How To Stop Telephone Abuse

Unauthorized use of business phones is "the biggest uncontrolled cost in American offices today," says a consultant, who shows how to cut that cost.

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Telephone bills had been escalating rapidly at Kanawha Bank & Trust Co., a medium-sized bank in Charleston, W. Va. So in the fall of 1980, Joseph Raymond, assistant vice-president and cashier, bought a telephone accounting system that delivered computer printouts with the phone number, date, time, duration, routing, extension, and cost for each call made at the bank. In the first six months after the system was installed, WATS line usage dropped 38%, Raymond reports. "Employees had been using the bank's phones to call relatives and friends outside the local telephone area," he says.

The telephone bill is "the biggest uncontrolled cost in American offices today," says telecommunications writer Harry Newton. It's often the second- or third-largest expense item in a business. White-collar workers -- some 53% of the nation's work force -- in particular spend an enormous amount of expensive time on the phone.

"If an employee wants to travel, to buy a new desk or a computer, he usually has to receive authorization. But he could spend $1,000 per month on the phone and not be held accountable for it," Newton says. "When an employee picks up the phone and dials 9, 93% of American companies have no way of knowing who made that call." Newton, president of Telecom Library Inc., in New York City, estimates phone abuse and misuse adds as much as 40% to a company's phone bill.

In the case of Kanawha Bank, Raymond figures the telephone accounting system and a new computerized telephone exchange are saving the bank about $40,000 a year on the bills for its 150-phone system. That saving means a four- to five-year payback on equipment that cost about $175,000. Paul Daubitz, president of a Boston consulting firm, ATI-Associated Telemanagement Inc., and current president of the Society of Telecommunications Consultants, believes that firms with as few as 20 or 30 telephones can save significant amounts with telephone accounting systems.

There are, however, things that businesses with fewer phones can do to reduce costs, or that larger companies can do without installing expensive new systems. Here's what experts suggest:

* Educate employees that the WATS line is not free. Since June 1981, every call, every extra minute, has cost money. A recent study found that the average WATS call lasted 7.2 minutes, while the average direct-dial call ran only 4.5 minutes.

* Analyze phone traffic. There may be cheaper and better ways to make long distance calls than using the Bell System. Newton points out that there are 30 different ways to call from Boston to New York, for instance, and that the most expensive of these is seven times as costly as the cheapest way. Calls may be routed through common carriers such as MCI, ITT, TDX, SP Communications, and Western Union.

* Examine the phone bill carefully. "Most businesspeople don't look at their phone bills," says Paul Daubitz. You should look for calls during non-working hours, calls that last longer than 10 minutes, and calls to places where the firm has no business -- "anything that's an aberration," he suggests. Look for repeated calls to nonbusiness numbers. If you don't think the calls were legitimate, dial the number and ask if they know anyone from your company. "They will usually tell you," says Daubitz. One senior executive at a Massachusetts newspaper made such an analysis, then asked a few employees to pay for their personal calls. The monthly phone bill dropped by $1,000.

* Buy phone locks. Employees can be given the responsibility of putting these on their phones after hours, at lunchtime, or whenever they're away from their desks. Locks for dial phones, which cost around $3, have been around for a while, and are available at many stationery stores. There are now locks for pushbutton phones, but they may be difficult to find. Some of these cover only two buttons, which might include the 9 for outside calls, while others cover all 12 buttons.

* Require that long distance calls be placed through the switchboard operator. Instruct the operator to ask each time if it is a business or a personal call. This can cut long distance calls by 50%, Newton says.

* If the phone system permits, put a beep tone on the line to remind employees that their calls have lasted a certain length of time.

The key to making these controls work is letting employees know that you're trying to control costs. "People are basically honest," says Newton. "They don't intend to defraud you by stealing your telephone lines. But many employees believe the telephone is a fringe benefit of the company." If phone abuse continues after these steps have been taken, it's probably a sign of such deeper-rooted problems as employee boredom and low morale.

If you decide to reduce phone costs by installing more sophisticated equipment such as a computerized private branch exchange (PBX) system, Newton says, buying the equipment from independent "interconnect" companies is almost always cheaper than renting it from Bell. Buying also often has tax advantages. Some 2,000 local companies compete for this telephone business by selling, installing, and servicing equipment. More than 100 firms also make telephone equipment. AT&T's recent agreement to divest itself of 22 operating companies in the Bell System is good news for business subscribers, Newton says, since 22 independent companies are likely to be more aggressive and innovative in seeking your business.