Staff attrition (or turnover) represents significant costs to technology and business process outsourcing (BPO) companies. High attrition rates drive up training costs, and increase human resources, recruiting, and productivity costs. They also increase the prospect of customer service complaints or quality problems, and create substantial continuity problems for longer-lived projects.
There are many causes for attrition including, retirement and death. However, most attrition is due to employee turnover. Employees leave their jobs for a number of reasons including: wanting more money, poor working conditions, irregular working hours, lack of advancement opportunities, lack of job security, difficulties with coworkers, desire for change, better opportunities, and family reasons (e.g. their spouse gets a job in a new location, females leave the workforce after marriage or childbirth). High wage inflation is another major factor in job hopping.
Attrition Rates and Costs in India
In India, the average annual attrition rate in the business process outsourcing (BPO) sector hit a high of close to 50% a few years ago. Better attrition management and the 2008-2009 global economic slow down have helped reduce the figure to 24-30%, but this still has a significant impact on costs and quality. Furthermore, attrition rates in India’s business process outsourcing (BPO) industry are about 8 percent higher than the national average, according to a report by global consulting firm the Hay Group.
In India there is an increasing demand and supply gap for professionals. It is sometimes difficult for HR managers to maintain consistency in performance and keep the motivation levels high especially when the work is monotonous.
Some companies believe that the attrition rates in India—and the costs associated with them—are so high that they can override the benefits of lower wage costs. For example; while wages in call centers in Indian are less than one-eighth of those in Northern Europe, it has been reported that Hewlett-Packard have found the cost per 'ticket' (the cost of processing a query) was double in India "due to the inability of the staff to resolve customer queries efficiently because of language barriers and inexperience”. The issue is not with the quality or education of the staff and still less with the investment in technology. It is simply attrition—people do not stay long enough to be taught or to learn the job.
India’s government is acutely aware of the attrition issue and has introduced several initiatives to create BPO jobs in rural areas of the country.
Managing Attrition in India
To ensure that attrition rates are kept to a minimum, businesses need to redesign their reward and recognition packages to help the industry hold onto staff and to find the right kind of people who can keep pace with the unique work patterns.
According to Oscar De Mello, country head of Hay Group’s Reward Information Services in India, adjusting pay might not automatically lead to higher operating costs for BPO companies. By creatively designing their total reward package towards more short-term incentives and benefits, and linking the package to performance, companies can ensure that they get higher productivity without hefty increases in salary costs and minimize attrition costs and issues at the same time. Hay’s Group recommends providing a better balance of short- and long-term benefits such as performance bonuses, employee stock option plans and retention bonuses; effectively communicating details of compensation plans to encourage employee buy-in; and promoting non-financial benefits such as career development, job rotation and transparent performance management systems.
If you are offshoring to a third party, most of the required activities will be managed by your vendor, but you need to be engaged. First, if you are working on a longer-term project, understand your partner's attrition rates and their management practices. Some firms manage attrition well, while others simply try to hide it. Second, review your team structure and ensure that there is sufficient information sharing and collaboration so that the loss of any one person does not set you back. Finally, get to know your key team members. Not only will this help reduce attrition, but help you minimize the down side if you do lose a key team member.