BPO policies- what works

The biggest challenge that HR managers working for BPO companies face is that of attrition. How to tackle attrition? Which HR policies work best? To start with, there are no easy answers. Nor should we expect any standard policy package to work for all companies. Each company needs to work out the HR policy package that would work best given the company’s specific character. A few general guidelines can, however, be suggested.

It is first necessary to point out that in the Indian BPO industry, attrition is more of a problem in voice operations and not so much in non-voice operations. Second, most Indian BPO companies operate in the low-end of the information food chain or the low end of the knowledge spectrum and rates of attrition are highest in these firms and, therefore, they pose a problem for HR managers. Attrition is not really a problem in high-end BPOs. Thus, the problem of attrition is most acute in call centres and, therefore, what we really need is a policy package to tackle attrition in these firms.

Many HR managers in such firms believe that high rates of attrition in Indian call centres are a phenomenon peculiar to India. It is not so. Various studies have shown that if the average rate of attrition in Indian call centres is in the region of 30-35 per cent, it is around 25-30 per cent in the US or UK. Moreover, in call centres in other countries competing with India (for example Philippines) the attrition rate is again at least as high as it is in India. Thus, high rates of attrition is a kind of given in the call centre industry around the world.

Studies show that Indian BPO firms which have been able to tackle the problem of attrition successfully adopt policies which can be grouped into two basic categories:
(a) policies that are based on the basic strategy of “learning to live with it”, and
(b) policies that are based on the basic strategy of “learning to tackle it”.
The emphasis in the first group of policies is on constant recruitment and training and not on retention while in the second group of policies the emphasis is on retention rather than on constant recruitment and training.

Studies also show that in call centres, the basic strategy of “Learning to live with it” works best while the basic strategy of “Learning to tackle it” works best for non-voice operations and in firms engaged in high end processes. In call centres, adopting a basic strategy that emphasizes retention can be suicidal because however much HR managers may try, call centres will have high attrition rates. Hence, spending too much on retention will only result in hiking costs and thereby eroding the very cost arbitrage that is the basis of the call centre business while it will not help in reducing the attrition rate appreciably. On the other hand, if the emphasis is on constant recruitment and training, costs can be kept down without affecting operations even if the attrition rate is in the region of 30-35 per cent.

Studies also show that one third of all attrition in call centres are because of high stress levels and the desire to pursue higher education or alternative occupations while two thirds can be attributed to better job opportunities in the industry. In short, a large majority of people quitting go to another call centre. This is the reason why many call centre HR managers fall into the trap of putting emphasis on retention thinking that if they can implement good retention policies then the two thirds of the people going to other call centres for better job prospects would not do so. These HR managers fail to realize that irrespective of the retention policies, two thirds of the people will still leave for better job prospects and that beyond a point spending more on retention would only eat into margins and erode the basic profitability of the business.

In this context some facts are worth noting:

(a) most Indian call centres need no more than graduates and there is no dearth of graduates in India so that there is no basic shortage of manpower as long as the call centre company does not make the mistake of recruiting over qualified people for their operations. Such over qualified people will leave anyway after a few days or weeks once they realize that their expectations do not match with the reality.

(b) Most Indian call centres need to train people for no more than three months to get them to become fully productive as long as the raw recruit had basic English language skills, especially verbal communication skills. Moreover, in many low-end processes where the script is given by the client and agents have almost no discretion, even basic skills of communication in English is not required since almost anybody can be trained to read a prepared script with a certain specific accent and diction. Hence constant recruitment and training is cost-effective even with attrition rates of around 30-35 per cent.

(c) In most Indian call centres, the majority of the agents are in the age group 18-26 and their focus is on the here and now. Such employees prefer to get their entire compensation in cash and not through such rubrics as provident fund, medical cover, superannuation benefits etc. Hence, call centres need to structure their compensation package in a way that most of the benefits go to the employee in the form of cash or through such things as company credit cards, easy car/housing/consumer durable loans, club membership etc. For this reason, proprietory firms have an edge over corporates as it is easier for proprietory firms to structure a pay package with a larger “here and now” cash component.

(d) Since most employees are young they are emotionally less stable than older employees and are prone to switch jobs for the most trivial reasons. Instead of spending a lot through higher pay packages in a bid to retain talent, call centres would do well to concentrate on constant counseling at the workplace to help young employees realize the virtues of patience and the fact that even a call centre job can lead to a long term career.

(e) Again instead of continually increasing the pay package, call centres would do well to try and create opportunities for upward mobility not just through scaling up of operations but also through moving up the value chain in terms of processes handled (this should anyway be a strategic goal for any BPO unit irrespective of whether it is facing a problem of attrition or not).

(f) The usual stress busting mechanisms should be in place – work should be fun – partying, get togethers, sporting events, facilities for yoga and aerobics exercises, good food and cafeteria facilities, etc help in a big way to retain younger people.

Space limitations do not permit a fuller discussion, but some of the basic issues have been covered above. From what has been said so far it should be obvious that what kind of policies a firm must choose to tackle attrition depends a great deal on the kind of processes it is handling. The problem of attrition is highest in the firms engaged in low end processes while those engaged in high end processes do not have so much of a problem. Also, while firms engaged in low-end processes would do well to adopt the basic strategy of “learning to live with it”, firms engaged in high-end processes would do better by adopting the basic strategy of “Learning to tackle it”. For those adopting the second strategy, talent retention policies would tend to be similar to standard policies adopted by most companies such as a fast track promotion policy, frequent hikes in the compensation package etc. For firms engaged in low end processes, the key to success is to realize that emphasis on retention will not work and, therefore, it is better to concentrate on constant recruitment and training.


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2. Aron Ravi & Jitendra Singh, “IT Enabled Strategic Outsourcing: Knowledge Intensive Firms, Information Work and the Extended Organizational Form, 2002”:http://knowledge.wharton.upenn.edu/papers/1071.pdf.

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4. Basu Indrajit, “India’s call centres hit mid-life crisis, 2006”:http://www.atimes.com/atimes/South_Asia/HG14Df02.html

5. Batt Rosemary, V. Doellgast, H. Kwon, M. Nopany, P. Nopany, A da Costa, “The Indian Call Centre Industry: National Benchmarking Report Strategy, HR Practices, & Performance, 2005”:http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1006&context=cahrswp

6. Dossani Rafiq & Martin Kenney, “Went for cost, stayed for quality? Moving the back-office toIndia, 2003”:http://iis-db.stanford.edu/pubs/20337/dossani_kenney_09_2003.pdf

7. Greene William, “Growth in Services Outsourcing to India: Propellant or Drain on the US Economy?, 2006”:http://hotdocs.usitc.gov/docs/pubs/research_working_papers/EC200601A.pdf

8. McPhail Brenda, “What is ‘on the line’ in call center studies?: A review of key issues in the academic literature, 2002”:http://www3.fis.utoronto.ca/research/iprp/publications/mcphail-cc.pdf

9. Williams Jeremy B., Learn while you earn: Strategic management of the attrition problemwithin the Indian BPO sector, “Indian Journal of Economics and Business (Special Issue)”:http://www.ijeb.com/IssuesIndex.htm, 153-167, 2004.

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