Lessons Learned from Impact

Sourcing in Rural India

Adam Guzowski – IDEX Fellow, Head Held High Pomai Verzon – IDEX Fellow, IndiVillage

November 2014

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Introduction

Did you know rural villages could be helping your insurance company move to the 21st century? You fill out an insurance claim and mail it to your provider. In this new, flatter world, the insurance company is shifting to digital records, but needs some help making this transition. Luckily, they have found a company they can outsource the process to that is willing to take the scanned claim, break it into pieces to protect your information, manually type the data, and return it back to them for a pittance of what it would cost their employees to do it. This is the Business Process Outsourcing (BPO) industry and it is going rural.

The BPO industry has grown exponentially in the past decade but recent years have seen the emergence of a new, socially responsible sector within the field. The new trend is termed Impact Sourcing and is primarily concentrated in India, South Africa, and the Philippines. It is the process of employing marginalized people with limited opportunities for sustainable employment and placing them in outsourcing centers to provide information-based services to both domestic and international clients. The size of the Impact Sourcing industry is estimated to be approximately 561,000 employed individuals worldwide or 10% of the total BPO workforce globally.i

India makes up roughly half of the impact sourcing market worldwide with 251,000 individuals employed.ii An increasing number of BPOs have started centers in rural areas in order to utilize lower operating costs and bring economic opportunity, often with an aim of employing women and youth.

This report examines some of the lessons learned from small to medium BPOs (defined here as 250 employees or less) working in this new, socially responsible sector in India. Data for this project was gathered through secondary data research as well as interviews with five rural Indian BPOs: Head Held High, IndiVillage, JSoft Solutions, rProcess, and SAI SEVA.

The Emergence of Impact Sourcing in India

Several factors have contributed to the rise of Impact Sourcing over the past few years. Organizations need to focus more than ever on expanding digital content and information, which grows the need for outsourcing processes such as data entry, data mining, and content management. These tasks can be broken into micro activities then assigned to employees with the proper training anywhere in the world with electricity and Internet connectivity. The market has responded to the increasing demand for outsourcing services with an influx of BPO companies competing to cut costs. India, the initial leading destination for outsourcing, found itself vying with other emerging economies to maintain its position. Furthermore, while customers expect low costs from outsourcing service

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providers, the wage expectations of traditional BPO employees are rising as India’s economy grows. This has led to a steady move of BPO centers to Tier 2 and Tier 3 cities and the emergence of the rural BPO. Outsourcing tasks, that do not require highly skilled labor, from urban to rural areas allows companies to save significantly on both salaries and overhead. Impact sourcing companies also have low attrition rates due to loyalty, community ties, and lack of other employment opportunities with good pay and work environment. Rural BPOs can operate with 20-40% lower costs than traditional BPOs.iii

Most companies are using Impact Sourcing in rural areas to complete a social mission or CSR strategy of empowering women and creating economic opportunity for the underprivileged. There are, however, other advantages such as utilizing vernacular language capabilities or a platform to tap into new markets. The Indian government has also become involved both through creating incentives and enabling policies for companies as well as forming rural BPOs.

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Lessons Learned • “Infrastructure seems like an overblown issue”

The most obvious challenge for a rural BPO is infrastructure. Understandably,

worries about consistent power supply and reliable Internet are at the forefront of potential customers and skeptic’s minds. However, this concern is largely overblown and diminishing as Internet providers continue to penetrate rural India. Facilities, energy, and connectivity are more complex when going rural but it is an obstacle dealt with only once. Where some BPOs falter is choosing the wrong location, not for lack of infrastructure but talent. One BPO realized that it needed to place facilities in areas with a population of 1 lakh (100,000) or more because there was not enough human capital available. The BPO found itself limited in the work it could complete without basic English and computer skills. Towns with a high number of graduates that would otherwise need to travel to the nearest big city provide an ideal employee pipeline. Budding BPOs need to do their due diligence when scouting an area not just for locations that meet their infrastructure requirements but also for a talent pool of potential employees. • “For them this might be their first professional job”

Rural employees typically require more training and a longer warm up period

on processes. Several BPOs have learned through trial and error that it is best to provide basic training in the beginning and then supplement it with more complex training as needed. One BPO found that it provided months of intensive training only to have many of the workers leave and bring their new skills to the city. It then started recruiting housewives knowing they were tied to the community and hoping to do a social good. But without productivity benchmarks in place they realized that some of the workers were being subsidized by the company instead of providing value. Most BPOs now follow a system of providing a stipend during training followed by a period of progressing job intensity and responsibility. While there is a steeper learning curve in rural BPOs, appropriately set benchmarks can alert management to workers that are not a good fit. Implementing reviews in the first 1-3 months can help objectively evaluate which employees have potential.

BPOs must also be careful about hiring as workflow can be inconsistent and companies cannot afford to keep employees on the bench waiting for new assignments. Recruitment should be client based. Employees should be hired and trained based on the requirements of customers once some work is secured. Otherwise BPOs may invest too much in a process that does not have enough customers. Again, this is a careful balance as depending on available talent the process can take four or more weeks.

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• “Low attrition rates can turn against you eventually”

Low attrition is one of the factors that help to make BPOs successful and bring down costs. It can also become an issue as long service is eventually met with pay and work ceilings. Employers find themselves unable to meet the rising expectations of workers. With gained experience, employees anticipate a salary increase but this experience is not always translated to a rise in productivity. As one BPO explained, “There are only so many forms that can be filled in an hour”. The other issue is that while an employee may be ready for more challenging work, it may not be available. This leaves the employee unmotivated and their career stagnant as there is no position they can be promoted to and the company cannot afford to pay them more. While some attrition is necessary, there are several actions managers can take to delay it including diversifying the workload

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of employees, providing training on services the BPO plans to offer, and for those with nothing left to teach - allowing and encouraging workers to pursue external learning through schedule flexibility and even providing education loans. • “There is only so much data entry work available”

The most common, if not the biggest, challenge that BPOs are facing is finding and maintaining the right work mix. There needs to be a steady supply of simple, repetitive work for employees with basic computer and language skills. But to grow the business and keep the workforce motivated, more complex work must also be found. As one BPO stated, “there is only so much data entry work available” and it can require specific training. A mix of low skilled workers and graduates can increase the variety of work a BPO can handle by splitting processes and having higher skilled workers act as quality controllers or team leaders. BPOs must first attract the work though and that is where they struggle. Small to medium BPOs have not found much success through cold approaches and sales teams have not had great returns. Instead, BPOs have benefited the most from their existing network and word of mouth. In the rural context, BPO directors actually end up doing the bulk of business development leveraging their own connections and doing it on their own dime. • “It’s easier to write a check and give money than work”

When BPOs are making a sales pitch they tend to use rural only as a selling point for lower costs. Despite almost exclusively having a social mission and being run by passionate leaders, BPOs have opted to make the business case rather than use the social impact approach. They have discovered that the social pitch does not attract the attention of most potential customers and that they are instead more interested in reducing costs. While this holds true for most domestic customers in India, Western customers have shown more of an interest in the impact they are helping to make. Perhaps due to the limited interest of customers, very few BPOs have devoted time and resources to measure their impact.

Both cost and socially focused customers remain concerned about the quality of the service delivered by employees from rural areas and their overall skills levels. One BPO that focuses on youth finds it is better to not mention the transformational journey their trainees complete as customers focus too much on where they have come from. It is important for BPOs to build their credibility and create the right expectations among their prospective customers. This has been done through taking on part of the work as a pilot and building the process up or forging partnerships with larger, urban BPOs who subcontract processes that do not require high levels of skill or specialization.

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• “We are careful about bringing city culture into villages”

BPOs bring opportunity but they can also be viewed as a threat to village culture, ushering in change where tradition has ruled. Husbands and over zealous community members often object to women not only working outside the home but next to men. Employees balk at different castes mixing. These issues require a hands-on approach not just of managing internal affairs but family and community members. A BPO working in a new area may find it beneficial to partner with a trusted NGO or to reach out to religious and other leaders. One BPO explained that in the beginning it had to explain to families the benefits of their wives and daughters working at the BPO but now employment brings them greater respect both within their homes and in the community.

For many employees the BPO will be their first experience in a professional environment. Managers have found the need to establish a work culture early on and include soft skills in training. A particularly challenging issue for one BPO is that employees tend to take long holidays for religious events and festivals that can last as long as 2-3 weeks. The center struggles to replace the employees as others need to be trained on the specific tasks and recruiting replacements in not profitable for such a short time period. This concern intensifies around major festivals when numerous employees plan their holidays simultaneously. Strategies to overcome this have included an effort to hire employees of diverse religious backgrounds and making rules around vacation time to maintain operational capacity.

As with many aspects of running a rural BPO, the balance of respecting yet disrupting village life can be a difficult one. A division of approach can be seen in the decision to implement night shifts or not. Safety concerns and a reluctance to bring the negatives of development to rural life has led many BPOs to have a policy of taking on no work that requires a night shift. Other BPOs have chosen to pursue global customers and see this as an opportunity to bring more jobs. BPOs need to have a clear vision that helps make these choices as well as guide which battles are fought, as there will undoubtedly be struggles, within village culture.

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                                                                                                                 i Parikh, Kevin. (2013). “Impact Sourcing”. Outsource. Issue 31. <http://www.avasant.com/images/uploaded/busi/Outsource_Magazine_Spring_issue_Impact_Sourcing.pdf>. ii Ibid. iii NASSCOM. (2012). “NASSCOM-Everest BPO Study”. <http://www.nasscom.in/sites/default/files/upload/55783/NASSCOM_Everest_India_BPO_Study_Exec_Summary.pdf>.