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Attrition & BPO |
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Business Process Outsourcing, commonly known as BPO, is one of the most booming sectors in the Indian industry. Since its inception, the Indian BPO industry has grown at a constant annual rate of 40-50 per cent and within a couple of years, India managed to secure the position of the most preferred and low cost destination for business process outsourcing. Despite the recent concerns about the non-viability of BPO due to the increasing cost (explained later in the article) and the emerging security issues, the Indian BPO industry is expected to generate one million jobs by the year 2008. The sector has also increased its revenue manifolds to $8.5 billion in 2006-07 and is poised for higher growths.
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Ironically, in spite of the tremendous growth potential of the sector, attrition rate and the manpower crisis is dampening the growth of the sector. The human resource professionals of the BPO industry are facing various challenges like the attrition rates and its implications, skill shortages, retaining the employees etc. The sources of recruitment used by the BPO companies are advertisements, employee referrals, outsourcing and walk-ins. The Indian BPO industry, which established itself as the low-cost destination for business process outsourcing in just a couple of years, is losing its position as the low-cost destination because of the rising people costs. According to the NASSCOM reports- The IT-ITeS industries are struggling with the critical issue of acquiring and sustaining manpower in the industry. The BPO industry – one of the most rapidly growing sectors in the Indian industry- is grappling with the issues of skill shortages, high attrition rates, performance management along the confidentiality and security concerns. All these issues are having a negative impact on the BPO industry.
The Attrition Problem
According to NASSCOM data, the attrition rate for voice-based BPO’s is around 55-60 per cent and 15-20 per cent for the non-voice based processes. The attrition rates and the retention have become the major threat and the biggest challenge for the human resource professionals of the sector. In fact, the outsourcing industry is expected to face a shortage of 2,62,000 professionals by 2012. The human resource professionals of the BPO sector are focusing their strategies on tackling the disruption caused due to the shortage of the skilled manpower as well as the unplanned or the undesired exists.
The top reasons for employees to leave a BPO company are:
- Monotonous work (repetitive nature of work and the average number of calls)
- Physical strains because of long and odd working hours
- No growth opportunity/lack of promotion
- For higher Salary
- For Higher education
- No personal life
- Problems with peers and managers
- Policies and procedures
- Conducive work culture or environment
- Handling abusive calls
The high attrition costs increases the costs to the organization considerably. They have to combat the amount of disruption due to unplanned exits. The more the people leave an organization, the more it is a drain on the company’s resources like recruitment expenses, training and orientation resources and the time. The high attrition rate also affects the productivity of the organization. The attrition cost has been estimated to be as high as 76 per cent of the annual salary costs for the low-end BPOs. The voice-based processes, which are facing an attrition rate of 60 per cent, are incurring the attrition costs of 27 per cent of the total operating costs.
The high attrition costs the BPO industry a huge amount of loss in terms of the expenses and the losses incurred on recruitment process, the training and development of the hired. In the year 2004-05, such expenses amounted to a loss of Rs. 300 crore and a total loss of 25 % of the annual revenue to the Indian BPO industry. Also, the retention strategies like providing higher education opportunities to the employees, creating growth opportunities for employees add to the burden of costs to the company.
Another problem being faced by the BPO industry is “Poaching”. Poaching refers to taking away the experienced professionals by competitors by offering them better salary, benefits than the competitor. With the already saturated market for the talented professionals, poaching is becoming a common practice by the organizations.
All these people costs are weakening the position of India as the low-cost destination in the worldwide BPO industry.
Another point of view explaining the high attrition rates in the BPO industry comes from the psychologists who argue that physical strains like sleep disorders, depression, odd working shifts, learning foreign accents, constantly handling abusive calls and high stress levels are also the major reasons of the high attrition rates in the BPO industry. There are also pressures from the society for not allowing the youngsters to work in night shifts. This also discourages the youngsters from joining the BPO industry.
Addressing the Problem
Although a large number of youngsters are attracted to the BPO industry because of the high salary packages offered by the MNC’s to graduates and even the under-graduates; also the sophisticated work environment, the facilities like free meal and transportation etc.; failure to cope with the stress of the odd shifts, the monotonous work, the compensation packages and the opportunities for higher education fails to sustain them in the organizations.
For the Indian BPO industry to sustain its growth and position, the human resource professionals have to re-formulate their strategies to check the problem of the attrition rate without losing their cost-effectiveness. BPOs will have to change their mindset and the practice of- “No matter I have a high attrition rate, I can cope up if my recruitment process is good” – to creating a synergy between the work life, growth opportunities, and the requirements of the job to control the attrition in the organizations.
The HR professionals need to redesign the HR policies for the industry without comprising on the cost competitiveness of the Indian BPO industry, to retain the employees in the organizations and to retain India’s position as the low cost destination for business process outsourcing worldwide.
In the next article, we’ll have a look at the western culture being promoted by BPOs in India and how the youngsters are losing out in the bpo.
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