High rate of attrition destabilising BPO industry

The $14.7-billion Indian BPO industry, which is struggling to retain its dominance in the face of competition from other emerging BPO destinations, now finds itself in further distress with attrition sky-rocketing in the last few months.

The $14.7-billion Indian BPO industry, which is struggling to retain its dominance in the face of competition from other emerging BPO destinations, now finds itself in further distress with attrition sky-rocketing in the last few months. With its lustre as a career option fading among Indian youth, BPO firms are discovering that just swanky glass facades and chic interiors no longer appeal to employees, who are looking at long-term career progression and stability at work.

For the BPO sector that employs one million people, the attrition rate has risen drastically to 55% during the last four months (December-March), with a significant movement in middle and senior management levels, according to a recent report by the Associated Chambers of Commerce and Industry of India (Assocham).

Experts point out that a job with a BPO company, once a sought-after choice for the urban youth, is fast losing its sheen. A diversified career scheme and opportunity for lateral movement, which most BPO jobs fail to provide, is acting against it. Employees today look for variety in their job functions and it is important for BPO companies to offer varied opportunities and not just hierarchical movement.

According to the study, the BPO-ITeS sector has emerged as having the highest attrition rate of 65% during the last two years, giving a serious jolt to India?s prospects as the most sought-after BPO destination in the world. ?With over 150-plus global delivery locations competing for buyers? attention, attrition can become a differentiating factor in the fast narrowing maturity gap across offshore locations,? says Amneet Singh, vice-president (global sourcing), Everest Group, a consulting and research firm.

Industry watchers say a few BPOs do provide options to their employees in terms of career growth and planning. ?Better BPOs are clearly investing in key areas around training, skills training, a reward structure that reflects performance, and an honest effort to provide real career opportunities,? says Sunny Banerjea, partner, head, performance and technology practice, KPMG. Major players like Infosys BPO, TCS and Wipro have training and education programmes for their employees, while pure-play BPOs like 24/7 Customer provide degree and diploma programmes via tie-ups with institutions. Intelenet also conducts various development and learning programmes besides its domain trainings for its employees.

However, some are of the opinion that high attrition has little to do with career planning and training. Normally, the maximum attrition happens within the first year of employment. Among employees, the most common reason for a job switch is more money. ?For the younger BPO employees, making more money in a quick manner appears to be more important than staying on with a company and building a career,? says Gopi Natarajan, CEO of Omega Healthcare Management Services, a BPO that does US healthcare work.

It is common for firms that are desperate to get the headcount to meet client commitments to raise wages arbitrarily. Companies offer unjustifiable salaries even to modestly trained people. DS Rawat, secretary general, Assocham, says frequent job switches have inflated BPO wages without development of expertise among knowledge workers, which is significant to justify their fat pay cheques globally.

?In the long term, this is a trend that is going to make the Indian BPO market suffer and become non-competitive compared to Philippines, Sri Lanka and other emerging countries with good talent,? says Natarajan.

According to the same study, services offered by IT/ITes and BPO in the domains of pharma and BFSI have registered an attrition rate of around 60%, while in the domains of retail and IT, an attrition of about 55% has been recorded during the period under review.

Industry experts say that as the BPO industry moves up the value chain, the players have to identify how well they can serve their employees. ?They have to look at how they can help their employees make progress ? maybe the duration in a BPO is four years or five years and not a lifetime, but recognising what their target employee base will bear will allow them to be more focused and ultimately reduce employee turnover,? says Banerjea of KPMG. Also, they need to truly understand what each percentage of attrition means to their business models ? cost, customer satisfaction, brand equity ? then they will able to handle their most valuable asset better, he adds.

According to Nasscom data, the attrition rate for voice-based BPOs is 55-60% and 15-20% for non-voice based processes. The industry is expected to face a shortage of 2.62 lakh professionals by 2012, says the software industry body. Looking at the current scenario in the BPO industry, companies have realised that there is an immense need to encourage career development and learning among employees. Experts say it is important for the sector to develop guidelines to constrain frequent job switches and policy-level initiatives to uplift and expand the skill base.

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First published on: 29-04-2011 at 01:50 IST