Please ensure Javascript is enabled for purposes of website accessibility

Sprint Cuts Customer Service Jobs, Says It Won't Affect Service

By Daniel B. Kline – Feb 3, 2016 at 8:44AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is making an argument that many consumers may find a little hard to swallow.

Only a wireless company, or maybe a cable provider, could try to advance the idea that cutting thousands of customer service positions actually helps customers.

It's like when a coffee shop won't add milk and sugar to your beverage and instead offers a station where you can do it yourself. Instead of noting that it's being cheap or lazy, the store always tries to sell it as a customer-empowering move where you now get the great honor of making your drink exactly as you like it. The public sees right through this sort of nonsense and knows when a company is offering less for the same price.

But just because people aren't nearly as stupid as corporations often believe they are, that doesn't mean cable and wireless companies haven't regularly tried this tactic. You can see this "make your own coffee because it's cheaper for us philosophy" every time you're directed to an automated system or a Web page when all you want to do is speak to an actual person. It's frustrating, self-defeating, and in most cases penny wise and pound foolish.

None of that has stopped Sprint (S) from deciding to close call centers and cut customer service jobs while insisting to its subscribers that doing so will result in better service. 

At roughly the same time as staff cuts are becoming public, Sprint CEO Marcelo Claure saluted his team. Source: Claure's Twitter feed.

What is Sprint doing?
After reporting an operating loss of nearly $200 million for Q3 2015, Sprint announced plans to continue to cut expenses. The company said in its earnings release that it has already achieved "$800 million of year-to-date reduction in cost of service and selling, general, and administrative expenses builds momentum for 2016 targets." 

The fourth-place wireless carrier plans to reach a reduction in operating expenses of $2 billion on an annual basis. That seems reasonable, but the company's statement as to how those cuts will affect user experience seems a bit more dubious.

"Our transformation is taking hold and the momentum is accelerating," said Sprint CFO Tarek Robbiati in the earnings release. "Most importantly, we expect these cost reductions to be achieved without compromising network quality or impacting the customer experience."

That's a tough pill to swallow when your read Bloomberg's report that the company is achieving those cost reductions in part by laying off 7% of its workforce, mostly in customer service, while also closing customer call centers. Still, even though it's hard to see how having fewer workers serving customers will create a better experience, Sprint stands by that logic.

The company told Ars Technica that is has already boosted "self-service and digital care tools," which has helped lower its churn rate. "In addition, we have made changes in service assurance that have now resulted in our lowest ticket levels and fastest repair times in the last three years," Sprint told the website.

Of course, any statistics cited are before the company slashes its customer service workforce and closes call centers.

This is a losing argument
There are almost certainly lots of areas where a company like Sprint can find cost efficiencies, but eliminating customer service jobs is not one of them. In a marketplace where even Comcast (CMCSA -1.16%), a company noted for its terrible customer service, has committed to adding 5,500 new positions in that department, it's hard to see how Sprint can do more with less.

Basically, Sprint is making the "you can have your coffee exactly as you like it" argument while Comcast, which had long tried to save money in this area, has given up the fight and acknowledged that serving consumers requires bodies.

"This transformation is about shifting our mind-set to be completely focused on the customer. It's about respecting their time, being more proactive, doing what's right, and never being satisfied with good enough," said Comcast Cable CEO Neil Smit in a press release.

Put simply, you can't focus on people by directing them to Web tools and other automated systems. You can create robust tools and make them easy to use, which might ultimately lower demand for human interaction. But cutting 2,000 workers and closing or cutting back operations at six call centers, as The Kansas City Star reported Sprint is doing, won't work.

The company may have been able to slowly push its user base into using more automated solutions, but taking the rip-the-bandage-off approach will only create increased consumer dissatisfaction. That leads to a downward spiral where lousy customer service leads to more customer defection, which then results in more cuts.

Daniel Kline has no position in any stocks mentioned. He has very little tolerance for companies which try to spin bad news as a good thing for consumers. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sprint Stock Quote
Comcast Stock Quote
$35.86 (-1.16%) $0.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.