In his popular book The Fifth Discipline, business management guru Peter Senge describes what he calls the “Parable of the Boiled Frog.” If you drop a frog in boiling water, it will try to leap out. If, instead, you place the frog in cool water and gradually raise the temperature to the boiling point, the frog will be oblivious to the incremental temperature change and sit contentedly while it is boiled to death. The frog acts this way because its survival instincts equip it to react to sudden dangers, not gradual ones. * Senge uses this parable to illustrate one of the ways in which businesses fail. Faced with obvious crises, businesses tend to react. In the face of slow, creeping problems, however, they often fail to react or even miss the signals altogether, joining the ranks of the thousands of “boiled frogs” that went before them.

In the fall of 1998, after 13 years in the business, and with three call centers employing 1,400 agents in three states, Damark International’s teleservices group wasn’t being boiled to death, but the water was bubbling – and at a critical time. With e-commerce on the increase, the demand for fast, well-trained, and knowledgeable customer care services was starting to peak. Talk time in our call centers was trending upward, resulting in a domino effect for our other key indicators. Cost per call handled was up. Our fixed costs were rising dramatically. Sales performance – perhaps the most important measure of our success – was down.

The future of Damark, therefore, depended to a large degree on improving its teleservices performance. We had three options: fix, outsource, or close up shop. Taking a systematic approach to process management, we not only fixed the problem, but formed an entirely new company.

Ten steps to conquer sloth Over the years, attempts had been made to effect changes in the process, but the efforts had been piecemeal, stopgap, and largely unsuccessful. We maintained entrenched, inefficient practices that had become part of the culture and passed from employee to employee and manager to manager. Damark had a legacy of “revolving-door” management that stunted growth. Skepticism and even a sense of hopelessness regarding our ability to improve the situation permeated the organization.

We had no choice but to act, and we approached the issue with several fundamental questions. Could this be fixed, and not incrementally but dramatically? Could we improve our performance and reduce costs, and could we do it quickly? Could we achieve this without engaging an outside consultant or replacing our systems? Could we operate in a manner in which every option was open to discussion and in which all bets were off?

The answer to all of these questions was yes, which we learned after three months of whirlwind team activity and a complete realignment of our teleservices business processes. Before embarking on this campaign, we developed ten steps to guide us. They were critical to our ability to accomplish our goals.

Step 1. Stay calm and focused.

At every stage of the process, we needed to retain a sharp focus on two goals: reduce costs and increase sales. We needed to balance organizational needs with the needs of our customers, and this always had to be our first priority. This sounds simple enough, but it can be easy for fear, pride, or other feelings to take over when issues became controversial.

Any time you try to bring about radical change, you can expect dissent, defensiveness, and discomfort within the organization. No one enjoys having his or her work or programs scrutinized. People identify with their jobs, and even mildly critical feedback can be off-putting initially before a willingness emerges to look at things with a greater degree of objectivity. You should expect and react appropriately to both overt and covert negative reactions within the organization, especially as the process is first initiated.

Change and conflict are scary, but they also can be energizing. If you expect tension and distraction from the outset – if you indeed welcome it – you will be able to use it to your benefit.

Step 2. Make sure you have the right team in place.

In a company going through change, one of the most difficult areas in which to effect that change can be in the deployment of personnel. It is important to be open to making organizational changes through new hires, reassignments, or separations. In some cases, having the right team may require a willingness to pay premium salaries to attract and retain the talent you really need to get the job done. For example, we determined that many of the analytical tasks on our team were the responsibility of people without sufficient background and skills to perform these tasks well. We needed to engage employees who could do so.

It’s also important to consider how your existing team functions. We found that people responsible for different but related aspects of the business tended to concentrate solely on their own process and not on the function of the business. We had to change this horizontal orientation to a vertical one, and this in turn affected changes we made regarding incentives, development of project teams, assignment of accountabilities, and reporting of results.

For example, we had always measured the performance of each call center separately, which encouraged call center managers to do things on their own to be successful. It was essential to find ways to encourage them to look to their colleagues and to the corporation for ideas, cooperation, and support.

Step 3. Assess your operating conditions.

Although it is tempting to rely on your baseline understanding of your call center’s performance, it’s extremely useful to dedicate time and resources at the beginning of the process to conduct a full, objective assessment of your operating situation.

We convened a candid, full-day, off-site meeting with our management to discuss and identify the issues that were affecting our performance. Once these were delineated, we assigned accountabilities to specific individuals for specific tasks. These accountabilities were then assigned specific delivery dates, and the staff realized that they would be responsible for reporting progress at that time.

This process led to some fundamental but important investigations. For example, we prescribed a thorough fishbone analysis of our call procedures to determine the exact requirements of the call and our current methods of addressing them. This basic examination had never been conducted before.

The findings were illuminating. We found, in one case, that operators were confirming the customer’s name, address, and phone number in a category of calls for which the information was unnecessary. This practice took 30 seconds of talk time and added little or nothing to the value of the transaction. We found dozens of similar examples.

We also found that we had considerable amounts of data about the organization, but lacked information that would allow us to act on that data. One result of this assessment was a restructuring of our reporting procedures, carried out with the help of new analytical staff.

Step 4. Focus on one or two issues at a time.

Performing a basic retooling of your processes can be a demanding task. Be prepared to ask a lot of your team members, but you must also be realistic. Your top performers are valuable, but even if they’re wildly enthusiastic, they can’t do everything.

Recognize as well that team members have their own day-to-day jobs to perform. Limit the number of extra duties you place upon them to one or two issues that are relevant to their area of expertise, but demand 100% accountability for these issues and ensure that this expectation is understood. Perform constant checks to ensure that things are going according to schedule and that you’re getting the desired performance and results from team members.

At the same time, it is important to communicate to senior managers that a sustained extra effort will be required of them, that the same is expected from all team members for the duration of the process, and that it is fundamental to the success of the program. They must understand that extra work hours can make the difference at critical junctures for the company – and that this applies to the CEO on down.

Step 5. Stay the course.

As change starts to happen, the team will begin to feel empowered and the exchange of ideas will be fast and furious. At this point, the team finds that the temptation to be distracted by outside issues is greater than ever.

To assist team members in staying on track, a clear mission statement is invaluable. We created and distributed a mission statement that was posted in every call center, meeting room, training center, and lobby. When a new idea or proposal arose, we evaluated it against our operating priorities: Does this idea further what we need to do? Is it a good idea better handled later on? Or should we drop it? The mission statement served to unite the team with a common purpose. We found that it was particularly helpful in the field, where employees typically tend to feel less connected to the organization.

Above all, once you have made changes, resist the urge to revisit them based only on anecdotal evidence. As changes happen quickly, you will not have time to defend or re-analyze decisions you’ve already made, nor should you feel obliged to backtrack. Reverse decisions and make course corrections only if you see a compelling reason to do so.

Step 6. Test, test, test. Then, do something.

Testing ideas is important, but too much testing leads to stagnation. All too often in the past, our organization had tested new concepts without subsequent action, and we no longer had the luxury of doing that.

We quickly adopted a strategy whereby if something was tested once and it looked promising, we implemented it. We became comfortable with acting on findings at the 60% or 70% confidence level instead of holding out for 90%. If the first test didn’t look promising, we stopped there in lieu of making subtle changes and then re-testing.

This approach was especially important because we were looking for radical change, not incremental improvement. As we were willing to assume greater risk as an organization, we had to act accordingly and encourage staff throughout the organization to take risks along with us. The sense of empowerment that this brought about was contagious.

Step 7. Develop reporting procedures.

Proper reporting and measurement are critical to improving process management. Like most companies, and after so many years, we certainly had no shortage of performance data. In fact, we were swimming in it.

As we considered our existing numbers, however, we realized that we had never configured them in a way that would allow us to act upon them properly. Much of the data we had was irrelevant or presented in such a way that it was difficult to make helpful and objective comparisons.

We needed to refine and streamline our reporting process to transform data into useful information. We started by asking simply, “What do we really need to know?” That served as the basis for a whole new system of reporting.

We found that our analysts were an excellent source for recommendations in this area, but they simply hadn’t been asked in the past to interpret data. When we asked them to help reconfigure our reports to make them more useful and applicable, the innovative ideas that resulted were impressive. The resources had always been there, but they were untapped.

Step 8. Celebrate success.

As the change process continues, it is important to recognize the successes you’ve achieved and the contributions that specific people have made to the performance improvement program.

On a quarterly basis, we visited the call centers and presented current reports indicating how much the team was improving against our baseline indicators and our goals. It was an opportunity to tell agents that they were doing a great job and that we had the data to prove it. We held a lot of modest events, such as pizza lunches, throughout the organization in recognition of milestones.

Remember, as well, to reward yourself – even in simple ways – for your successes.

Step 9. Share the results.

Demonstrable improvement in teleservices center performance is something that speaks well of the entire company. It becomes an asset that can be leveraged with customers, shareholders, business partners, and others. Ensure that your progress and successes are known throughout the company.

Good news, moreover, tends to promote good news. At Damark, we distributed a monthly summary of results that served two purposes. First, it let staff at all levels know about the changes we were achieving. Second, it provided additional incentive for team members to perform (and even compete with other departments) so that they, too, could be recognized in the summary and credited for success. In doing so, we transformed the reputation of teleservices at Damark from a negative to a strategic asset for the company.

Step 10. Never let down your guard.

Avoid the temptation to rest on your laurels, either during or after the process. Maintaining improvements requires constant vigilance and management. Continue looking for your next area of development and sustain the momentum.

No longer in hot water To date, our results have been significant and sustained. Talk time is down 18%, the cost per call handled has dropped 8%, fixed costs have fallen 21%, and sales performance is up a very rewarding 54%. The changes we put in place have enabled the company to shift its process management emphasis from cost control to customer care – the reason we’re in business.

Moreover, the improvements enabled Damark International to form ClickShip Direct, Inc. (CSDI), this past January as a subsidiary to handle its rapidly expanding e-services businesses. Damark is expected to separate CSDI as an independent, publicly traded company later this year.

CSDI now provides downstream value chain outsourcing for retailers, e-merchants, direct marketers, and manufacturers. It maintains two call centers, staffed around the clock, with 625 seats and 120 training seats. In all, the organization can handle approximately 18 million live agent calls and more than 30 million interactive voice response calls per year.

Our improved call center performance has also allowed us to focus on new services. For example, our centers now have an automated e-mail system and interactive e-mail capabilities as well as online, live-agent chat capabilities.

And the frog? Don’t worry about him. The water’s just fine, thanks.

When it set about reengineering its teleservices practices, Damark first developed a set of guidelines in the form of a mission statement and operating principles and put them to daily use. The mission statement was a summary of the group’s common purpose, while the operating principles focused on three areas – process, profitability, and employees – critical to the effort. Both items were published and physically posted throughout the organization, serving as a filter through which to accept or reject the new ideas and proposals that started to emerge once the process was initiated. Although not elaborate, these tools were effective and used constantly. Employees at all levels, and especially those in the field, appreciated the company’s effort to communicate its priorities and the role that each team member was expected to play.

MISSION STATEMENT: The teleservices division creates a link between Damark and its customers by being committed to its employees, who provide quality service to our customers. Teleservices is committed to executing the operating principles of cost management, sales performance, and customer care.

OPERATING PRINCIPLES: Process guidelines included maximizing the profit contribution of each customer contact through optimal service delivery, building and maintaining long-term relationships with qualified customers and clients, and integrating call center resources to ensure effective communication. To bolster profitability, we would need to increase shareholder value by maximizing efficiency, leveraging a sophisticated database system, and providing seamless service and value delivery. For employees, we needed to supply the necessary training to ensure that workers were competent to achieve sales performance and provide high-quality service to Damark customers and clients. In addition, our goals were to maintain high standards and expectations for all levels of the teleservices organization and deliver a recognition program that rewards performance, efficiency, and good service.

Damark has since updated its operating priorities to focus on continuing improvement in customer care and continues to revisit them as strategic business needs evolve.