Managing Attrition in BPO

Abstract

Managing attrition is not just a 'nice thing to do' in the BPO industry. It is the route to
their survival.

Staff attrition (or turnover) represents significant costs to most organizations. It is

odd, therefore, that many organizations neither measure such costs nor have targets
or plans to reduce them.

Many organizations appear to accept them as part of the cost of doing business - a
sign of increasing job mobility and decreasing staff loyalty perhaps, a matter to be
regretted but just 'one of those things'.

An attrition rate in call centers has become legendary. Indeed, the attrition rates in
some Indian call centers now reach 80%. This is an extreme figure but the average
attrition rates in Indian call centers are up around 30-40%. It is interesting to note
that the attrition rates in Indian BPO industry - and the costs associated - are so high
that they can override the benefits of lower wage costs.

In this paper, we have made an endeavor to highlight attrition issue faced by BPO
industry. We try to find out the various reasons for this problem, and have proposed
some ways in which this issue can be addressed.

Introduction

The business process outsourcing industry in India is growing at a phenomenal pace.

Exports were worth $ 5.2 billion in 2004-05, growing at 44.5 per cent, and are
projected to have 41 per cent growth in 2005-06 to $ 7.3 billion. (Source: NASSCOM)

With 245,100 people employed at the end of March 31, 2004, against 171,100 last
year, the industry witnessed a hiring growth rate of about 40-42 percent. On the
hiring front, the industry absorbed about 74,000 people in 2003 despite the attrition
rate of 45-50 percent being a matter of concern. The size of the Indian BPO market
is likely to be around $ 9-12 billion by 2006, and will employ around 400,000 people.
(Source: ICRA)

Business process outsourcing (BPO) has been basically facing two significant issues
of late. One is the growing number of employees in its rolls (as discussed above). And
second, the abnormally high attrition rate.

The attrition rate, which hovers around 40% now, is unlikely to come down in near
future.

For a fresh college graduate, a call centre job pays about 2.5 times as much as other
job openings. And the boom shows all signs of continuing considering that the cost
per transaction in India is estimated to be the lowest at 29 cents compared to 52
cents in China.
Nevertheless in ITES, the proportion of persons employed in BPO industry are over 50
% as shown in the table below: -

FY2001 FY2002 FY2003 FY2008E

BPO 23,600 35,000 68,000 570,000
Other IT-enabled 21,400 35,000 38,000 530,000
Total 45,000 70,000 106,200 1,100,000

Table: Employment in the IT-enabled Services Sector in India Source: IDC,

NASSCOM

It is interesting to note that the attrition rates in Indian BPO industry - and the costs
associated - are so high that they can override the benefits of lower wage costs.
According to NASSCOM, the outsourcing industry was expected to face a shortage of
262,000 professionals by 2012.

In fact GE Capital has moved a call centre from India back to Australia "after staff
attrition rates of 70% wiped away any potential cost savings".

Various Costs Associated With Employee Attrition

There are various costs associated with employee attrition. For example, if a new hire
leaves after the training, it costs the company about Rs. 60,000. For a 300-seater call
centre facing the normal 30 percent attrition, this translates into Rs. 60 lakh per
annum. Many experts are of the belief that all these challenges can turn out to be a
real dampener in the growth of this industry.

BPO employees' changing jobs costs the industry millions of dollars in recruitment
and training. Moreover, companies run the risk of inefficiency, impacting client
agreements and business development efforts.

These costs can be classified as the following: -

Recruitment Costs

These include: -

 The cost of advertisements; agency costs; employee referral costs; Internet

posting costs.

 The cost of the internal recruiter's time to understand the position requirements,
develop and implement a sourcing strategy, review candidates' backgrounds,
prepare for interviews, conduct interviews, prepare candidate assessments, conduct
reference checks, make the employment offer, and notify unsuccessful candidates.

Training Costs

These include: -

 The cost of orientation in terms of the new person's salary and the cost of the
person who conducts the orientation.
 The cost of various training materials needed including company or product
manuals, computer or other technology equipment used in the delivery of training.

Lost Productivity Costs

As the new employee is learning the new job, the company policies and practices,
etc., they are not fully productive. It includes the costs associated with the low
productivity of the new employee.

Lost Sales Costs

These costs are the lost revenue which occurred as a result of project loss due to key
employee attrition.

Reasons for Attrition

According to NASSCOM, the cost of attrition in the Indian BPO industry is 1.5 times
the annual salary. So it becomes all the more necessary for BPO industry to explore
into the reasons for this high attrition rate.

The main reasons which have led to this problem are: -

 Improper Work Timings

 Family Pressure

 Health problems due to imbalance in work-life pattern

 Peer Pressure

 Lack of growth options within the company

 Other Career options like pursuing further education, joining other sectors.

 Salary (at lower levels)

Keeping low attrition levels is a major challenge as the demand outstrips the supply
of good agents by a big margin. Further, the salary growth plan for each employee is
not well-defined. All this only encourages poaching by other companies who can offer
a higher salary.

The high percentage of females in the workforce (constituting 30-35 percent of the
total), adds to the high attrition rate. Most women leave their jobs either after
marriage or because of social pressures caused by irregular working hours in the
industry. All this translates into huge losses for the company, which invests a lot of
money in training them.

The much-hyped "work for fun" tag normally associated with the industry has in fact
backfired, as many individuals (mostly fresh graduates), take it as a pass-time job.
Once they join the sector and understand its requirements, they are taken aback by
the long working hours, and later, monotony of the job starts setting in. This is the
reason for the high attrition rate as many individuals are not able to take the
pressures of work.

The inexperienced middle and frontline management is also one of the key causes of
attrition.

Strategies to Address Attrition

We propose the following solutions to tackle the acute problem of attrition in BPO
industry.
BPO companies are still grappling with the issue of keeping agents motivated in a
rather monotonous job. To resolve this problem the high achievers in the company
should be moved up the hierarchy (refer figure) as systematically as possible, to
keep them motivated.

Figure: BPO Personnel Hierarchy: Typical Case

Source: NASSCOM

The Indian BPO companies have realized the importance of employee retention and
are looking for ways and means to keep a check on employee attrition. For this, some
measures that can be adopted by the BPO firms are: -

 Besides the induction and project training, a "continuous training program" should
be launched for the employees, which should also involve motivational training.

 BPO companies can look beyond the traditional areas of recruitment and some
thought could be given to employ physically challenged people and housewives. This
would also earn the companies good reputation with compliance of CSR objectives.

 Companies need to go in for a diverse workforce, which does not only mean race,
gender diversity, but also includes age, experience and perspectives. Diversity in
turn results in innovation and success.

 Age should not be a barrier for training employees and could in fact bring in more
stability to the company.

 Better Customer-Agent Communication should be encouraged by adopting a mix

of various media like e-mail, phone and fax. Today BPOs deploy voice-call, e-mail,
web-chat and fax to "collaborate" or interact with customers. However, even after
tapping all these media, BPOs have largely failed to deliver uninterrupted agent-
customer communication. The customer-agent interaction is still plagued by various
bottle-necks, which directly result in customer dissatisfaction. This has a direct
bearing on employee attrition.

 A fun factor could be brought in this operation, which becomes boring and
repetitive after some time. This can be done by blending all the media. That way an
agent can switch between answering queries over the phone, e-mail or fax. It will lure
employees to stay in the organization for a longer period by giving them exposure,
experience and education. It also addresses a professional's most important need:
the need to grow. Besides, it will help remove the monotony and boredom from an
employee's job as he would be performing all the processes, as opposed to being
restricted to just one.

Besides these, some innovative employee retention techniques already being

employed in some BPO firms are stated below: -

 Shift rotation - It is said that "Permanent night birds fly away faster". To retain
them, suitable day-shift opportunities should be provided from time to time

 Flexi Timing

 Monthly Party

 Shop till you drop - Tie-up with a shopping mall for an evening outing and
distributing prizes based on that.

 Housing

 Cash Incentives (good rewards)

 Career Guidance

 Bonding Techniques

 Pressure Relievers

 Flexible Working Hours

 Stronger Career Path

 Growth Opportunities (within the company)

 Education (learn while you earn)

 Another strategy that BPOs are employing is the go-ahead to indulge in "small
talk" between customers and agents. BPOs such as Amex, HCL, Convergys, Spectra-
mind and EXL are some of the few companies that have reaped dividends from
implementing this strategy.

In small talk the agent is not restricted to just fixing the problems of the customer. It
rather gives the agent sufficient room to discuss things other than business. For
BPOs, small talk helps in striking a good agent-client rapport. A happy customer
means an agent who feels elated at a job well done. For BPO companies, it is a win-
win situation - being successful in retaining both employees and clients.

Housing Education Cash Career

Incentives Concerns
Hire outstation Offer management
candidates diplomas and MBA As only 5 out of Use various filters
(preferably non- courses as most 150 employees like psychometric
metro) and put them fresh graduates become team tests to get
up in shared want to study leaders in a year, people who can
company further. Also give cash incentives work at night and
accommodation. As incentives like are a great way handle the
an incentive, pick up scholarships. If to get employees monotony. Career
utility bills. If the they leave in to stay on. The counseling and
employee leaves, he between, they bonus - planning career
or she loses the have to performance paths also helps
apartment discontinue the boost
course Who is doing it
Who is doing it Who is doing it HCL Tech BPO
exl Service.com Who is doing it Daksh e- Services, GTL,
GE, Wipro Services, Global Tracmail, Vertex
Spectramind Vantedge India

BPO Industry - Positive Outlook

As the industry moves up the value chain, attrition rates are expected to decline.

For BPO service providers, moving up the value chain is critical, given the attrition
rates in the industry, which are on an average higher in low value-added segments
(in call centers) as compared to higher value-added segments like engineering.

It will not be possible for the industry to arrive at a blanket agreement on poaching
but bilateral agreements between companies are being signed. Basic norms are
being put in place and code of ethics is being stressed upon by industry. Companies
are being encouraged to adopt responsible behavior in order to ensure that the
industry does not become a victim of its own actions. Industry needs to go aggressive
but not cannibalistic.

In order to ensure a consistent flow of trained manpower in the future, the industry
needs to work with the government to introduce courses at a school and college
level, which are in line with the requirements of the ITES-BPO industry. India has one
of the largest pool of English speaking graduate workforce.

The challenge for the industry is not in employment but employability. The industry is
also hiring professionals from outside the industry in order to meet its steady supply
of manpower.

High attrition rate, price wars, poor infrastructure and lack of data protection laws
could derail India's booming outsourcing industry. All this has induced the companies
to take necessary steps, both internally and externally. Internally, most HR managers
are busy putting in efforts on the development of their employees, building
innovative retention and motivational schemes (which was more money oriented so
far) and making the environment livelier. Outside, the focus is on creating awareness
through seminars and going to campuses for recruitment.

Companies which have not been able to tackle this image could take a cue from ICICI
OneSource, which gives employees who have been with the company for more than
18 months an option to switch to positions in other ICICI group companies.

The system works as a big assurance for BPO employees that the skills they have
learnt such as customer friendliness and rapid response to customer problems have
wider applications and market demand.

Conclusion

It is clear that there are massive costs associated with attrition or turnover, and while
some of these are not visible to the management reporting or budget system, they
are none the less real.

Pay cheques alone are not enough to retain employees. Management also needs to
consider other aspects like secure career, benefits, perks and communication. The
attrition battle could be won by focusing on retention,

making work a fun place, having education and ongoing learning for the workforce,
and treating applicants and employees in the same way as one treats customers.

A better agent-client interaction using latest technologies would also help in

establishing a good rapport with the employees as well as customers, resulting in
win-win situation for the company.