Attrition in Indian BPO Industry


at·tri·tion
  1. A rubbing away or wearing down by friction.
  2. A gradual diminution in number or strength because of constant stress.
  3. A gradual, natural reduction in membership or personnel, as through retirement, resignation, or death.
  4. Repentance for sin motivated by fear of punishment rather than by love of God.

What is the biggest challenge for the BPO industry in India today? Well, it is a no brainer: Attrition!

The business process outsourcing (BPO) industry in the country which is expected to employ around one million people by 2008 is facing the challenge of finding quality human resources given the current attrition rate of around 50 percent.

Analysts say attrition rates vary by 20%-40% in some firms, while the top ones averages at least 15%. Nasscom in a report said the outsourcing industry was expected to face a shortage of 262,000 professionals by 2012.

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 said in its Indian BPO industry report.

Mercer India said the industry should look beyond the traditional areas of recruitment and some thought should be given to employ physically challenged people and housewives. The reasons for the high rate of attrition was due to various factors like salary, work timings, other career options, adding that there is always the danger of costs increasing while billing rates decline.

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.

Attrition rates in IT-enabled business process outsourcing sector have come down from the 30-33 per cent being witnessed of late to about 25 per cent now, according to statistics compiled by the National Human Resource Development Network.

 


Attrition rates %
US 42%
Australia 29%
Europe 24%
India 18%
Global Average 24%
*Source-Times News New York (2003)

If you compare attrition rates for a Voice and Non-voice process, then attrition rates are significantly lower in a non-voice process. As the industry moves up the value chain and becomes a full-scale BPO player, attrition rates will further decrease.

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 centres) 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.

Honest corporate managers will tell you that to make offshoring work, you need at least a 300% to 400% wage spread between American software writers, engineers, accountants, and call-center employees and their Indian and Chinese counterparts. Labor costs have to be very, very low overseas — not just lower — to compensate for time-shifting, managing over such long distances, and decreased productivity.

High attrition rate, price wars, poor infrastructure and lack of data protection laws could derail India’s booming outsourcing industry. This seemed to sum up the views of BPO fraternity at the Nasscom summit here.

Tackling Attrition Head-On

Industry experts feel, as the industry was still in its nascent strategy there was lot of strategies available to reverse this trend and make it an attractive employer.

NASSCOM ITES-BPO forum has identified HR as one of the key challenges of the ITES-BPO industry and has formed a special task force to address short-term challenges such as Attrition and also long-term challenges such as ensuring availability of a skilled talent pool.

To arrest this trend, companies can look into various options like good rewards, bonding programme, flexible working hours and stronger career path. With attrition rates ranging between 30-60 percent in the BPO industry, HR specialists feel that a scientific and analytical approach should be implemented.

The tremendous turnover rate is undeniably one of the main problems faced by the BPO industry globally. HR specialists at the Nasscom 2004 summit brainstormed on various approaches to handle this bugbear- either declare war on attrition and tackle it head on, or adopt a more scientific analytical approach.

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.

Companies need to go in for a diverse workforce, which does not only mean race, gender diversity, but also include age, experience and perspectives. Diversity in turn results in innovation and success. The 80:20 rule also applies to recruitment, she quipped, since studies showed that 80 percent of the company’s profit comes from the efforts of 20 percent of the employees. So BPOs need to focus on roles, which have the most important impact.

According to experts, the cost of attrition is 1.5 times the annual salary. Age should not be a barrier for training employees and could in fact bring in more stability to the company.

 

Update In November 2008

With the global financial meltdown it appears employees prefer to stick to their current jobs as much as possible. In November 2008 BPO attrition fell to 30%. The attrition rate in few leading companies are,

  • Infosys BPO 28%
  • Wipro BPO 18%
  • TCS BPO 21-22%
  • Tesco HSC has seen a 6% drop in attrition

In 2007 the attrition rate was about 50-55%.

Created in September 2004, last updated Nov 2008.




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