ATTRITION: A PREDICAMENT FOR ITES IN INDIA

**Dr. A. Chandramohan
*K. Vasanthi Kumari

Abstract

Attrition Definition: “a natural reduction in workforce as a result of resignation,

retirement or death.”
Attrition Rate: "the rate of shrinkage in size or number"

The IT enabled services (BPO) industry is being looked upon as the next big employment
generator Nasscom predicts 1.1 million job requirements by the year 2008.

In India, the average attrition rate in the BPO sector is approximately 30-35 percent.
Staff attrition and absenteeism represent significant costs to most organizations. Costs to
be considered while computing attrition rates are:
 Recruitment Costs
 Training Costs
 Lost Productivity Costs
 New Hire Costs
 Lost Sales Costs

To arrest this trend, HR must implement a scientific and analytical approach.

_______________________________________________________________________
*Professor, SRM School of Management, SRM Institute of Science and Technology (Deemed University), Chennai.
** Lecturer, SRM School of Management, SRM Institute of Science and Technology (Deemed University), Chennai.

1
 ATTRITION: A BIG CHALLENGE FOR ITES IN INDIA

**Dr. A. Chandramohan
*K. Vasanthi Kumari

Attrition Definition: “a natural reduction in workforce as a result of resignation,

retirement or death.”

Attrition Rate: "the rate of shrinkage in size or number"

1.1 INDIAN ITES INDUSTRY AND ITS GROWTH

The Indian IT-ITES industry is broadly categorised into IT services and software, ITES-
BPO and Hardware segments. The IT enabled services (ITES) industry is being looked
upon as the next big employment generator (Nasscom predicts 1.1 million job
requirement by the year 2008).

The ITES-BPO industry has seen 'highest growth' over the last two years and is likely to
maintain this for the next few years according to Nasscom's Strategic Review for the
year. Assuming that Indian economy would grow by 6% over the next 3 years, ITES
would contribute approximately 1.6% of Indian GDP and more importantly contribute to
10% of the growth. The Indian IT services market recorded a 26.7 per cent growth in
2004-05 and is expected to have a Compounded Annual Growth Rate of 8.9 per cent
during 2004-09 according to global research firm Gartner.

In terms of export markets, the US continued to be the main consumer of India’s ITES-
BPO services (with a 66 percent share of the market), followed by Western Europe
(primarily UK), which accounted for 20 percent of export revenues.
_______________________________________________________________________
*Professor, SRM School of Management, SRM Institute of Science and Technology (Deemed University), Chennai.
** Lecturer, SRM School of Management, SRM Institute of Science and Technology (Deemed University), Chennai.

2
The factors that catalyzed the growth of the Indian ITES-BPO industry included a
pressure on customer organizations to outsource, the ability of service providers to scale
operations and broaden their services portfolio, India’s abundant manpower pool and
sustained cost advantage.

The global financial services remain the largest user of Indian ITES-BPO services,
followed by telecom, healthcare and airline segments. Customer care and support
services are the main revenues earners within the ITES-BPO export market accounting
for 38 percent of the industry’s employee base and a third of its revenues. Global demand
for customer care outsourcing continues to grow with clients looking to outsource more
and more aspects of the customer care function.

Vendors are moving beyond traditionally outsourced segments such as customer support
and inbound calls and expanding their customer care ITES-BPO engagements to include
higher- level technical support, account management, customer data analytics, and the
hosting of the technology that enables them to interact with the customer. A related trend
is that companies are looking to service providers that can provide this entire spectrum of
services in an integrated manner, within one ITES-BPO contract.

1.2 IMPORTANT IT/ITES CITIES IN INDIA

IT Landscape of key Indian cities

City Focus Prominent firms Employees

Delhi Call centres, transaction GE, American Express, 73,000
(includes processing, chip design, STMicroelectronics, Wipro
Gurgaon software Spectramind, Convergys, Daksh,
and Noida) ExL
Mumbai Financial research, back TCS, MphasiS, i-flex, Morgan 62,050
office, software Stanley, Citigroup
Bangalore Chip design, software, boi- Infosys, Wipro, Intel, IBM, SAP, 109,500
informatics, call centres, IT SAS, Dell, Tisco, TI, Motorola,
consulting, tax processing HP, Oracle, Yaho, AOL, E & Y,
Accenture
Hyderabad Software, back office, HSBC, Satyam, Microsoft 36,500
product design
Chennai Software, transaction Cognizant, World Bank, 51,100
processing, animation Standard Chartered, Polaris,
EDS, Pentamedia
Kolkata Consulting, software PwC, IBM, ITC Infotech, TCS 7,300
Pune Call centres, chip design, MsourcE, C-DAC, Persistent 7,300
embedded software Systems, Zensar
Source: http://www.bpoindia.org/knowledgeBase/#indian-market-size

3
1.3 SWOT ANALYSIS ON INDIAN ITES SECTOR

Strengths Weaknesses
 Highly skilled, English-speaking  Recent months have seen a rise in the
workforce. level of attrition rates among ITES
 Cheaper workforce than their Western workers who are quitting their jobs to
counterparts. According to Nasscom, the pursue higher studies. Of late workers
wage difference is as high as 70-80 have shown a tendency not to pursue
percent when compared to their Western ITES as a full-time career.
counterparts.  The cost of telecom and network
 Lower attrition rates than in the West. infrastructure is much higher in India
 Dedicated workforce aiming at making a than in the US.
long-term career in the field.
 Round-the-clock advantage for Western
companies due to the huge time
difference.
 Lower response time with efficient and
effective service.

Opportunities Threats
 To work closely with associations like  The anti-outsourcing legislation in the
Nasscom to portray India as the most US state of New Jersey. Three more
favoured ITES destination in the world. states in the United States are planning
 Indian ITES companies should work legislation against outsourcing
closely with Western governments and Connecticut, Missouri and Wisconsin.
assuage their concerns and issues.  Workers in British Telecom have
 India can be branded as a quality ITES protested against outsourcing of work
destination rather than a low-cost to Indian BPO companies.
destination.  Other ITES destinations such as China,
Philippines and South Africa could
have an edge on the cost factor.

1.4TOP 10 ITES-BPO (THIRD PARTY) COMPANIES

1. Wipro Technologies
2. IBM- Daksh
3. WNS Global Services
4. Mphasis BFL
5. ICICI OneSource
6. Exlservices
7. HCL – BPO
8. Intelenet Global

4
 9. Progeon
10. eFunds International

1.5OTHER LEADING SERVICE LINES

 Financial Process Outsourcing (FPO)

 Administration
 Content development
 Customer analytics and CRM
 Legal transcription support
 Knowledge Process Outsourcing

1.6ITES - BPO MARKET

Players in the Indian ITES-BPO industry are broadly classified into captive units and
independent third-party services providers. Captive units continue to dominate the
segment, accounting for over 65 percent of the value of work off-shored to the country.
While the independent /third-party ITES-BPO vendors outnumber the captive units, the
scale of work undertaken by each unit in the latter category is significantly higher. There
are over 400 companies operating within the Indian ITES-BPO space, including captive
units (of both MNCs and Indian companies) and third-party services providers.

2.1 ATTRITION: A PREDICAMENT

Manpower is the most crucial resource in the high growth IT-ITES industry in India. It is
also the primary factor for the country's immense success in the overseas markets, the one
key asset that will help India sustain its edge in the years ahead.

During 2004, as the IT-ITES industry picked up momentum, almost all players, including
both Indian and MNC organizations, stepped up their hiring. According to NASSCOM
studies, while around 284,000 professionals were employed by the IT-ITES industry in
1999-2000, the numbers jumped to one million in 2004-05. In the last year alone, as IT-
ITES companies scaled up their operations and enhanced their investments, the sector
hired around 150,000 personnel.

The role of an HR manager in this sector is to find the right kind of people who can keep
pace with the unique work patterns. The biggest concern for an HR manager is the high
attrition rate. In India, the average attrition rate in the ITES sector is approximately 30-35
percent. It is true that this is far less than the prevalent attrition rate in the US market
(around 70 percent), but the challenge continues to be greater considering the recent
growth of the industry in the country.

5
High attrition rates are a major challenge for the HR manager 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. Many individuals (mostly fresh graduates) take it as a pas-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
toughness of the job and timings is not adequately conveyed. Besides the induction and
project training, not much investment has been done to evolve a “continuous training
programme” for the agents. The high percentage of females in the workforce
(constituting 30-35 percent of the total), adds to the high attrition rate.

2.2 COSTS INCURRED DUE TO ATTRITION

 Recruitment Costs
 Training Costs
 Lost Productivity Costs
 New Hire Costs
 Lost Sales Costs

When a person 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. The recurring recruitment costs because of attrition are detrimental. The same
also leads to recurring training costs. Inconsistent performance directly affects revenues.
Dwindling motivation levels leads to loss of interest in the job and higher number of
errors. A research study on BPOs that was done by the Hay Group in the NCR region
shows that the cost of attrition to a company is 70% of an employee's annual salary, or
27% of the company's operating expenses.

2.3 REASONS FOR ATTRITION

Several Indian BPO's face the charge of making young people work under sub-optimal
conditions. Employees in some IT-enabled services companies have cited instances of
their passports being kept by their employers during training stints abroad. A growing
tribe is complaining of loss of sleep and appetite due to long hours and strenuous work
conditions. A report published by VV Giri National Labour Institute in the year 2004,
surveyed 277 employees in six call centres in Noida, linked work conditions to “19th
century prisons”. Taking extra time for lunch and reaching pick-up points late were
recorded as “defects” in employee dossiers. Not only can this stem the flow of talent into
the sector, it can also make several overseas companies ask for a closer scrutiny of work
conditions in BPO outfits dotting the landscape of the country.

In fact, several BPO companies told Business Standard that their customers, especially in
the West, have started demanding more information on human resources policies.

6
“Foreign clients prescribe the kind of training, including course contents, that needs to be
given to employees,” says Ranjit Narsimhan, CEO, HCL BPO Services. Information on
HR practices is included in service level agreements BPO firms sign with their clients. In
these agreements, explicit mention is made of working hours, night shifts and training,
which can last for three weeks to seven months. Foreign clients have started laying
emphasis on regular employee-satisfaction surveys.

ITES companies claim that they have often been complimented by their customers for
creating a work environment better than what their counterparts in the US and the UK
have. To support their claims, they also point out that attrition levels have come down to
around 45 per cent from over 65 per cent a year ago. Critics feel that the attrition rates
have come down due to a slowdown in hiring and not because of improved work
conditions. Lower attrition rates have also meant a decrease in pay hikes, from around 50
per cent earlier to about 30 per cent now.

3.1 INDIAN IT-ITES COMPANIES: MOTIVATING THE WORKFORCE WITH

CREATIVE HR STRATEGIES

The HR strategy must have at its centre of focus people needs and requirements. It must
also build in the flexibility net to adjust to a sudden demand from employees or for
employees. According to most industry experts, with technologies, techniques, processes
and methodologies being redefined and reinvented by the day, the contact centre manager
needs to constantly handle changes in management philosophy and operational practice
to successfully and consistently deliver customer goals.

Fully aware of the magnitude of the problem, ITES companies have started paying more
attention to HR issues than ever before. Companies like GEnpact, HCL BPO Services
Ltd, EXL and Xansa have 150-200 HR executives each. Practices like promoting
employees to middle management positions have become the norm. To tide over the
problem of stress due to continuous nigh shifts, companies like GEnpact have started
offering employees the option of working from home or working on night shifts by
rotation. During night shifts, the working hours can also be reduced to four. GEnpact and
others like EXL and HCL BPO have also started reimbursing either the entire or part of
the fees paid by employees for distance-learning programmes.

The ITES companies are consequently also busy designing development initiatives for
their employees. They are trying to help people identify their strengths and weaknesses,
pick up their problem-solving skills and their leadership abilities. This being a people-
driven business, the emphasis is also on improving their personalities and processes and
help individuals emerge as winners.

In spite of the vertical movement in this industry, HR managers should try developing
horizontal career options, which will only help in enhancing an individual’s personality
and strengths. These options are—growth content specialists, trainers, quality experts or
even help in operational and business development of the organisation

7
Some of the strategies adopted by Indian ITES companies:

 EXL Service has taken 125 flats in Noida, where for a nominal rent, it houses
young staffers.
 Wipro Spectramind has tied up with BITS Pilani and the Symbiosis Institute of
Management to provide distance-learning programme for employees.
 Major Software giant, Computer Sciences Corporation gives its employees a six –
month sabbatical to work with an NGO of their choice.
 ICICI OneSource, the Bangalore based BPO, gives scholarships of upto Rs.
50,000 to employees who want to enroll in distance learning programmes.

3.2 LOOKING BEYOND SALARIES: FOCUS MOVES TO SMART PEOPLE

MANAGEMENT TOOLS

Paychecks alone are not enough to motivate employees. Apart from salaries, Indian
software and services and ITES companies are also focusing on smart people
management tools and strategies to keep their people happy.

 Players such as Wipro are offering employees a restricted stock option program.
Even TCS, which has traditionally seen low attrition levels (below the 10 percent
mark), are offering additional benefits. The company gave out shares to its
personnel after its famed IPO.
 ITES-BPO services companies in India are also giving a keener look to their
People's perks, while working cooperatively with contemporaries to keep
poaching down.
 Signing of bilateral agreements between ITES firms is not uncommon.
Organizations are putting in place norms and a code of ethics to keep employees
from straying.
 ITES-BPO firms are also providing a host of benefits to employees from luxuries
such as housing schemes, low rate loans, pick and drop, attractive catering to
having spouses working in the same organization and recruiting the non
recruitables (like housewives and old age people).

3.3 TO HAVE AND TO HOLD

A look at how IT-ITES companies are holding on to their people:

 Anti-poaching agreements
 Better perks
 Flexible working hours
 Higher compensation levels
 Well-laid career plans essential for retaining employees
 Better recruiting methods to filter the right people for right places
 Balance between performance expectations and growth aspirations

8
4 CONCLUSION

Indian IT services and ITES companies to address their people’s issues should implement
a scientific and analytical approach.

In spite of so many initiatives, industry experts feel that the major concern is that nobody
has really taken it as a “career choice” but a “pass-time” or “time-gap employment”. If a
mature industry has to evolve, the picture needs to be changed wherein it becomes “the”
choice industry like its software counterpart.

At the end of the day, it is apparent that better HR policies can result in more committed
and loyal manpower. As long as IT-ITES organizations concentrate on issues such as
employee retention, provide work environments that combine work with pleasure,
encourage continuous learning and treat employees as important "internal" customers,
India will remain a leading provider of high quality, highly motivated IT talent.

5 REFERENCES

1. http://www.nasscom.org/newsline/issue42/indiamatters.asp

2. http://unpan1.un.org/intradoc/groups/public/documents/APCITY/
UNPAN006932.pdf

3. http://www.bpoindia.org/knowledgeBase/#indian-market-size

4. http://www.ciol.com/content/news/repts/102103104.asp

5. http://www.hindu.com/thehindu/edu/2002/10/29/stories/2002102900030200.htm

6. http://www.chillibreeze.com/articles/How_the_Indian_BPO_industry_works.asp

7. http://www.icmr.icfai.org/casestudies/CHALLENGES%20FOR%20THE
%20INDIAN%20BPO2.htm