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

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

CAUSES

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.

ANALYZING CAUSES OF ATTRITION USING A MULTILEVEL APPROACH

Attrition in the BPO industry needs to be tackled using a multi-level approach. Maslow's
Hierarchy of Needs is a multilevel model which primarily identifies the needs which are likely to
act as factors of motivation for any human behavior. We now analyze the current circumstances
in BPO using Maslow's Hierarchy of Needs to develop a better understanding of what are the
expectations of any person from the industry at each level and how is it being fulfilled presently.
During this process the framework would also be used to identify gaps which when handled
appropriately can act as motivators for a person to carry on in this industry, thus bringing the
present attrition rate under control.

Maslow's basic needs are as follows: -

Physiological Needs

These are biological needs. They are the strongest needs because if a person were deprived of
all needs, the physiological ones would come first in the person's search for satisfaction.

For any person in the BPO industry, this basic need is satisfied by the compensation provided.
Hence he looks forward to a sufficient compensation structure which would take care of all of his
basic physiological needs. This needs to be continuously updated with time such that it fulfills all
the physiological need of the person and his family at every stage of his life. Presently the BPO
industry has been providing a better than average salary in the entry level but there is a general
perception that it does not provide a proportionate rise in salary as the experience increases.

GAP: The boom in the BPO sector has lead to exorbitant rise in salaries. Hence even after the
high entry salary, the industry workforce look forward to opportunities for making easy money. An
absence in such arbitrage opportunities leads to dissatisfaction of the physiological need.

Safety Needs

When all physiological needs are satisfied and are no longer controlling thoughts and behaviors,
the needs for security becomes active. Adults have little awareness of their security needs except
in times of emergency or periods of disorganization in the social structure (such as widespread
rioting). Children often display the signs of insecurity and the need to be safe.

There are two aspects of the security which would concern a person in the BPO business. One is
the physical security of the employee and their family. This need becomes particularly important
for the weaker sex who sometimes avoids BPO jobs because of the late night timings. The other
aspect is the psychological fear of job security. At the moment since the industry is growing and
there is ample abundance of jobs, this is not an issue. Also the Indian laws are not favorable to
retrenchment. Hence the later is not an issue although physical security is.
GAP: The companies presently provide the best of available security but with the industry
growing rapidly there is a need to maintain the same standards if we don't want this need to be a
cause of attrition.

Needs of Love, Affection and Belongingness

The next higher class of needs which emerge is the need for love, affection and belongingness.
Maslow states that people seek to overcome feelings of loneliness and alienation. This involves
both giving and receiving love, affection and the sense of belonging.

This need of an individual gets highly affected by the BPO industry predominantly for people
working in the night shift. Night Shift causes separation from ones family, friends and relatives.
Employees have been found complaining about not being able to spend ample time with their
family after working in night shift. The BPO companies try to compensate for this by creating a
fun-filled working environment and much stress is laid down on developing friends and
relationships inside the company. But there is a huge gap in expectation and fulfillment which
needs to be satisfied.

GAP: Lack of family and social interactions is one of the major concerns for the employees which
needs to be dealt by the BPO companies. This issue needs to be dealt with the importance and
sensitivity which it deserves.

Needs for Esteem

As per Maslow, after the first three classes of needs are satisfied, the need for esteem becomes
dominant. These involve needs for both self-esteem and for the esteem a person gets from
others. Humans have a need for a stable, firmly based, high level of self-respect, and respect
from others. When these needs are satisfied, the person feels self-confident and valuable. When
these needs are left unfulfilled, the person feels inferior, weak, helpless and worthless.

BPO industry unfortunately has been regarded by the Indian society as a low value industry with
low end work and which does not need high educational qualification. Hence a person working in
this industry is viewed as a person of less ability compared to others working in any other
industry. This attitude has developed because of the mass recruitment undertaken by BPO firms
during the initial days, where not much focus was laid on selecting highly capable person. This
diminution in esteem sometimes leads to reasons for one to leave the industry. The industry
presently requires an image makeover. Some of the present firms are focusing on creating a
positive image of the industry by using the media in a positive manner, though much is yet to be
done. Certain measure such as change in Job Title is a positive step in this direction. Providing
great working environment in terms of infrastructure and facilities also acts as boost to ones
esteem for the employees.

GAP: People working in this industry have an unsatisfied Esteem need because of the general
perception about the industry. As the industry matures, the industry's positioning needs to change
from being a mere money maker option to an industry which provides immense learning, high
growth prospects and opportunities for foreign experience.

Needs for Self-Actualization

When all of the foregoing needs are satisfied, then the need for self-actualization gets activated.
Maslow describes self-actualization as a person's need to be and do what the person was "born
to do". These needs make themselves felt in signs of restlessness. The person feels on edge,
tense, lacking something, in short, restless.
The BPO firms nowadays are trying to provide Career growth path and higher Educational
Opportunities for employees as a measure of retaining them. These steps are strides in fulfilling
the discontented Self Actualization needs of the employees. These are one of the few long term
motivations provided by companies.

GAP: Though recently companies have been trying to cater to the self actualization needs of their
employees, this has been one of the major reasons for attrition. Industry workers are not able to
envision the BPO industry as a long term career option. They feel that a long term career in the
BPO industry is not feasible.

RECOMMENDATIONS

Owning to the nature of the industry we can predict that the attrition problem will remain a hurdle
for BPO industry in foreseeable future. The attrition in the BPO is consistent with what has been
witnessed in any industry during its growth phase.

The IT industry, manufacturing industry had seen similar high attrition during their growth stage
which later reduces as the industry matures. The need of the hour is not to be bogged down but
to accept the problem and see what we can do best in given scenario to reduce the impact. A
win-win model needs to be devised for this, satisfying the needs of both, the employer and the
employee.

Needs of the employer: To get maximum returns from each employee, recover training and
development costs, minimize cost in terms of time in training new workforce, ensure that
adequate no of people are there to carry on the process (proper manpower planning)

Needs of the employee: Enriched job profile, better career path, challenging work environment,
future prospects of the job; in a nut shell a job that satisfies his overall needs as discussed earlier.

THE WIN-WIN MODEL

The Win-Win model is conceptualized on the supposition that the employees need to be enclosed
from the universe by strategies at each level such that the attrition and its impact can be reduced
to the minimum. Plans differentiate on the basis of tenure into short and long term as well as on
the basis of usage into mitigation and contingency.

Short Term Mitigation Plan

Break Even Period

One of the objectives at this level should be on retention for a specified period of time (break
even period) so as to recover the cost incurred on the employee. This should be formally included
as a process such that the organizations include this in consideration while recruiting candidates.
Here are few suggested steps to calculate the minimum time period to recover the cost of
employee.

Small Tenure Bonds

Once this period is calculated, strict actions can be taken to ensure that employees do not leave
the organization before completion of this min timeframe. One such measure is getting a bond
signed between the employee and the employer.
 80 - 20 Rule

The firms concentrate on 20 % of the roles/ employees who contribute to 80 % of the productivity.
These identified employees/roles need to be retained by special attention from the management's
side.

Short Term Contingency Plan

This plan will focus on the work environment that enhances employee motivation for the job. It
includes work conducive and fun filled environment, informal work culture suiting to the needs of
the young employees. This is essential for compensating the affected social life owning to the
nature of the job. Certain measures that can be included -

Having crèche in workplace would also help for the same

Flexible Salary Structure

Variable pay package based on performance

'Working from home' when required for a short term

Added benefits like sponsored vacations

Provide job rotation amongst department such as Quality, operation etc on a periodic basis
such that employees get bored with the same monotonous work

Long Term Mitigation Plan

The long term mitigation plans are steps taken by the management to minimize the impact of
attrition such that the firm does not face losses on the long term basis.

Defining job roles would help in mitigating the effects of attrition.

Clear documentation of the process and the jobs performed so that the process is not
dependent upon an employee.

Succession planning for the critical positions in the organization for faster replacement.

An assessment and certification can also be helpful in creating an employable talent pool with
benchmarked-requisite skill for frontline management.

Long Term Contingency Plan

The long term contingency plans are attempts by the industry to reduce the attrition as a whole.

To minimize the training costs, 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.
 To reduce poaching of employees within the industry bilateral agreements between
companies should being signed. Basic norms are being put in place and code of ethics is being
stressed upon by industry.

A Common Database should be maintained by all the players of the industry to ensure that
they are not cannibalizing each others resources.

The industry should look at Tier II and Tier III cities, where it can move its operations. These
would increase the resource pool as well as would minimize the attrition. Awareness needs to be
spread in these cities about the industry through advertisements.

Focus should be on having education and ongoing learning for the workforce, sponsoring
employees on post-graduate programs and treating applicants and employees in the same way
as one treats customers.

The WIN-WIN MODEL