 with only a few hundred dollars in up-front setup costs. They will recover this in just over 2 months, and save significantly thereafter with an added bonus of happier employees.

In addition I was able to shift an additional 3 man-hours per day during the most effective calling times, which brings me to the most significant and effective change. By simply looking at historical data they already had, I was able to see that from about 8-11 and 2-4 was when they got the largest ROI on their agents' time. This explained why the increases in phone time had no effect on outputs. They were calling the customers during fruitless times of the business day. I enacted "call blocks" where the agents would focus on calling as many customers as possible, and minimize all other activities. This simply meant that they would do all prospecting, data entry, and any other non-calling activity outside of these two call blocks.

The Results:

The effects of these changes were immediately felt. The morale was higher because the agents found it much less monotonous, and they were able to be in better spirits when talking with the customers. Call times actually increased, but more importantly, output increased. They were closing approximately 25-30% more leads than before, AND they were able to help out with other miscellaneous tasks.

Lessons Learned:
Sometimes the little things really add up. None of the changes made were earth-shattering or even difficult, but they were based on an assessment of the data, rather then emotion. It's critically important to utilize the empirical data at your disposal, and to listen honestly to what it's telling you. All I did with this company was rearrange the employees' day, and eliminate non-core functions, which is something businesses do every day. Treating the corporation as a whole as a customer of the NY division, and focusing on the core value that the NY division can provide led to lower costs and higher outputs.

In the Beginning

Hello world.