What is Shrinkage? And Why is it so Important?

By Todd Cotharin, CommunityWFM

Everything in your forecast looks great, call volumes and average handle times are accurate, your schedule is in place to meet the expected demand. But you are still missing service levels. So, what is the missing ingredient? Could it be shrinkage? Did you underestimate your shrinkage, or leave it out of the equation entirely? In many cases, shrinkage is underestimated or calculated incorrectly.

What is Shrinkage?

Shrinkage is the value used to determine the total required staffing levels necessary to meet your business goals. In other words, it’s the amount of “over-scheduling” you must perform in order to have the right number of agents working at any given time of the day. Let’s face it, agents are going to call in sick and they are going to take time off for various reasons. In addition, critical meetings and training will take agents away from their desks. These are all factors in shrinkage. Simply put, shrinkage is anything that keeps agents from being able to perform their main job function… interacting with customers.

Most contact centers average around 30% shrinkage, but it can range anywhere from 20% to 50%. The range is dependent on the type of business and the culture.

The best way to determine shrinkage is to break it into two distinct categories: discretionary and non-discretionary. Discretionary includes the things that we can control (e.g., meetings, training, vacation time, break time). Non-discretionary would be the elements we cannot control (e.g., agents coming in late or calling out sick, and any other unaccounted time.)

You need to staff 100 agents on the phones at a given interval of the day to be able to answer the calls, meet your service goals, and decrease abandons as much as possible. In order to meet this demand with 30% shrinkage, you need to schedule 143 agents.

Why 143 agents when shrinkage is 30%? Isn’t 100 x 30% = 30? This is one of the biggest misconceptions and miscalculations that occurs when determining proper shrinkage.

How to Calculate Shrinkage

You schedule 130 agents to be on the phones tomorrow for the interval 8:00 a.m. to 8:15 a.m. By tomorrow morning, 30% are absent due to shrinkage…how many agents remain?

130 agents – 30% shrinkage = ?

The answer is 91 agents remaining instead of the 100 we need.

Thirty percent of 130 agents = 39 agents lost due to shrinkage.

You are already short-staffed by nine agents in that single interval of the day.

To determine true schedule needs after shrinkage, use the following calculation:

Required Base Staff ÷ (1 – Shrinkage %) = Total Staff Required
100 ÷ (1 – 30%) = 142.85 or 143 agents

Why is it so Important?

Shrinkage plays a big part in determining the efficiency rating of your agents.

This is a typical agent’s day in a typical contact center environment.

shrinkage figure 1

Occupancy = The percent of an agent’s logged-in phone time during a given interval that an agent is either on an interaction or in after-call work.

Efficiency = The percent of paid work time an agent is either on an interaction or in after-call work.

shrinkage figure 2

And, higher shrinkage rates can affect your efficiency.

As you can see from the chart above, the more unmanageable your shrinkage rates become, the lower efficiency values you can expect to get out of your agent’s time.

Your mission is to determine your true shrinkage percentages. Calculating shrinkage is tricky, since shrinkage can vary by time of day and day of week and even by different agent groups.

Can This be Automated?

It is easy now to see how crucial it is to understand and manage shrinkage. Contact centers need to be able to forecast the workload accurately. Understanding non-discretionary shrinkage will enable you to better manage agent behavior, generate headcount, and understand overhead. By optimizing shrinkage, you can offer more consistent customer service, better agent coaching, more efficient management, and more effective policies. It also protects the bottom line.

Thankfully, most WFM systems will perform this reverse calculation for you in order to give you the proper values of staffing requirements to ensure you meet your contact center’s goals!

Todd Cotharin was one of the original founders of CommunityWFM. Prior to CommunityWFM, Todd worked for Cybernetics Systems and held the position of Director of Customer Service. He also managed multiple contact centers for Citibank. Todd has both designed and influenced a number of workforce management solutions and is a widely recognized industry thought leader. Todd can be reached at cotharin@communitywfm.com.

CommunityWFM (formerly WFMSG) was founded in 2005 by a team of industry-leading workforce management consultants. Today, CommunityWFM provides a modern and simplified approach to forecasting and scheduling contact center agents through two product versions, Enterprise and Essentials. To learn more visit CommunityWFM.com.