Growing Attrition – Causing alarm?

Wednesday, 07 April 2010

With economy rebounding, the once frozen attrition rates are set to rise again. The only difference this time is that the organizations are better prepared and know what to expect.

The period of 2003-2006 was the peak of growth in the BPO industry in India. Several opportunities opened up for the Indian graduates, as there was a new market that had just got created for them. The call centers and the BPO industry took off in a big way thus creating a rush for the most talented among the huge number of graduates available in India.

However, the gradual realization of mismatch between ‘qualifications’ and ‘output’, led to a lot of quality issues within the industry followed by a huge manpower crunch. This intensified the race to acquire the best talent within the BPO industry that seemed to be in short supply. Poaching and job hopping – terms that were unheard of earlier, became industry phenomena. Given the market demand, this ‘talent’ went on an overdrive hopping jobs for better salaries (even if marginal) leading to an overall attrition rate of over 40-45% across the industry. Not alarming by the western standards – in the US, a 50% attrition rate is said to be the norm. The only difference is that the Indian BPO industry was somewhat unprepared to handle this. While some BPOs believed in retention strategies like – free food, facilities, transport, and other means of entertainment for employees to make them stay on, others took steps like financing higher studies for employees, offering onshore assignments, etc. Some BPOs went ahead with signing non-poaching agreements with competitors. It is quite difficult to ascertain which of these steps worked; nevertheless, all these were indicative of the industry in desperation to retain what they had acquired; their raw material – manpower.

Moving ahead…

However, things began to change, post global slowdown in the economy. The environment forced BPOs to look at their own costs more incisively. As a result, the most vulnerable, peripheral and non-productive jobs were weeded out of their systems. Several companies reportedly laid off employees during this period, some of which include Convergys, 24/7, Keane and Fidelity. With fewer opportunities and an environment of job losses, employees became guarded against “job hopping” merely for the lure of the extra buck. The period of 2008-2009 saw a gradual downslide in the average attrition rates to approximately 15%.

With a current rise in the positive sentiment, given the gradual bounce back of the economy, attrition in the BPO industry is once again expected to grow. According to a survey of over 20,000 employees conducted by Timesjobs, over 40% of India's workforce will quit their current jobs within the next six months. ‘Salary’ is considered to be the main driver for the workforce looking for new opportunities, says the survey. BPO is among one of the sectors that is expected to lose employees not just to competitors but also to other industries.

The BPO industry has plans to restore (once frozen) salary hikes, offer performance linked bonuses, and attractive pay hikes for retaining the right people. Hiring plans in several BPOs are also on full swing. Some of the companies which have announced their plans include:

Genpact may hire around 9,000 people in 2010
Infosys BPO plans to hire 6,000 people in this year
Convergys plans to hire 5,000 people during 2010-11
Patni plans to hire up to 3,000 employees this year

While some of the hiring plans are geared to tackle the growth in demand, they are partly meant to negate the impact of expected attrition.

While the situation of high attrition rates will probably be similar to that in 2006, there is a difference in the approach of BPO companies now in 2010. The coping mechanism has evolved in the form of better processes and not resorting to knee-jerk reactions vis-à-vis earlier. There is significant focus on refined recruitment processes, training and development and retention programs. Just as the BPO companies now have well-established sales and delivery cycles shaped by experience; the recruitment, training and retention cycle of BPOs is also more mature now. One can say that the back-end of the world’s back-office is in much better shape to handle the onslaught of ‘attrition’ which is likely to hit once again.

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