To Prevent Attrition in Business Process Outsourcing, Focus on People

To Prevent Attrition inBusiness Process Outsourcing,Focus on People PRIYA THALY

AND VIN ITA S INHA

Addressing the high rate of attrition that has longplagued business process outsourcing (BPO) enter-prises has become essential in light of the sector’sexpansion across numerous industries around theworld. A study of one Indian BPO enterprise re-vealed that many of the factors that contribute toattrition can be offset by an organizational focus onpeople. On the basis of their findings, the researchersoffer numerous strategies for improving employeeretention without compromising business processes.Managers in any sector can apply these suggestionsto help ensure the continued growth and success oftheir organizations. © 2013 Wiley Periodicals, Inc.

A fast-growing IT business process outsourcing(BPO) firm in Pune, India, was grappling with aserious attrition problem. Within 24 months, 33percent of the workers in one of its banking, finan-cial services, and insurance engagements had left theorganization. Responsible for the back-end opera-tions of a leading bank based in the United States,these employees handled various financial serviceson a 24/7 basis, including opening new accounts,investments, and providing loans. An error on theirpart could lead to huge losses, not only for the BPOcompany, but also for its client, the bank. Employ-ees reported that the pressure at work was alwaysintense and mentally straining. Their 100 percentquality target meant that they had to meet strictTAT (turnaround time) requirements ranging fromone hour to four days, depending on the process. Thedemanding nature of the job required that the com-pany try to contain its rising rate of attrition, whichis one of the most significant hidden costs in anybusiness.

When a company loses a significant number of em-ployees, it also loses the time and training resourcesthat it had invested in those valuable workers. Withits reputation tarnished, it may also find it increas-ingly difficult to attract high-quality talent to replacethose who have left. Such challenges are of partic-ular concern in India, which has become the mostpopular destination for any company that wants tooutsource its business processes (Neale, 2004).

The Indian business process outsourcing sector hasemerged rapidly. Its exports grew from $565 millionin 2000 to about $7.3 billion in 2005 (Budhwar,Luthar, & Bhatnagar, 2006). This same industry,which is growing at an unparalleled rate (Sengupta& Gupta, 2012), is plagued with India’s highest at-trition rates. Indeed, some argue that attrition isthe biggest problem that BPO firms face (Gupta &Malati, 2011).

What Causes Attrition?The rate of attrition—that is, a reduction in the num-ber of employees through retirement, resignation, ordeath—is usually expressed as a percentage, reflect-ing the degree of losses of personnel or material dueto various causes within a specified period of time.

The high rate of attrition in Indian BPO organi-zations represents a significant challenge to humanresource managers in that sector. Once employeesjoin the sector and understand its requirements, theytypically are taken aback by the long working hoursand the monotony that can subsequently set in. Off-setting those pressures and the others that can con-tribute to attrition becomes essential in light of the

c© 2013 Wiley Per iodicals , Inc .Publ ished onl ine in Wi ley Onl ine Library (wi leyonl inel ibrary .com)

Global Business and Organizat ional Excel lence • DOI : 10.1002/ joe .21483 • March/Apr i l 2013 35

Exhibit 1. Global BPO Market by Industry

Industry (%)

Information technology 43Financial services 17Communication (telecom) 16Consumer goods/services 15Manufacturing 9Source: PricewaterhouseCoopers (2005).

widespread use of BPO in several industries aroundthe globe (see Exhibit 1).

The main reasons that contribute to the high attri-tion rate in Indian BPO operations include:

� Irregular work hours—Since most of the out-sourcing work comes from the United States,most BPO employees work night shifts.

� Family pressure—Women constitute 30 to 35percent of the total BPO workforce (Michael,2010). Most of them leave their jobs either aftermarriage or because of social pressures caused byirregular working hours in the industry.

� Health problems—These can stem from an im-balance between work and personal life.

� Peer pressure—Since most BPO firms hire primar-ily entry-level employees, the percentage of youngpeople susceptible to peer pressure in the industryis very high.

� Lack of growth options within the company—Not every entry-level employee is able to climbthe corporate ladder. Out of every 100 peoplehired, only four to five will attain a supervisoryposition.

� Other career options—Unfulfilled by the natureof BPO work, some employees decide to quit theirjobs so they can further their education or joinanother sector.

� Lack of motivation, rewards, and recognition—The much-hyped “work for fun” tag normally as-sociated with the industry has, in fact, backfired,as many individuals (mostly recent graduates),take BPO positions as stopgap jobs. Rewards andrecognition are not easy to come by.

� Salary—Bottom-tier jobs in BPO operations paypoorly. Salary growth plans are not well definedin the BPO sector, either. These factors encouragepoaching by companies that can offer a highersalary.

� Inexperienced middle and frontline manage-ment—To save money, BPO organizations typi-cally promote agents with only two to three yearsof experience into supervisory roles. Given theirown lack of experience, these supervisors usuallyare not adept at people management.

Lowering attrition levels is a major challenge, as thedemand for good agents outstrips the supply by awide margin (“High Attrition Rate,” 2010).

A review of the literature highlights the previouslymentioned factors leading to attrition, as well as fac-tors that have proven helpful in reducing turnover.Joshi (2010) used factor analysis to examine thecauses of employee attrition in the BPO industry andhighlighted some of the conceptual issues surround-ing the impact of attrition on organizations. Theseincluded relocation, health considerations, a lackof appreciation from employers, ineffective policiesand procedures, uneasy relations with peers or man-agers, and tight supervision. The study also foundthat employees in the field were discouraged by themonotony of the work, the lack of opportunity foradvancement, and poor guidance. It also found thatunrealistic promises made by the company turnedwhat should have been simple jobs into high-tensionones. Similarly, Anantharaja (2009) focused on themain causes of attrition at a midsize Indian firm.Sengupta and Gupta (2012) analyzed data collectedfrom 500 BPO employees to identify the significantdimensions of attrition and suggested further stud-ies in the field of employee retention in the BPOindustry.

Suneja and Kumar (2011) detailed the factors influ-encing employee satisfaction in ITES (informationtechnology–enabled services) BPO companies. An-other study, by Combs, Clapp-Smith, and Nadkarni

36 March/Apr i l 2013 Global Business and Organizat ional Excel lenceDOI : 10.1002/ joe

(2010), focused on the performance of Indian serviceworkers in the fast-paced and sometimes turbulentBPO environment. Using a sample of 160 workersfrom a privately held BPO firm in India, they exam-ined the relationship between Indian service work-ers’ expectations and their performance outcomes.Regression and structural equation model analysesindicated a significant positive relationship betweenIndian service workers’ levels of expectation andtheir performance. These promising results high-light the importance of measuring and managingemployee expectations to maximize employee pro-ductivity and performance. Through effective man-agement, BPO firms can combat the high rates ofattrition, stress, and burnout that have plagued theirindustry. Managing employee expectations may alsohelp mitigate the influence of various aspects of In-dian culture on human resource management prac-tices in Indian BPOs. For example, emphasis is nowbeing placed on creating a people-oriented work cul-ture, fostering participative management and qual-ity of work life, and providing personal and careergrowth opportunities.

According to Anantharaja (2009), employeeturnover reflects a company’s internal strengthsand weaknesses. When new hires are continuouslyadded, the costs of training and keeping employeesaligned to the company culture increase, posing achallenge to the bottom line. Organizations also facedifficulties in retaining remaining employees whileattracting potential candidates—all of which has asignificant impact on the strength of a company inmanaging its business in a competitive environment.

Using a structured questionnaire to solicit inputfrom 110 employees in BPO companies in andaround Bangalore, Gupta and Malati (2011) de-termined that attrition is the biggest problem thatBPOs face. Many programs have been applied toimprove retention, but a single tool is not sufficient.Rather, the researchers found that the best results inemployee retention are achieved through the strate-gic application of various tools and explored the

retention strategies adopted by such BPO firms asGenpact and HCL.

Through effective management, BPO firms can com-bat the high rates of attrition, stress, and burnoutthat have plagued their industry.

Another study by Sengupta and Gupta (2008) notedthat employees new to BPO are initially enthusias-tic about their jobs but lose their motivation as therealities of their position unfold over time. Review-ing previous research, the researchers identified themain causes of high attrition in the BPO industryand argue that a vicious cycle is formed when thelow perceived value of their position drives employ-ees to quit, which further lowers the perceived valueof their jobs.

Empirical research by Dubey and Bisht (2009) fo-cused on the retention of high-potential workers,also known as KREs—key results employees. Ac-cording to their research, the attrition rate of KREsin the BPO industry in 2007 was 42 percent in theUnited States, 29 in Australia, 24 percent in Europe,and 18 percent in India, with a global average of24 percent. Their work went on to identify the areaswhere special strategies have to be deployed in orderto effectively counter the menace of attrition. Studiessuggest that BPO professionals experience problemsrelated to stress, sexual and racial abuse, and dissat-isfaction at work (Cacanas, 2005; Houlihan, 2002;Rose & Wright, 2005; Singh, 2005; Walletwatch,2003; Witt, Andrews, & Carlson, 2004).

A Look at One BPO’s ExperienceThe major objectives of the present study were to:

� Highlight the existing trend of attrition in an In-dian BPO.

� Investigate the causes associated with the BPO’sattrition rate.

Global Business and Organizat ional Excel lence March/Apr i l 2013 37DOI : 10.1002/ joe

� Find solutions to the problems leading to attritionand offer suggestions to improve retention.

Fifty employees working on a banking, financial ser-vices, and insurance engagement at a leading BPOcompany in, Pune, India were randomly selected toparticipate in the study. Male and female and rang-ing in age from 22 to 38, they reflected all levels ofthe organization, from new hires to the operationsmanager, and included senior executives, subject-matter experts (SMEs), and team leaders.

The researchers administered a self-developed ques-tionnaire listing 18 possible contributors to attritionand asking respondents to rank each of them as hav-ing the most (1), a moderate (2), or the least (3) im-pact on attrition. The percentage for each cause wasthen calculated. The 18 possible reasons for leavingthe BPO were:

� the offer of a better compensation package else-where,

� the desire to change professions,� discontentedness with working a night shift (be-

tween 6 P.M. and 6 A.M.),� peer pressure,� monotonous work offering little or no challenge,� a lack of new opportunities within the organiza-

tion,� the desire to pursue higher education,� medical reasons,� a lack of appreciation, rewards, and recognition

for performance or output,� a hampered social life because of reduced contact

with those outside the company,� the belief that a BPO firm is not a good place to

work for a long period of time,� no opportunity to take off more than a few days

at a time,� a lack of motivation,� family pressures or other personal needs,� marriage/need to relocate,� discomfort with the way discipline is handled in

the company or with work ethics,

� poor employee-manager relations, and� performance issues.

Attrition data for April 2011 to March 2012 werecollected from the senior operations manager, whoobtained them from the engagement business’s HRpartner. The questionnaire was distributed to theparticipating employees during working hours. Theywere encouraged to clarify any doubts before rank-ing the items and were assured that their responses,which would be used for academic purposes only,would be kept confidential and would not be tracedback to them. All 50 employees returned a com-pleted questionnaire, yielding a return rate of 100percent.

A Work Environment That Leads to DisillusionmentThe analysis centered on the factors that most em-ployees said would contribute to their quitting theorganization. The first part of the study analyzedthe existing trend of attrition, while the second partfocused on the potential causes of high attrition atthis BPO organization.

Exhibit 2 on page 39 gives the head counts at thebeginning and at the end of each of the months dur-ing the study period and the corresponding rates ofattrition. As can be seen, the YTD attrition rate rosefrom 0 percent to almost 33 percent within one year.The YTD attrition rate for FY 2011–12 is graphi-cally presented in Exhibit 3 on page 40.

The primary reasons why employees leave this BPOfirm are given in Exhibit 4 on page 40, which tracksthe responses of the 50 survey participants. Leavingfor better compensation or because managers do lit-tle, if anything, to motivate workers are each cited asa “most influential” determinant in quitting by 100percent of the respondents. All the respondents alsofound that monotony and the lack of new opportu-nities were “moderately influential” in that decision.Eighty percent of respondents said that lack of ap-preciation, rewards, and recognition, and the belief


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that a BPO career was not for the long term arealso “most influential.” Eighty percent cited med-ical reasons as “moderately influential,” while 75percent said a change in profession was “moder-ately influential,” 65 percent said night-shift workwas “moderately influential,” and 60 percent saidthat family pressures/personal needs, marriage, anddisciplinary issues were “moderately influential.” Amajority of respondents found the “least influential”factors to be pursuing higher education (cited by 90percent of respondents), no social life (80 percent),peer pressure (70 percent), and the leave policy (60percent).

At the beginning of the engagement, in April 2011,enthusiasm among employees was high, and the at-trition rate was the lowest. But as the months passedby, pressure to meet performance targets also startedincreasing. Although the employees seemed to en-joy their work, no steps were taken to keep themmotivated. Managers were engrossed in stabilizingthe banking/financial operation service to the clientsand were remiss in providing support and encour-agement to those who were doing the actual work.Employees did not receive any tokens of apprecia-tion, rewards, or recognition. The atmosphere wasonly work, work, work.

The month-to-date attrition rate increased eachmonth, and was the highest—almost 47 percent—in March 2012. In the middle of the fiscal year, man-agement realized that they needed to do somethingto motivate employees and began one-on-one meet-ings between the manager and each employee to un-cover work-related concerns and offer counseling,but it was too late to stop the exodus of workers.Employees had already decided to leave.

Since the study was completed, managers at this BPOorganization report that the work environment hasimproved. Managers are more in tune with work-ers’ needs, employees seem happier, and the attritionrate has fallen. Managers have come to realize thatpaying attention to people does not mean they have


Exhibit 3. Attrition Rate, Expressed as a Percentage (YTD for FY 2011–12)

Exhibit 4. Why Employees Quit the Organization

Causes Most Influential Moderately Influential Least Influential

1 Better salary packages 100% 0% 0%2 Change in profession 0% 75% 25%3 Working night shifts 35% 65% 0%4 Peer pressure 10% 20% 70%5 Monotonous work profile that offers no challenge 0% 100% 0%6 Unable to identify new opportunities 0% 100% 0%7 Higher education 10% 0% 90%8 Medical reasons 0% 80% 20%9 Lack of appreciations, rewards, and recognition 80% 20% 0%10 No social life 0% 20% 80%11 Career in BPO is not considered for long duration 80% 0% 20%12 Long leaves 0% 40% 60%13 Lack of motivation 100% 0% 0%14 Family pressure/personal needs 0% 60% 40%15 Marriage 0% 60% 40%16 Disciplinary issues 0% 60% 40%17 Employee-manager relationship 60% 40% 0%18 Performance issues 60% 40% 0%


to neglect overall business processes and, indeed, isgood for business.

BPO companies are still grasping with the is-sue of keeping agents motivated in a routine job.One resolution, which is already being followed atthe organization that was studied, calls for using thehierarchical chain of command to keep employeesmotivated.

Recommendations for Encouraging Employees toStayThis study was not without its limitations. At times,the employees were not willing to discuss their con-cerns freely, for fear that doing so might affect theirperformance appraisals. Management was hesitantto disclose information regarding the organization’sengagements. Since the survey was conducted inonly one banking, financial services, and insuranceengagement, its findings cannot paint a completepicture of attrition in the BPO industry. Additionalresearch is needed to study the problem of attri-tion and formulate strategies to retain productiveemployees.

Nonetheless, the findings of the present case studydo allow for the proposal of several recommenda-tions for effectively dealing with the potential of at-trition in the BPO industry. BPO companies are stillgrasping with the issue of keeping agents motivatedin a routine job. One resolution, which is alreadybeing followed at the organization that was studied,calls for using the hierarchical chain of commandto keep employees motivated. Thus, the agents whoare at the lowest level will have regular contact withthe upper levels through the SME, on up to the teamleader and the center’s manager. Here are some othersuggestions for helping to create a BPO work envi-ronment that will encourage employees to stay:

� Offer flexible work schedules, periodic rewardssuch as shopping vouchers for good performance,recognition parties, timely appraisals, companyoutings, career guidance, team-bonding exercise,and posting of career openings to keep employ-ees excited about their role in the company andmotivated.

� Base salary increases and other incentives onperformance. Compensation and benefits plansshould be structured in such a way to encourageretention.

� Regularly conduct competency-based employeetraining programs to help employees improvetheir skills, knowledge, and attitude, which willultimately help them advance in their career.

� Update HR policies and procedures on recruit-ment and hiring to reflect the current BPO marketsituation and encourage hiring a diverse work-force.

� Make training in manager-employee relations asthorough as that for agent-customer communica-tion.

� Offset boredom without losing sight of businessobjectives by encouraging fun in the workplacethrough the creative use of workplace games andother techniques.

� Conduct town hall–style meetings on a regularbasis to keep employees informed and motivated.

� Hold one-on-one meetings between supervisorand their direct reports.

� Give employees every opportunity to hone theirskills and develop new ones.

� Have HR and OD practitioners, along withthe other functional units, implement short-,medium-, and long-term strategies for employeeretention. They need to make a concerted effortto understand what makes people tick and to sat-isfy their basic needs, rather than just giving themhigh hopes.

� Institute employee assistance and health pro-grams to help employees address issues out-side the workplace that could be affecting theirperformance, including nutrition, exercise, andhygiene.


� Place high value on equal discipline at all levels,ensuring that employee grievances are handledfairly, with sensitivity, and in a timely manner.

Human resources are any company’s most valu-able asset. Therefore, motivating employees to ef-fectively deal with their workload is an essentialpart of management. Paying a fair salary is notenough to retain employees. Managers also must ad-dress the other factors that influence an employee’sdecision to leave. These include, and are not lim-ited to, monotony and lack of motivation, appreci-ation, rewards, recognition, security, advancementand communication between employees and man-agers. Tackling attrition means focusing on reten-tion and striving to make the work environmentboth challenging and uplifting for all concerned.

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Priya Thaly has been working in operations for ten yearsand is a process specialist for an IT company in Pune, In-dia. She holds a bachelor of arts degree with a specializationin economics and a diploma in computer programming andapplications. She is pursuing an MBA at the Symbiosis Cen-tre for Management and Human Resource Development inPune, India, where she is specializing in human resources andoperations. She can be reached at priya [email protected].

A member of the faculty at the Symbiosis Centre for Man-agement and Human Resource Development in Pune, In-dia, where she teaches organizational behavior, Vinita Sinha,PhD, previously taught at the Great Lakes Institute of Man-agement in Chennai and at BIMTECH in Greater Noida andEMPI Business School in New Delhi. She holds doctoral andmaster’s degrees in psychology, with a specialization in or-ganizational behavior, as well as a post-graduate diploma inHR management from IMT Ghaziabad and a post-graduatediploma in health, psychology, and behavior modificationfrom Amity University. Widely published in a range of refer-eed international and Indian journals, Dr. Sinha is the authorof Implications of Hardiness and Social Support: Psychologi-cal Well-Being—A Recent Perspective and The Burnout Pro-cess (Lambert Academic Publications). She can be reached atvinita [email protected].


To Prevent Attrition in Business Process Outsourcing, Focus on People

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