Updated: March 8, 2023

I once managed the call center for a catalog company that sold a wide range of imported collectables.

Our call center reps had to have a lot of knowledge. They dealt with sophisticated customers who had high expectations and were expected to handle both sales and customer service calls.

You might think we paid well, but our company had cash flow problems. The company's owners mandated a starting wage that was in the bottom 25% of the market.

This made it hard to hire great people.

I asked the CFO many times to raise wages. He always said no, citing the company's cashflow issues.

It wasn't until years later that learned to make a better pitch.

In this post, I’m focusing on three benefits of paying your customer service employees more. I'll also show you how I used these techniques to convince a tightwad CEO to increase pay.

#1: Hire better talent

Good employees don’t come cheaply. They tend to have more options than less skilled or poorly performing employees.

Offering a higher wage immediately gives you access to better talent.

The problem is executives don't like to spend money if they don't have to. So how do you convince them?

By tapping into the another big way executives make decisions: benchmarking.

CEOs spend a lot of time worrying about what other companies are doing. They tend to follow suit when they see a trend.

So show them the trend.

Here's the graphic I showed the tightwad CEO who was paying bottom-barrel wages:

At the time, he was paying his customer service reps $12 per hour. (This was a few years ago, wages are even higher now.) I wanted him to raise wages to $14 per hour.

This graphic provided a clear visual that he was paying bottom-market wages.

A few well-placed stories can help make the case.

Ask your CEO or CFO to name a few companies they admire for outstanding customer service. Here are a few that are almost always on the list:

• Trader Joe's

• Costco

• In-N-Out Burger

These companies are all low-margin businesses that pay their employees above-market wages.

Your CEO is wavering now, but they're still hesitant. So eliminate some risk by proposing a simple test:

1. Post a job at the new rate

2. Compare the quality of applicants to what you got at the old rate.

I did this with the tightwad CEO. He was blown away by the volume and quantity of applications they received.

#2: Get Better Results, Faster

You should expect more from employees when you pay them more. They bring more skills, ability, and passion to the job than someone who is willing to work for less.

A great to make this case is to focus on the issue your CEO cares most about.

The tightwad CEO cared most about the conversion rate. This was the percentage customers who called with a product question and then made a purchase.

The current rate was 33%. The CEO wanted it to be higher.

I asked him what the conversion rate needed to be to justify raising wages from $12 to $14 per hour. He crunched the numbers with his CFO and came back with 35%.

So I proposed another test:

1. Hire a new rep at $14 per hour.

2. Measure their conversion rate after 90 days.

3. See if they can beat 35%.

The tightwad CEO agreed to do the experiment. What happened next was amazing.

His contact center director hired a great new employee who was passionate about the company's products and had great customer service skills.

Her knowledge and skills also inspired the rest of the team. They were excited to have a new coworker they could really count on.

After just 30 days on the job, the entire team’s conversion rate was 45%!

#3: Reduce Turnover

Good employees won’t stick around very long if they feel undervalued, especially if they can get the same job for higher wages.

The real cost of employee turnover can be enormous when you factor in the cost of covering for absent employees (overtime, lost productivity, etc.) and the cost of recruiting and training new ones to take their place.

Paying just a little more might be much less expensive than the high cost of employee defections.

Here's how to run the numbers:

1. Download this turnover cost calculator.

2. Calculate the cost savings of a modest reduction in turnover.

3. Ask your CFO to validate your calculations.

Getting your CFO involved can give your numbers more credibility.

I did this with one client and the CFO estimated the company could save $100,000 per year in direct costs by improving retention a modest amount.

He surprised me by also estimating an additional $1,000,000 in soft cost savings. These are essentially cost savings that would likely result from increased retention, but hard difficult to measure.

The CEO probably wouldn’t have listened to me if I had shared those numbers, but she did listen to the CFO.

Conclusion

Wages aren't the only reason great employees stay or go. There is a whole list of factors that influence employee performance, engagement, and retention.

It’s ultimately about culture, and how you pay your team is part of that.

For example, 95% of job applicants consider culture before applying. And 64% of customer service employees have left a company because of culture. (Source)

Here are some more resources to help you:

1. Report: Wages are one of 11 factors tied to burnout risk

2. Book: Build a customer-focused team with The Service Culture Handbook