WHITE PAPER

Measuring Performance of High-Volume

Outsourced Services Using the Foundation
of High Performance Model
Author: Kathleen Jezierski, Chief Operating Officer, COPC Inc.

Overview
Measuring the performance of a supplier in producing or delivering procured products can be
relatively simple. Typically, the most important measures are on-time delivery of the correct number
of products and the quality of the delivered products relative to pre-established quantitative
specifications. In comparison, measuring the performance of high-volume outsourced services,
such as contact center services, application processing, and data entry is a more complex endeavor.
It is difficult to establish quantitative specifications to which the output—the call, application
decision or data entry—may be compared.

This paper presents the Foundation of High Performance model and its application, which evaluates
the performance of high-volume services by examining five areas of measurement that provide a
robust assessment of the performance of the supplier. This balanced set of performance metrics will
provide a holistic and objective appraisal of the performance of the supplier, and ensure focused
performance improvement in one area is not gained at the expense of reduced performance in another.

Introduction
The traditional supply organization was typically established to procure products, support
services (e.g., cleaning) and a small amount of professional services. When companies began to
outsource high-volume services that were once considered key competencies, such as responding
to customer billing inquiries, this effort was often coordinated by the operations group that had
previously performed these services. The rationale was that services are “different” and the
operations staff had the necessary technical expertise required to effectively establish and
manage the supplier relationships for these services.

Over time, some or all of the responsibilities for these relationships have found their way to the
supply organization. Examples of these services include contact center services, physical
fulfillment, rebate processing, and data entry. Measuring and managing such high-volume
services is relatively complex, as it requires the assessment of the delivery of a service, which is
often considered a qualitative exercise.

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The Foundation of High Performance

The Foundation of High Performance model provides a framework for establishing metrics that may be
used to measure and manage the performance of suppliers of high-volume services. The model focuses
on five key areas: service, quality, revenue, costs and customer satisfaction as shown in Figure 1.

Figure 1

• Service is the timeliness of delivery and is usually measured using an on-time metric. For
example, in data entry, the metric might be the percent of applications entered within twenty-
four hours of receipt.
• Quality is the accuracy of the service delivered. For example, in fulfillment, quality may be the
percent of orders with zero defects. Quality results are often difficult to obtain and it is often
measured via sampling.
• Revenue may be revenue generated or collected for the company. This is typically a measure
found in the outsourcing of a sales- or collection-related service.
• Costs are especially important when outsourced services are provided on a time and materials
basis. The overall costs of the company are reduced when the supplier is more efficient.
• Customer Satisfaction is typically measured via surveys. Ensuring the integrity of this data is
vitally important, especially if suppliers are held accountable for the results. Suppliers should be
held accountable for Overall Satisfaction or for one or more of the attributes (or questions) over
which they have direct control.

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Using the Foundation of High Performance model, suppliers should be measured on and held
accountable for the results in all these areas. Management of results should focus on balanced
results, as improvement in one area should not adversely impact another. In fact, achieving
balanced results often can improve more than one area simultaneously. For example, a contact
center can improve its speed of answer by better scheduling its agents to work when calls arrive.
This will not only improve service, but will also reduce costs by minimizing the unproductive time
that agents are waiting between calls.

Focusing on the Right Metrics

One of the challenges of managing a supplier of high-volume services is balancing the need to
measure performance at low levels to ensure consistent performance across all “programs” and
assisting the supplier in focusing on what is important to the company by minimizing metrics. In
addition, performance data may be needed at a granular level to enable root cause analysis when
high level performance requirements are not met. The metrics established in each area of the
Foundation of High Performance model can be prioritized by grouping them into three categories:
compensation metrics, key performance indicators, and tracked metrics, as shown in Figure 2.

Figure 2

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Services Using the Foundation of High Performance Model

• Compensation metrics are the components of any “pay for performance” model. These metrics
typically fall into one of two categories:
• Metrics that are most important to the company comprise this category. Usually Customer
Satisfaction and, if relevant, Sales are compensation metrics. These are the metrics that ensure
the future viability of the company’s business.
• Metrics that mitigate the risks of the supplier payment model comprise this category. There are
many payment models used to compensate suppliers for services, and none are without risk. If
the model is based on time, the company is at risk the supplier will not be efficient or accurate,
so efficiency and accuracy metrics may be designated as compensation metrics. If the model is
based on output, such as number of rebates processed, the company is at risk the supplier will
not be accurate, so accuracy metrics may be designated as compensation metrics.
• Key Performance Indicators (KPIs) measure the performance of the service provided by the
supplier. Metrics from each of the categories in the Foundation of High Performance model (service,
quality, revenue, costs and customer satisfaction) are included as KPIs. These metrics are often
found on dashboards that provide frequent performance updates. Suppliers should be contractually
bound to meet required performance levels for KPIs.
• Tracked metrics may be measured for monitoring purposes or to make the results available for root
cause analysis when performance of a KPI or compensation metric is deficient.

Guidelines for Establishing Metrics and Required

Performance Levels
Establishing the appropriate measures for a supplier of a high-volume service program requires a
combination of operational knowledge of the service and an understanding of how metrics and
targets impact supplier behavior. The following are general guidelines:
• Address all components of the Foundation of High Performance model, but emphasize the metrics
that are most critical to the company.
• Clearly define all metrics and the source of results. There should be specific formulas for
calculating the results of all metrics. In high-volume service organizations, results may be available
in several systems, but there may be variation in the results from system to system. Therefore, the
source of results for each metric should also be identified.
• The company should require realistic performance levels based on historical performance and
comparisons with high-performing organizations. Requiring unrealistic performance levels from
the supplier only reduces the company’s credibility and leads to unnecessary friction in the
supplier relationship.
• Establish specification limits as targets for appropriate metrics. More is not always better.
If on-time targets have been established based on customer requirements, exceeding this
requirement only results in greater cost.

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Sample Results
A manufacturer of consumer electronics applied the Foundation of High Performance model to
measure and manage the performance of its supplier that was processing technical support email
inquiries from consumers. Before applying the model, the company held the supplier accountable for
the performance of two metrics, the average time to respond to emails (Turn-Around Time or TAT) and
Overall Customer Satisfaction.
For the previous six months, the supplier met or exceeded the required performance levels for the two
metrics only 33 percent of the time periods. The supplier met or exceeded the required performance
level for TAT four out of the six months and did not meet the required performance level for Overall
Customer Satisfaction at all.
The company was relatively satisfied with the speed at which the supplier responded to emails, but
continually required action plans from the supplier to improve Customer Satisfaction results. Most of
the improvement plans required further training of the supplier’s agents. The months in which TAT was
missed were the months in which agents were moved from processing emails to training in an effort to
improve Customer Satisfaction. In the months after training, Customer Satisfaction increased slightly
but never reached the required performance level.

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As part of the implementation of the Foundation of High Performance model, the company
established the following metrics to measure the performance of the supplier’s processing of emails:

AREA METRIC FORMULA REQUIRED

PERFORMANCE
LEVEL

Service On Time The percent of emails/electronic contacts responded to within >=95.0%

24 hours.
On Time = Number of emails received by the Supplier that are
answered within 24 hours of receipt / Total number of emails
received by the Supplier
Note: Hours are clock hours (24 hours in one day, 365 days per year)

Backlog The average hours late of emails not responded to within 24 <=12.0 hours
hours
Backlog = [(Number of emails 24-36 hours old) * 12 + (number
of emails 36-48 hours old) * 24 + (number of emails 48-72 hours
old) * 48 + (number of emails greater than 72 hours old * 60)] /
Total number of emails not responded to in 24 hours
Note: Hours are clock hours (24 hours in one day, 365 days per year)

Quality Accuracy of The percent of all monitored transactions with no errors. >=95.0%
Responses Accuracy = Total of all transactions monitored with no errors /
Total number of transactions monitored

First The percentage of all end-user satisfaction surveys in which end- >=75.0%
Contact users answer “yes” to Question #X (the question which asks if
Resolution their issue was resolved with the response to their first email).
FCR = Total number of surveys in which end-users answered “yes”
to Question #X / total number of surveys in which customers
answered Question #X

Cost Emails Per The average processing time per email >=3.0
Hour Emails per hour = Total number emails responded to / total number
of hours during which agents are actively processing emails

Customer Overall “The percentage of all end-user satisfaction surveys in which >=3.0
Satisfaction Customer end-users rank their experience in the Top Two Boxes on a five-
Satisfaction point scale.
Overall = Number of end-users answering 1 or 2 to Question #X
(overall satisfaction question) / number of end-users answering
Question #X

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WHITE PAPER: Measuring Performance of High-Volume Outsourced
Services Using the Foundation of High Performance Model

After implementing the Foundation of High Performance model, the company found that though the
turnaround time of emails was meeting its target of 24 hours on a relatively consistent basis (four out
of six months), it was not processing emails in “first in, first out” order. In fact, agents chose the emails
to which they responded, so more complex emails were often not responded to at all. On Time
performance was actually only 83 percent and Backlog (the average hours late) was greater than 48
hours. Some emails in backlog were more than two weeks old. The implementation of the
Foundation of High Performance model enabled the company to identify and correct this
performance issue that had affected its customers for the past two years.

In addition, the granular data available from monitoring and evaluating emails enabled the supplier to
develop and implement action plans to improve Customer Satisfaction to required performance levels
by addressing process-level issues that were adversely impacting customers.

Nine months after the implementation of the Foundation of High Performance model, the supplier
was meeting or exceeding required performance levels for 83 percent of the time periods for the
previous six months.

Conclusion
The complexity of high-volume outsourced service delivery requires a comparably complex set of
performance metrics. The Foundation of High Performance model provides guidelines for a company
to establish a holistic set of metrics that may be used to evaluate and improve the performance of
suppliers of high-volume services. By taking a balanced approach, the supplier organization can
measure and manage the performance of suppliers and provide the quantitative data required to
determine and address the root causes of deficient performance.

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Services Using the Foundation of High Performance Model

About COPC Inc.

COPC Inc. provides consulting, training, certification and the RevealCX™ software solution for operations
that support the customer experience. The company created the COPC Standards, a collection of
performance management systems for call center operations, customer experience management, vendor
management, and procurement. Founded in 1996, COPC Inc. began by helping call centers improve their
performance. Today, the company is an innovative global leader that empowers organizations to optimize
operations to deliver a superior customer experience across all channels. COPC Inc. is privately held with
headquarters in Winter Park, FL, U.S. and with operations in Europe, Middle East, Africa, Asia Pacific, Latin
America, India and Japan. www.copc.com.

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