The Attrition Rate For The Bpo Industry

This project is based on one of the major issues faced by the HR managers in the BPO industry. In this project we had done a detailed study on “Attrition rate” of the BPO industry in Sri Lanka. I have taken this opportunity to the best extent and we are attempting to analyze various concepts and provide reviews to the existing situation on attrition rate.

This research project critically evaluates dimensions such as Motivation, Salary and other benefits, Organizational Culture, Career development, Access to immediate supervisors working environment, rewards and recognition, training and development, influence in key decision making, proper job descriptions, performance management, workload and pressure shift timings, Fair and Equal Treatment through primary and secondary sources in order to identify roots and major industry worries towards employee attrition. I have taken the BPO industry which suffered in attrition rate in the past to explain why HR managers need to focus on this issue in future.

1.1 Research Background

In today’s Business Process Outsourcing (BPO) arena one of the frequently spoken subject has became the increasing “Employee Attrition” and many expensive reference materials can be commonly seen in bookstores, libraries and via online sources. This research report has been prepared in order to investigate and examine the “attrition rate for the BPO industry”

After considering depth of the research topic report has been divided in to two segments. The initial segment of this research report defines the term and the concept “Employee Attrition” as per different authors’ perceptive thoughts. At this point, major industry worries towards attrition and the associated costs of attrition to an organisation have also been explored in order to bring a clear understanding about vitality of “Employee Attrition”. Finally the latter section of this individual research report extensively analyzes the findings from the Research Questionnaire which are completed by fifteen employees of three prominent BPO organisations in Sri Lanka, which includes five executives, five assistant managers and five managers of each BPO, where the total sample size would be forty five employees. It is to be noted that based on these findings recommendations have being provided.

I would like to bring in to the kind attention of the reader that, this individual research report covering a broader topic of the “attrition rate for the BPO industry” has been successfully completed after gaining a substantial understanding from the various reliable sources where the information have been gathered.

1.2 Research Problem, Questions and Objectives

Research problem refers to the situation that needs a solution for further improvement, or an alteration of, or in contradiction with the way things are and how they should be. This proposed research study on attrition rate for the BPO industry will be investigating the following problems associated with employee attrition:

Why people leave the organisation in the BPO industry?

What are the major industry worries towards attrition in the BPO industry?

What is the cost of attrition to an organisation in the BPO industry?

Meanwhile, in the fast paced business process outsourcing industry with this changing environment, organisations must adapt to remain competitive in the business process outsourcing industry. This research has been prepared in order to investigate and examine the attrition rate for the BPO industry along with the following critical objectives:

An identification of causes as to why people leave the organisation

Determining the major industry worries towards employee attrition

Identification of what are the costs of attrition to an organisation

1.2 Significance of the study

The major motivation for this study is the rate of increase in attrition in the BPO industry. There has been an increase in the attrition rate in the recent past which has called for an immediate attention by the company. Human resources management has played a very important role in stopping attrition rate and to improve the corporate culture in the BPO industry. Hence there is a major requirement to know the role of human resource management in the BPO industry.

2.0 Literature Review

2.1 Definitions of attrition

Attrition rate is one of the most critical problems in the BPO all around the globe including Sri Lanka. The main drawback of having a high rate of attrition in the BPO industry is for this reason that most organisations do not have time to read the minds of employees. Thus, each organisation has their mind on this question “Why our attrition rate is higher than any other company”. In order to answer this, every BPO organisation MUST know what exactly “Attrition” is?

Attrition is a situation which employer face when employee left the organisation due to job dissatisfaction, new opportunity in the market, retirement & natural cause (death/illness). Now days this is one of the most important question which is asked by higher authority to HR people….”Why our attrition rate is higher than other company” (Black, 2009).

According to Halvey and Melby (2007) the term attrition refers to the shrinkage in the quantity or gradual reduction of employees as a result of retirement, resignation, relocation, sickness or death. It has been proved that attrition is normal and uncontrolled decline of the workforce due to above mentioned forces. It can be considered as a way to reduce the size of the work force without management guidance. Employee retention is critical to the long-term health and success of any association.

2.2 Reasons for attrition

Managing of attrition is not only a “right thing” in Sri Lankan BPO’s. It is the way for ensuring each BPO organisation’s survival. NASSCOM-Hewitt (NASSCOM News-Byte, 2003), revealed that the average attrition levels in the Information Technology Enable Services (ITES) and BPO organisation ranges from 15% – 60% per annum. Attrition through a call centre based on the voice is 40%. Therefore it is very much evident that such attrition rates raises the sole responsibility to find the appropriate candidate; and providing them the appropriate work environment, that will benefit both the organisation and the candidate.

Human resources are always left open when an employee leaves an organisation, after obtaining all relevant information and benefits within the learning period. In my opinion, problem lies equally on both the parties. An employee leaves the organisation, if he/she is not satisfied with the respective organisation, usually such employees’ people crib about the money and the facilities provided by those organisations.

Similarly the problem on the organisation is that they do not provide a good working culture to the employees and provide them with the adequate motivation for the job what they are doing. Prior to checking the attrition rates a manager of human resources must know how to create a corporate culture and working environment. This can be done through leadership and excellence in management and human resource strategies, the fair and equitable treatment for all, clearly defined policies, training and personal development including training and job rotations, professional development, organisational communication, teamwork, reward programs, objective assessments, adequate pay, benefits and company activities (Sharma, n.d).

2.3 Cost of attrition

It is becoming increasingly difficult for companies worldwide to attract and retain key talent, the attrition rate is always motivating the increase and where the war for talent is becoming more intense every year. It is increasingly important for businesses to make sure they have the right people in place to guide its future. The problem of employee attrition must be addressed proactively. Employees may be attracted and retained by offering career opportunities, variety of jobs, responsibility and education and gives them a sense of belonging.

It has to be clearly understood that there is no standard formula to calculate the attrition rate of an organisation. This is due to the fact the, many BPO organisations can not include the attrition of the freshers to leave the BPO organisations because of higher education or within their probation period. Also in some cases, attrition of poor performers will not be treated as attrition. Therefore considering these facts we can come with following formula in order to calculate the attrition rate.

Attrition Rate % = Total no. of resignation per month

X 100

Total no. of employees in the begin of the month +

Total no. of new joins – Total no. of resignation

An online survey conducted by NASSCOM-Hewitt (NASSCOM News-Byte, 2003), has revealed that in the BPO industry, about 70% of the population of working age is neither happy nor satisfied working in BPO organisations, which resulted in a very high attrition rate. It is common that in any BPO organisation, especially an employee see only the future growth prospects, working conditions, the current state and future stability of the respective BPO organisation.

According to the NASSCOM-Hewitt survey (NASSCOM News-Byte 2003), the cost of attrition is 1.5 times of the annual salary. If an employee leaves the company after gaining the training, cost the organisation is around Rs 60,000. For a call centre with 300 seats against the normal 30% attrition, this translates Rs. 60 lakhs every year. Many experts believe that these challenges can prove to be a real drag on growth towards the BPO industry, since the cost of attrition is so high they may outweigh the benefits of lower labour costs.

While salaries in the call centres in Sri Lanka are less than one-eighth of those in Northern Europe, it was reported that NASSCOM-Hewitt survey (NASSCOM News-Byte 2003) have found that the cost per query processed has doubled due to the inability staff to deal effectively with user queries because of language barriers and lack of experience. Thus, attrition is a two-fold issue, one that the costs and, secondly, retaining much needed and often experienced talent. The central issue is not with the quality or staff training and even less with technology investments. In simple terms people are not long enough to be taught or learn the job. Employees may be cheaper, but if they can not do the job, what’s the point of retaining them?

2.4 Industry worries towards attrition

Attrition cannot be blindly classified as negative in tone. A healthy attrition rate in the BPO industry is a necessity for new ideas and innovations for the flow and facilitates the overall growth of the sector to share information. According to Heathfield (n.d) when a low performer leaves a company it is termed as a sign of good attrition. Attrition is not always bad if it happens in a controlled manner.

Some attrition is always desirable and necessary for growth and organisational development. The only concern is how to differentiate organisations “good attrition” from “bad attrition”. The term “good attrition” indicates the importance of employee productivity, less voluntarily leave the organisation. This means that if those who left in the under-performance of attrition considered healthy (Heathfield, n.d). According to Halvey & Melby (2007) healthy attrition rates are considered to be beneficial in the following ways for a BPO organisation.

Attrition rate holds good when the performers contribute negatively to the company.

It is also beneficial when those employees who demoralize the work culture and team spirit tend to leave the company.

If all employees retain at the same organisation for a long period of time, most of them will be on their high scale pays, which is expected to result in excessive manpower costs.

When some employees leave, whose continuation of service would have negatively impacted productivity and profitability, the company will be benefited.

New employees bring new ideas, approaches, skills and attitudes that can sustain the organisation to become stagnant.

There are also some people in the organisation with a culture negative and demoralizing work and team spirit. This long-term, detrimental to the health of the organisation.

Cont…

There are people who are unable to balance their performance as per organisational expectations, lack of opportunities for the future, or in the need for disciplinary action. In addition, awards are limited, commercial pressures do not allow management to more than the reward of the artist, but when employees leave the business side, employees get the good part they deserve.

According to Raman (2006) attrition causes a huge loss for an organisation in terms of work force as well as financial losses. Attrition is a universal phenomenon, and the no organisation can refuse it, but the degree varies depending on the field and at various levels. The main reason for people leaving the BPO industry is due to the cause that the industry is viewed as a gap filler occupation. There seems to be an error in the way the BPO industry has been structured. The industry has been mainly dependent on youngsters who are taking out time to work, while making money in the process and thinking of career alternatives. Therefore, it is very clear for this group of youngsters; BPO is never a long term career but only as a part time income opportunity.

Also the unfriendliness in working conditions, late night shifts, and high pressurized and tensed jobs acts as a deterrent for people to stick to this industry for long time. In addition, the BPO job opportunities are taken less positively by the high end Sri Lankan business communities. Research indicates that nearly 50 percent of those who stop out of business. In addition to above Raman (2006) has identified several other reasons for high attrition in the BPO industry, which are divided into two broader categories. The first can be coined as “Drive Attrition” which is due by reason of the employer; the other can be defined as “Drag Attrition” which caused due to the employee.

The reasons for Drive Attrition are due to employer’s policy / policies of terminating the employee at the end of the contract period for employment. Also the quality policy of the BPO companies guides them to retain only the most productive employee and hence makes them to terminate employee at regular intervals.

On the other hand Drag Attrition is caused due to the host of insecurities and vulnerabilities associated with the taking up a career with a BPO company. The job of a call centre agent can be compared to a telemarketing or a telephone operator. Hence the scope to take up any other job or change of field is ruled out, as the experience gained in a call centre will not be a scrap of importance (Raman, 2006).

The parallel lines of the organisation also recognize the need for people to establish positive vibes with the new environment. This impression is reinforced and encouraged by the feedback mechanisms on the effective management and monitoring of the line, the alignment of objectives, internal communications, training duration and range of other human resources functions. Employee development and growth, learning opportunities have become critical factors in the induction of retention.

A dynamic and transparent cross-section function of the company is the main factor in retaining employees by instilling employee confidence in the company. Therefore it is very much evident that in order to reduce attrition in the BPO organisat