Managing Attrition in BPO - A win-win model to satisfy employer and the employee

 | October 28,2010 05:51 pm IST

Attrition in the BPO industry is one of the biggest issue which the growing ITES industry in India is facing. The effects of attrition are wide varying and impacts the firms in terms of losses (due to training and administration cost, high recruitment cost), incompetent processes, inability to offer services for highly technical process etc.

Attrition though a nuisance also has some associated benefits along with such as low cost of operation, knowledge sharing amongst the firms benefiting the overall industry in increasing its competencies. Attrition usually occurs on two fronts – people leaving the industry and people shifting jobs inside the industry. Both of them have separate causes which have been identified in this paper.

The paper attempts to understand the underlying reasons for attrition by analyzing the BPO industry through Maslow’s Hierarchical model of Needs. The Maslow’s framework helps in giving a better perception about the motivation of the employees in the BPO industry and identifying gaps in their expectations which needs to be filled up.

Finally, the paper concludes by recommending a Win-Win Model which endeavors to satisfy the needs of both the employer and employee. The model encloses the employee by 4 level of strategies thus reducing the attrition rate as well as minimizing the impact whenever it occurs. It is a 4 stage framework consisting of –

  • Short Term Mitigation Plan
  • Short Term Contingency Plan
  • Long Term Mitigation Plan
  • Long Term Contingency Plan

Various measures have been identified within each level of strategy to help in managing attrition creating a win-win situation for the industry as well as its stakeholders.

About the Industry
Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external provider that in turn owns administers and manages the selected process based on defined and measurable performance criteria. Business Process Outsourcing (BPO) is one of the fastest growing segments of the Information Technology Enabled Services (ITES) industry.


The Indian business process outsourcing industry, roughly around 4-5 years old, is growing at a phenomenal pace. The number of BPO companies in Indian cities has mushroomed from a handful a few years ago to about 500 in 2004. The size of the Indian BPO market is likely to be around $9-12 billion by 2006 and will employ around 400,000 people (ICRA, Indian BPO industry report). 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.


Even after displaying impressive statistics about the growth and future, the BPO industry in India is bleeding with heavy attrition. According to several recruitment firms in the country, attrition in the ITES (IT enabled services)-BPO industry is close to 35-40 %. The worse news is that, this is only the reported figures and the actual figures are much higher and can be as high as 80% annually. Nasscom in a report said the outsourcing industry was expected to face a shortage of 262,000 professionals by 2012. This impediment is likely to affect the industry severely in the long run by creating a man power shortage as well as bringing up the cost arbitrage on which the Indian industry is playing at the moment.


Attrition cannot be blindly classified with a negative connotation. A healthy attrition rate in any industry is necessary for new ideas and innovation to flow in as well as to facilitate the overall growth of the industry in terms of knowledge sharing. But after a particular level the same boon becomes a bane.


Recruiters explain that the high attrition rates significantly increase the investments that are made on the employees. The problem of losing funds in employee acquisition is more prominent in the high-end BPO segment. Companies invest a lot of time and money in training a candidate for the first four months. But these investments do not always get converted into actual profits. In case of the BPO industry, each agent level recruitment roughly costs the company Rs. 5000/-. This is the amount which a company needs to pay the job recruitment agency. Other than the direct cost, an associated cost of training and administrative service is also involved. Each agent works is non-productive or partly productive in the organization for nearly the first 2-3 months. Hence an employee leaving the organization within the first 6 months is a bad investment for the company. Also, as stated earlier the cost of attrition in the industry is 1.5 times the annual salary.


However, there is another perspective for attrition which is specific to the BPO industry in India. India at the moment is working on low end Business Processes which do not require quite a lot of amount of high skills. The reason for India’s success has been primarily the low cost, high quality labor which India provides. Compared to other competitors such as Philippines, South Africa, Ireland; India is the only country where we have a balance between the cost involved and the quality provided till now. For Indian companies to remain successful in future they would have to keep the cost low. Since the tasks performed by an agent are pretty standard and does not require added skills, there is no benefit in retaining a highly experienced employee. At the floor level operation, a non-experienced candidate could work with the same efficiency of a 2-3 year experienced employee after minimal training. Hence the industry players consider the present attrition as a positive attrition which is serving the industry by keeping the cost low.


Attrition in the BPO industry is two fold. One part of the attrition is where the employee leaves the industry entirely. The other section of attrition is where the employee joins another firm in the industry. Both the sections have separate reasons which need to be identified.


The primary reason for people leaving the industry is due to the cause that the industry is viewed as a gap filler occupation. There seems to be a flaw in the way the industry is structured. The industry has been mainly dependent on youngsters who are taking out time to work, making money in the process also while thinking of career alternatives. Hence for this group BPO is never a long term career but only as a part time job. The easy availability of BPO jobs is only a source of easy money till the time there is no other source of funding. Also the unfriendly working conditions, late night work shifts, high tension jobs acts as a deterrent for people to stick to this industry for long time. In addition, the BPO jobs are not being taken with a positive spirit by the society on a large. Research says that nearly 50 per cent of those who quit leave the industry.


Regarding the attrition between firms, the chief cause is the unavailability of resources in the job market causing a great demand compared to the supply available. Presently there is no certified institute providing BPO specific training and education. The scarce resource in the market leads to wide scale poaching and head hunting amongst the competitors for the common pool. Due to the immaturity prevalent in the industry, the industry also has not witnessed mature HR processes such as Work force planning being implemented by the firms. Usually new projects in the BPO industry, requires a transition stage to be implemented within a short time. The lack of preplanned recruitment leaves the firms with no option but to fulfill their immediate requirement by poaching resources working on similar projects in other firms.




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Pradeep Kumar Bahuguna on 10/29/10 at 02:04 pm

Good article