On Thursday, I visited the Global BPO forum at London Business School where the topic of the discussion was the high attrition rates in the offshore BPO industry. High rates of attrition pose a threat to the viability of global sourcing models because of the rising costs of finding, training and retaining skilled workers. More important, attrition among skilled knowledge workers can compromise the quality of service. How are client and vendor companies coping with problems of attrition in the BPO sector? Should high attrition rates simply be taken as a 'structural feature' of the industry, and should managers design around the problem? What can be learned from other industries with high rates of attrition? What mechanisms are likely to be most and least effective to control attrition? With millions of unemployed English-speaking graduates in India, it seems unfeasible that attrition rates are so high but it is a real issue and one which is being addressed with varying degrees of success.
The Extent of The Problem
Firstly, it's important to note that every business needs a moderate level of attrition to ensure the flow of fresh ideas whilst allowing for the company to get rid of its dead wood.
In the UK, call centre attrition is fairly high but well below many other industries such as hotel and catering. However, in the major offshore destinations of India and The Philippines, the figure is now much higher. It's difficult to determine the full extent of the problem for two reasons;
Firstly, the way in which companies calculate attrition varies from one company to another. Some companies exclude people who are in their first year of their employment, people who leave to work outside the industry or people undergoing training.
Secondly, companies lie about the extent of their attrition. Some companies admit internally that their attrition stands at 70% whilst publicly admitting to figures of 30-50%. The issue is such that it's now almost impossible to compare different vendors on a like for like basis.
However, the fact is quite simple'attrition in many offshore call centres is far too high. This article looks at practical measures for managers of captive centres as well as the clients and managers of offshore centres to control the issue. In order to do this, we have examined the many professionally run centres who do have attrition at manageable levels.
Why is the Issue so Severe?
The truth is that the offshore call centre industry is in many ways a victim of its own success. Only 12% of anyone leaving an offshore call centre is actually leaving the industry. The remaining 88% are simply moving to other call centres. With demand for quality agents so high, an experienced agent can easily find employment with another call centre. When a new call centre sets up, an agent can switch and expect to add up to increase their salary by up to 25%.
The Keys to Success
Of course, the theories on retaining staff are equally as applicable to the offshore call centre industry as any industry in the world.
- The type of work they do. When offshoring work, it is very common for a company to keep the high value work at home and offshore the lower value work. As opportunities for Indian graduates increase, so do their aspirations and they increasingly want to undertake work which stimulates their minds. It's important for companies to constantly look at new ways of making the work more interesting for their staff and to review the type of work they are offshoring. Outbound dialing has a more significant problem. As in The UK, attrition is much higher for outbound agents where the work is far more pressurised.
- Advancement. In a rapidly growing industry, there would seem to be an endless supply of advancement opportunities. However, too many companies are failing to develop their staff for the next level and are bringing in external talent. With 2 years experience as an agent, it's often easier to get a team-leader position working for the competition than in the company they are currently with. Attrition is typically much lower in rapidly growing organisations as agents can see the potential future prospects.
- Personal Growth. The perception of many Indian call centre agents is that their jobs were offshored simply to save money. If this is their perception, how can they be convinced that their employer is interested in their personal growth? When IBM took over a major Indian BPO provider. Attrition stopped for 6 months. The agents (rightly or wrongly) believed that IBM's global policy of developing their people would provide far better opportunities for personal growth. Many companies are now sponsoring their staff to take on additional education and this has proved a great success.
- Working Conditions. If your call centre's main call centre traffic takes place during the Indian night-shift, you have to consider that your staff will burn out much faster. However, some centres have come up with some very innovative ideas to reduce its impact. The best run centres offer things such as on-site recreational and medical facilities. They also transportation to bring their staff to work as finding public transport at night can be difficult. When working night-shifts, a job can take over an employee's entire life so it is important that the call centre provides a fun and stimulating environment to offset this. If an agent is going to be working night shift, interviews and training should also take place at night so that their expectations are set from outset.
- Relationship with supervisor. There has been some debate as to the quality of middle management in offshore locations. Indian team leaders can tend to be more direct in their approach than their British counterparts but the forward-thinking companies are working hard to develop their team-leaders and supervisors into mentors for their staff. With so many employment opportunities, an agent does not need have to accept being poorly managed. One interesting point is that the bond between agent and team-leader is often so strong in India's call centres that when a team-leader leaves for the competition, his or her agents will often follow.
- Salary. It's no surprise that the call centres which pay the highest salaries typically have the lowest attrition rates. With so many call centres keen to offer a competitive salary, there is significant wage inflation. In a country where '100 has significantly more purchasing power than the UK, a small amount can make a lot of difference!
- Combined Onshore-Offshore Team. No successful company would want any part of their company to feel isolated from the rest of their company but this is what happens in too many offshore facilities. Successful companies now view their offshore facility as an integral part of their overall organisation. Many Indian call centre employees have worked in the British centre and many British call centre employees have worked in their Indian facility. This has obvious advantages in terms of bridging cultural differences and in motivating the staff. However, the Indian centre needs to be careful in how they manage their newly-skilled staff when they return to India. At Deutsche Bank's BPO facilities, many of the managers regularly visit India where they have a significant retail banking presence. All these managers are required to do a presentation to their Indian staff on their role within the company. An agent who understands how their role fits in to the overall company strategy is bound to be more motivated.
Closing The Door
There are 2 methods employed by offshore call centres in restricting their staff from leaving. The first is 'training bonds' which are widely used in other industries in many Asian countries. On joining the company (or after a period of training), the employee signs the 'training bond'. If the employee wishes to leave the company during a specified period of time, they have to pay the bond which can sometimes equate to up to 3 years salary making it totally impractical to leave. Many internationally-run companies object to training bonds but we must consider that these are far more acceptable in India and The Philippines than in The UK.
The second is for call centres to form a group whereby they will not employ the agents from another call centre in the group. These tend to be formed between the larger call centres. However, the attrition problem escalates when a new call centre sets up in that area. These new centres tend to avoid these schemes as they need a large quantity of experienced staff in a short period of time. After they have been in operation for some time and start experiencing the attrition issues for themselves, they too want to join the scheme!
A few years, I was working for an outsourcer who ran a telephone hotline for one of the airlines. At a meeting with the client, they told me that the average tenure of a cabin crew employee at Heathrow was 9 months compared with 6 years at East Midlands Airport. Anytime that a Heathrow based employee had a slight grievance at work, there was no shortage of other airlines willing to give them a job the next day. When other airlines added additional routes at Heathrow and needed additional cabin crew, they would normally 'poach' their staff by offering a salary increase and the promise of better conditions. This seems surprisingly similar to the situation that currently exists in Bangalore's call centres. This has led many centres to look to set up in other 2nd tier cities in India and in other locations such as The Philippines and Sri Lanka. However, many people believe that cities like Manila are now very similar to Bangalore in that demand outstrips supply. One strategy proposed at the forum was to move to smaller cities and attempt to dominate the local market for call centre employees and put off other potential entrants. This strategy appears to have been implemented by Client Logic with their large centre in Baguio, a small city in The Northern Philippines.
What Can Clients of Outsourced Call Centres Do?
The client of both onshore and offshore call centres find themselves in a very dominant position. With such a large supply of outsourced vendors all over the world, the pricing has become increasingly commodotised and terms and now often very unfavourable. Add to this, the fact that some clients are now insisting on increasingly short contract durations, the vendors find themselves having to undertake practices which are far less than 'world class'. Clients need to be aware of the human impact of overly biased contracts and they also need to ensure that the staff of their vendors are made to feel as big a part of their operations as in-house employees.
India and other offshore locations remain highly competitive destinations for call centre traffic despite the current issue with attrition. Call centres need to focus on globally accepted best practices in ensuring that their staff remain motivated and not just rely on throwing money at the problem. They need to ensure that agents know how important their role is and develop them. International training is a far greater motivator for India's youth who are hungry to advance themselves. Pay close attention to culture. Newly formed call centres tend to have far lower attrition. They start up with bags of enthusiasm and a strong values as to how the centre should be run for their employees. As the centre matures, they can tend to move away from these 'family-like' values and get bogged down in the daily grind of operations. It's important to make sure these values are lived every day otherwise it's difficult to expect the agents to continue their high enthusiasm for the end-goal.