The Business Process Outsourcing industry in India has flourished and matured over last decade or so and has been a real overall success story as far as global outsourcing markets are concerned. A major part of the BPO business is done by the call centres that primarily focus on voice based business handling calls from clients in a pressure environment.
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It has often been said that the call centre industry in India is plagued with the agent attrition issues and a lot of efforts are continuously made by the companies operating in the industry to reduce attrition and improve staff retention. A major component to the phenomenon of attrition in Indian call centre industry is how the management handles its key functions that impact an agent in the organisation both directly and indirectly. In several call centres across the country, key areas of management practices such as recruitment and selection, training and development, employee motivation through communication and performance management play a key role in determining their handling of the issue of attrition. An important area that is sometimes ignored by the organisations is the structure, particularly the way the management and agents share a formal and rigid relationship structure.
As the global outsourcing industry get more competitive, it is important for Indian call centres to curb the attrition issues and keep situation under control always to maintain value with their clients. While the obvious areas of management practices are often analysed and most firms, especially the ones with lesser resources tend to ignore an in-depth understanding within the practices being followed. Amongst factors dependent on individual staff, stress factor is often attributed to be a major contributor towards attrition however not much has yet been done in most organisations in the industry to provide assistance in this area.
Further, it is extremely important to consider the fact that attrition is not always the problem but sometimes it is the retention that becomes the key issue. Often a minor attrition might lead to exodus in call centres for reasons not justified enough. For the call centres in India to meet long term business objectives, it is a must that they put significant efforts to manage the situation post attrition as much as while attempting to formulate policies that look to curb the attrition at the outset.
1. Introduction & Aims and Objectives
Employee retention refers to the numerous policies and practices that help the organization to retain the best talent for a longer duration. It’s a complete loss to an organization when an employee leaves the company once being entirely trained.
From past few decades, BPO sector in India has been relishing the biggest share of the world’s outsourcing market. It has been noticed that the employees working in the BPO sector earns almost double the wages of the same age group working in other sectors of the country. However, the employees in the BPO sector are unsatisfied as they work under tremendous pressure as compared to the other industry because of target oriented workload with tight deadlines, odd working hours and strict working policies & procedures, all this enforced by electronic monitoring. This kind of working environment leads to higher than the normal stress level amongst the employees at work. Therefore, the work in BPO sector are said to be more stressful, while the back office jobs are more qualitative with less stress such as accounting.
The BPO sector plays a critical role in the Indian economy with worth of $11 million industry and employing more than 2 million people. However, if the industry is to achieve the projected $30 billion by 2013, the sector will have to resolve the issue of employee turnover at the present. Managers in the BPO sector have been struggling with the attrition issue and retention strategies since a while now. Some of the organizations have been successful in managing the issue of employee turnover in this sector. According to CIPD report (2008), the UK had an attrition rate of 17.3%, based on the survey of 779 organizations. In BPO special sector survey (2008), the employee turnover rate in BPO is 23.8% in India, followed by Retail at 18% and Communication at 22%. The study has also shown that an average BPO employee in India works not more than 11 months whereas in the UK they complete 3 years of tenure with an organization. Despite potential for remarkable growth, BPO industry continues to suffer from high level of employee turnover because of the several factors such as high stressful working environment.
Attrition and retention strategies are major concern and a challenge for BPO (Business Process Outsourcing) industry as it disrupts the day to day operations, increases the cost to the company considerably by recruiting and training new employees and also affects the overall business in terms of productivity and loss of clients due to inefficiency. Due to unplanned exits, the organization struggles significantly. It is extremely important to restraint attrition not only for individual organization but also for an industry as a whole.
However, this report only covers the call or contact centre sector of the BPO industry in India. The call centres are primarily voice based and do not covers the back end process or functions unlike non-voice processes.
Business Process Outsourcing (BPO)
BPO is a subcategory of outsourcing that comprises the contracting of responsibilities and operations of specific business processes to the third party service provider. Originally, it was related with manufacturing firms, such as Coca Cola that outsourced large section of its supply chain.
BPO is normally classified into back office outsourcing that consists of internal business processes such as finance, human resources, accounting and front office – which involves services related to the customers such as contact centres or call centres. Often, the business functions outsourced to the numerous nations like India and Philippines are known as ITES – BPO (Information Technology Enabled Services), LPO (Legal Process Outsourcing) and KPO (Knowledge Process Outsourcing). The following are the five major countries which are considered as hotspots for outsourcing businesses:
India – Engineering & Technical
China – Manufacturing & Technical
Mexico – Manufacturing
United States – Analysis & Creative
Philippines – Administrative
In 2010, the Philippines have surpassed India in front office business outsourcing i.e. contact centres as the leading business process outsourcing industry in the world.
Attrition refers to the reduction in the number of staff in the organization through resignation, retirement or death.
Employee retention is a practice in which the employees are encouraged to stay with the company for the longer period of time or until the project is completed.
1.2 Aim of the study
This research is aimed at gaining the insights of management practices being followed by managers in various call centres. It will allow us to evaluate the perspective of both the employees and the managers pertaining to the five fundamental management practices in any organization i.e. organizational structure, recruitment and selection, training & development, performance management and communication. How do these factors influence the organization? This will provide a profound understanding to the Indian call centres and will assist the mangers and the organization in controlling the attrition by reducing unnecessary churn.
Indian call centre industry needs to focus on the problems of high attrition and weak retention strategies as it can be detrimental for call centre industry as a whole. According to Cappelli (2000), the aim of improving the retention should not be restricted to only minimizing the attrition but should also have an influence on the agent’s intention to leave the company.
Subsequently, literature review will be conducted in respect to the attrition and retention in the call or contact centre industry. It will explore the five key management practices that majorly influence the attrition and retention strategies. The aim to conduct a literature review is to highlight the views on the management practices through various famous sources and its influence on the retention of employees.
1.3 Problem Statement
There are numerous problems of employee retention that has been discussed in past by many researchers. The common set of variables in management practices that impact the employee retention are recruitment and selection, compensation, work culture, performance management, training and development and effective communication that act as a motivation or de-motivation factor for an employee.
It has been perceived that there is a lack of communication of process from organizational front to enhance the ability and willingness of managers to take on responsibility in the HR practices. The responsibility of HRM does not rest only with the HR but also requires the participation of functional managers to make the whole process more effective and efficient. (Buford, 2006).
Attrition may be reduced if the other motivational factors associated with the employee satisfaction can be taken care of. Though, that does not indicate that it will help the organization in retaining the employees. Thus, the negative characteristics of job also need the attention respectively. Looking at the big picture of comprehended potential in BPO sector in India, it is clear that the issue of employee turnover cannot be ignored. Consequently, there is an extreme need of curbing the attrition rate of employees in the BPO sector in India.
1.4 Significance of the study
Apparently the study has become significant to many researchers because of the remarkable growth of BPO industry in recent years. Where industry is growing rapidly with leaps and bounds on one hand, the attrition rate has also been alarmingly high on the other hand in past few years. Thus, the issue of high employee turnover is costing a lot to an organization. In BPOs, the employees at middle and lower level are victims of dearth of job satisfaction and motivation. The study is an effort to evaluate the patterns of attrition in the BPO and analyze the relationship among the job satisfaction, employee retention and motivation so as to formulate the concrete recommendations for the industry to improve the retention strategies and curb the attrition. Thus, it is not only substantial for academicians but also for the professionals who can exploit it to restraint the employee turnover.
1.5 Objectives of the study
From the above study, it is evident that the attrition has been adversely impacting not only an organizational effectiveness but the BPO industry as a whole. It is important for the industry to come up with some concrete solutions to curb the attrition issue and improve the retention strategies. This research is conducted to overview broadly the reasons of high employee turnover and ineffective retention strategies in BPO and seek to narrow down it to the specific concerns surrounding management practices. The key objectives of this study are as follows:
To review and assess the fundamental theoretical factors affecting the retention of employees in BPO industry based on literature review.
To classify and rank the factors influencing the employee turnover in BPOs based on the secondary data and literature.
To identify and analyze the level of employee motivation with regard to the management practices.
To make recommendations in order to improve employee retention in BPOs and curb the ever-increasing attrition rate.
2. Literature Review
2.1 Call Centres in India
According to Gans et al., (2003), call centres are defined as a set of resources that are an essential part of many organizations, typically computers, personnel and telecommunications equipment that enables the delivery of services via telephone. The various functions performed by the call centres are customer service, help desk and emergency response services, order taking and telemarketing.
The call centres are basically of two types i.e. inbound and outbound. Inbound call centres are where incoming calls are handled by the agents or employees that originates from outside callers calling into a centre. This kind of centres provides the services such as help-desk, customer support, reservation and sales support, and claims processing and order-taking functions. Whereas, Outbound call centres are where calls originate from within the call centre and these outgoing call traffics are handled by the agents. These kinds of centres are typically associated with business surveys and telemarketing.
In an immense populated country, India is estimated to have a contact or call centre industry of approximately 50000 organised seats with an additional half million disorganized seats. The terminology of organized and disorganized are used by Indians themselves to differentiated between the legitimate and fly-by-night call centres and BPOs that are formed and pull apart shortly thereafter. The main cities for call or contact centre industry in India are Delhi, Bangalore, Mumbai, Hyderabad and Chennai. As per the size comparison of call or contact centre industry in other countries, Korea has over 300,000 seats, China- 230,000, Australia-200,000, Philippines has over 140,000, Malaysia has 35,000, Thailand – 30,000, New Zealand has more than 27,000 and Singapore has 20,000 seats. Thus, India is the leading and the largest call or contact centre market amongst the other countries in the region. The growth of Asia – Pacific call or contact centre industry at a regional level is of about 22% annually in terms of seat size. In comparison with other countries, Philippines seat growth rate is of about 33% per annum whereas India’s growth rate is noticed to be 16% annually in terms of seat size that is proportionately lower than Philippines and has been reducing every year.
In India, approximately one third of the call or contact centre industry is based on the international market where 22% of contact or call centres service the USA, 18% to the UK, 7% to Australia, 3%-Singapore, 2%-global customer base, 1%-Hong Kong, 1% to New Zealand and 1 % to Japan. And almost three quarter of Indian call or contact centre industry is based on domestic market and service the domestic economy.
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The requirement of about one quarter of call centres in India from the agent is to speak in a language other than their national language. The eight in ten call centres in India require their agent to speak in English to the customers. The other languages required in Indian call or contact centres are Kannada, Spanish, Tamil, Telugu, Malay, French, Italian and German.
In Indian call centre industry, six out of ten operate 7 days a week and one third 24*7 a week. (Wallace, C.M., & Organ, J.M., 2007a).Work of call centres in India involves agents to provide mainly voice to voice service to the clients primarily in the North America. Employee in Indian call centres learns American accent, work at night that is typically called as ‘graveyard shifts’ to cater to time zones of the United States. They are expected to be fluent while speaking in English language and also be aware about the day to day issues in America to some extent so as to converse with the customers in a casual manner (Mirchandani, 2004; Shome, 2006). Although, the clientele has spread across the globe such as the United Kingdom and Australia but the focus of Indian call centres are largely on U.S. as the major big companies that Indian call centres are associated with are Dell computers, AT & T, America Online, General Electric, GE Capital, American Express and Goldman Sachs etc. (Mirchandani, 2004; Shome,2006).
Indian call centres have emerged as most productive and cost effective for various organizations across the global. The employees in Indian call centres provides services to the clients by making telemarketing to cater to customers on credit cards, network connections, insurance claims, computer hardware, financial plans and banking. The services that Indian call centres provides to their client has been phenomenal and thus the industry grew by 59% to $2.3 billion between 2002 and 2003 (Sharma, 2003), and it also showed the increase in the number of foreign companies outsourcing to India from 60 in 2000 to 800 by the end of 2003 i.e. more than 1200% increment (Mirchandani, 2004). Dell alone has more than 30 sites in India in four different cities with over 15,000 employees (Ribeiro, 2006).
In India’s global leadership, the call or contact centre industry is well positioned with its growth in business process outsourcing and offshore information technology industries at a rate of more than 25% annually and creating export revenues of over $60 billion (NASSCOM, National Association of Software and Service Companies, 2005).
In a varied literature on Indian contact or call centres, some of them have discussed the issues related to HRM practices (e.g. Kuruvilla and Raganathan, 2008; Budhwar et al., 2010), and trade unionism and employee relations (e.g. D’Cruz and Noronha, 2006; Taylor et al., 2009). Some of them explored the concerns of work organization (e.g. Batt et al, 2005; Noronha and D’Cruz, 2009; Thite and Russell, 2008). The major attention is dedicated to the cultural contradictions implicated in transnational agent-customer interaction (e.g. ElSawad and Cohen, 2007) that also leads to attrition.
2.2 Growth in Indian BPO industry
Generally, for outsourcing call centres in English language India has been seen as the first option by the companies. Having said that, in the last 10 years we can see boom in BPO industry in Philippines which has shaken India’s BPO business and clients are shifting due to the benefits of Philippines-situated call centers.BPO industry has seen extreme growth of 25-30 percent where as India shown 10-15 percent growth, according to Dani, research director at the Everest Group. Moreover, the country employs 400,000 people in this industry in comparison to India’s 350,000 employees.
According to today’s statistics Philippines BPO business made itself from US$350 million in 2001 to more than US$11 billion today. This kind of growth happened due to three causes:
Firstly, Cultural and language barrier has been overpowered due to the cultural exchange history between Philippines and United States. Filipinos start learning English language at an early age than Indians and large amount of population start discovering habit of American culture. These things help American consumers, as many of them complained now and then of not understanding Indian call centre people and their accent. At an entry level stage Filipinos earn US$ 300 per month which is US$ 50 more than Indian call centre people, but they have been taken positively by the American users.
Secondly, infrastructure is the biggest advantage of Philippines which helps them to be forward always from India. Outsourcing hubs in India like Gurgaon and Bangalore has to use generators and diesel to get an uninterrupted power of supply. However, problems like power supply and all are not really an issue which gives them good infrastructure and helps them to avoid extra overheads.
Thirdly, there is a great support of Philippines Government for the growth of this industry in their country. Provision of tax incentives and subsidies are the kind of help by government. Govt. simplified the administrative procedure of setting up call centres by companies. It also organizes company special visits to India to get the know-how of this industry, provides the benefits to single buildings to come under special economic zones and provided training to 40,000 students in communication and English.
The success of these policies can be measured by the availability of dominant American companies like AT&T, Expedia, Proctor and Gamble, JPMorgan Chase, IBM, Shell and the Hershey Company. But still, India has a convincing edge in all over BPO. Regardless of Philippines’ growth in BPO, India’s know-how in other fields is the added support over the new bee cultural and linguistic benefits. India has shown 14.8 percent
of growth last year in BPO sector and it is expected to jump US$100 billion line this year.
India’s added advantage is their tremendous knowledge in “non-voice” products where it has huge amount of experience from years which is almost 90 percent of worldwide outsourcing sector worth. There are lot of complex and difficult work other than “voice” which consists of medical and legal sectors, banking process, research and analytics in many departments which needs high knowledge and expertise and Philippines in this regard are still behind from us with only one-fifth of earned revenues with one-third of workers employed working in these departments.
Nation like India which produces 4 million college graduates every year is never short of manpower. On the contrary, Philippines face the problem of meeting the manpower needs to continue their growth. There is increasing demand of 20 percent in this sector every year where as the number of university graduates passing each year is only increasing by 3 percent and as per the government data only 5-8 percent among them are get hired.
However, the overall position of this sector in Philippines is very favourable. In the Government latest plans more positive policies are coming in line for the outsourcing sector to cross the revenue of US$25 billion, or at least 10 percent of GDP, till 2016. Although, country is inexperience in difficult and complex areas of “non-voice” areas of BPO industry, the growth prospects are still very positive in call centres as now Indian companies are moving their processes eastward.
2.3.1 Maslow’ Hierarchy of Needs
The most renowned description of needs is the one that articulated by Maslow (1954 as cited in Armstrong’ Handbook). According to Maslow, there are five key categories of need that apply to individuals in general such as basic physiological needs that is lowest need in the hierarchy, subsequent to safety & security needs, social needs, esteem needs and the highest need of all in the end is self-fulfilment. It is a typical human tendency that the next highest need becomes dominant when the lower one is satisfied and the attention of an individual gets entirely shifted to satisfy the next highest need. The only need that is impossible to satisfy for an individual is self – fulfilment as it can never be satisfied. People are wanting animal; and only an unfulfilled need can motivate an individual’s behaviour that is dominant need which is utmost motivator of behaviour. When people move upwards in the hierarchy of needs than the psychological development of an individual takes place but that is not an essentially straightforward development. However, the lower need always exist and it becomes dormant as motivator but as and when required an individual regularly return to his previously satisfied needs.
Behaviour/ ActionMaslow’s hierarchy of needs has an intrinsic appeal and has been very famous. But the study showed that Maslow’s needs hierarchy hasn’t been verified by experiential done by Bridwell and Wahba (1979). It has also received criticism for its apparent rigorousness (every person has different priorities and it is quite unacceptable that needs move steadily upwards in the hierarchy) and for the misleading conceptual language of Maslow. In fact, the doubt was raised by Maslow himself about the validity of strict hierarchy need order.
Maslow – Need Satisfaction
2.3.2 Herzberg’s Two Factor Model
Herzberg et al. as cited in Armstrong’s handbook, developed the two factor model i.e. satisfiers and dissatisfiers. The needs of employees were divided into two groups by him. The first group revolves around the wants to develop in one’s job as a basis of individual growth such as recognition, achievement, responsibility, advancement and the work itself. Whereas the other group operates as an important base to the previous and is also allied with unbiased treatment in supervision, compensation, administrative practices and working conditions. In medical terms, the second group formulae a hygiene factor, meaning environmental and preventive. Herzberg has pointed out in his theory that the financial incentives work as a motivator for short term but its effect wears off quickly.
It has been highlighted by many companies on various occasions that there has been dissatisfaction amongst the employees with the wages, leaving to pursue higher education, illness and physical strain. In Indian call centre industry most of the employees are young people and thus the motivation level is low as their needs are higher and keeps on accumulating over the period of time whether in regards to physiological needs or psychological needs.
2.4 Management Practices
Many practices have shown that manager’s behaviour towards their employees helps in increasing their motivation and retaining them in the company (Buckingham, 1999; Thompson et al., 1999). But those studies did not say anything about the specific action and behaviour to increase the retention.
There has not been really specific set of HRM practices which is agreed by everyone but generally the most common practices are: job security, job previews, orientation programming, compensation systems, performance appraisals, career advancement, training and development, and effective communication (Delery & Doty, 1996).
Many authors (Huselid, 1995; Hemdi & Nasurdin, 2007) pointed that HRM practices has a positive impact in the hotel industry in building trust in an organization which helps in keeping the employees retention level. Performance measures, training and development and career advancement are the HRM practices used in this study.
Pfeffer (1994) and Telfer (2008) both said that application of 16 management practices will lead to increasing productivity and profitability among the organizations. These practices consists of information sharing, participation and empowerment, selectivity in recruiting, incentive pay, self-managed teams, measurement of practices, skills development and training. Teffer (2008) also states Deloitte Best Company to work for (BCTWF) consist training and development, performance management and communication.
Call centre agent decision to stay or to leave depends upon 11 complex factors which have been suggested by Mashatola (2003). These factors that employee expect are growth opportunities; and the organization’s size and external image; stimulation and challenging role; work schedules that fit with lifestyle needs (day time job); behaviours of co-workers; perception of general treatment of employees (fairness, transparent, trust and freedom of expression); the organization’s interest in the individual’s non-work interest; management’s competence in managing work and guiding agents; accessibility of workstation; excellent facilities and technology; working conditions with minimum stress.
HR practices like selection, employee retention, job and work design, training and pay performance measures have been practiced by Holman et al. (2005). These practices are controlled by the management. Call centre agents are the better people who can throw light upon the “intention to leave” factor. Organizational system is formed in the manner which constitutes and backs the management principles, performance and communication in any organization. Both agents and managers impressions are going to be studied with the help of this research and it will be concluded on the basis of five management principles and analyze which holds retention the most.
2.4.1 Recruitment and Retention
Call centre has the potential to provide high turnover rate to recruitment system. High turnover rate is the major problem in the call centres and this problem takes birth from recruitment system where capable employees are not given the right job and they have been put at the wrong areas (Doshi, 2002).
Many of the new employees join the call centre and most of them in few days of time generally feels that the working environment is not suitable for them which leads to take call centres turnover high (Moss et. al., 2008). These studies point out that selection procedure and putting right people at right area are the major departments that need to be work upon. In UK as well, 9% of call centres use Psychometric and aptitude tests in the selection system (Moss et. al., 2008).
Studies (CIPD, 2008) found that highest turnover rate is in retail, call centres, catering and hotels. If candidates are shown environment and organization with the help of job previewing tool, early resignations can be prevented as this will keep the expectations of employee and employer and post-employment will go smooth.
Increased turnover rates are due to the weak recruitment process and poor selection choice which can be blamed on both employee and employer (CIPD, 2008). Analoui (2007) brought the new system i.e. flexible recruitment practices which have great impact and it teaches organization to be flexible in this constantly changing working culture. A new flexible method of recruitment and code of conduct for departments of work force is required to select the best candidates who suited best for the job requirements. Analoui (2007) further explained that putting right people at right area is work of HR planning.
Jassim et. al. (1998) explained that managers use different selection models as they have different eligibility criteria to recruit people and that is why they use different models so that they can employ right person for the job.
Grobler and Warnich (2005) said that communication binds various elements, coordinating activities, allow people to work together and produce results. According to them, communication itself is the action to convey information.
In 2006, Yates described on communication ROI study of Watson Wyatt where substantial evidence was found that bringing improvement in employee engagement is the result of high internal communication practice. Engagement of employees is like satisfaction towards job, which also influences productivity and retention of employee. Yates (2006) describes how effective communication increases ROI. (Figure)
The Watson Wyatt (2006) defines eight effective communication areas i.e. making employees learn about the institute and values, guiding employees to understand the industry, merging employee’s actions and customer’s needs, to provide employees with information on the value of the rewards programs and policies, integration of new workforces into the institute, and executing strong headship by applying the organizational change.
Figure: Communication Flow (Watson Wyatt, 2006)
As stated by CIPD (2008), communication plays a very progressive role in relationship building. An effective communication system creates media for employees to use their voice within the pre-defined framework of studies, assessments, grievance systems and training within organisations. A lack of this will result in dis-satisfied employees with many different mechanisms to manage their problems before they resign or form the intention of resigning. The teams based and top down communication areas have now been obsolete where management is in need of wo
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