Description
It is well established that globalisation, particularly in terms of the mobility of capital and the spread of communication technologies, has had a profound effect on employment relations in countries that are well integrated into the global economy.
Globalisation and outsourcing: confronting
new human resource challenges in India’s
business process outsourcing industry
Sarosh Kuruvilla and Aruna Ranganathan
ABSTRACTirj_559 136..153
In this article, we argue that the rapid growth of the outsourcing industry has resulted
in both high turnover and labour shortages and at the same time provided employ-
ment opportunities to a new group of employees: young upwardly mobile college
graduates. We argue that this particular demographic pro?le is prone to high turnover
and presents new managerial challenges. We then examine the variety of recruitment
and retention strategies that companies in the business process outsourcing industry
are experimenting with and show that many novel HR strategies are being crafted to
address the needs of this young middle-class workforce. We also examine macro
efforts by state and central governments and the industry association to help resolve
some of these problems.
INTRODUCTION
It is well established that globalisation, particularly in terms of the mobility of capital
and the spread of communication technologies, has had a profound effect on employ-
ment relations in countries that are well integrated into the global economy. The rapid
increase in service sector ‘outsourcing’ and ‘offshoring’ during the last decade has
created a new and rapidly growing ‘business process outsourcing’ (BPO) industry in
India. While this industry has experienced phenomenal growth rates and has contrib-
uted signi?cantly to India’s export earnings, it has also thrown up new employment
relations challenges.
At the level of the ?rm, the challenge is to manage a new breed of employees: young,
middle-class, ‘upwardly mobile’ college graduates (who form the bulk of employment
in this industry) who historically have not played a signi?cant role in the labour
market at their age (prior to the growth of this industry, middle-class college gradu-
ates would normally have continued onwards for postgraduate quali?cations before
entering the labour market). At the level of the economy, the challenge is to solve the
problem of adequate supply of skilled labour, one that contributes to record high
levels of turnover and rapidly increasing costs that are a threat to the long-term
sustainability of the industry.
? Sarosh Kuruvilla is Professor of Industrial Relations, Asian Studies and Public Affairs at Cornell
University and Aruna Ranganathan is Doctoral Candidate, Sloan School of Management, MIT; email:
[email protected]
Industrial Relations Journal 41:2, 136–153
ISSN 0019-8692
© 2010 The Author(s)
Journal compilation © 2010 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St.,
Malden, MA 02148, USA.
This article traces the growth of the BPO industry in India and argues that the
demographic pro?le of employees in the industry contributes to rising turnover but
also presents Indian HR managers with particular challenges in attracting and retain-
ing employees. We then highlight the variety of strategies that ?rms are experimenting
with in responding to these challenges.
The research in this article is the result of ?ve months of intensive ?eldwork across
the metropolitan cities in India conducted in 2004 as part of a larger research project
on outsourcing. That ?eldwork included extensive interviews with a sample of 20 HR
managers of BPO ?rms that was the primary source of information for this article. In
addition, follow-up interviews were conducted with a second sample of eight HR
managers from larger BPOs who were attending a conference on HR issues sponsored
by the National Association of Software and Services Companies (NASSCOM) in the
summer of 2007. The two sets of interviews, along with some participant observation
of the ?ow of BPO work in four BPOs and some archival research and regular reading
of the ‘trade’ journals, provided the basis for our argument in the article. Given that
the companies that we interviewed were the larger BPOs, with most of them having at
least 500 employees, our article might re?ect a large company bias.
In the section below, we brie?y describe the pro?le of the industry and its new
workforce, and in later sections, we identify key HR problems and describe employer
and public policy responses.
1
INDIA’S BUSINESS PROCESS OUTSOURCING INDUSTRY
India enjoys a dominant position in the global market for business process
outsourcing—a 48–50 per cent market share (The Economic Times, 2007). Growing at
an annual average rate of over 50 per cent since 1999, this industry has seen employ-
ment rise from 50,000 in 1999–2000 to 553,000 by mid-2007. Table 1, which reports
basic industry data for the outsourcing industry
2
, shows that the BPO industry is
growing very rapidly (columns 5 and 6). The BPO segment was valued at $9.5 billion
in 2006–07 and contributed $8.4 billion of the outsourcing industry’s total exports of
$31 billion. By 2012, the BPO segment is expected to overtake the software services
segment in terms of overall value (Ranganathan and Kuruvilla, 2007).
Although typi?ed by call centres, the BPO industry is actually a highly variegated
industry. Many ?rms engage in ‘low-end’ ‘services’ (involving low skill) such as
insurance forms processing and customer service call centres, but there is a discernible
and growing ‘high-end’ services outsourcing market that involves very advanced skills
(of which many are in short supply). The variability in ‘service lines’ in the BPO
industry is great, and there is a mushrooming of new service lines on almost a weekly
basis, making accurate categorisation of the work in the BPO industry dif?cult.
However, in Table 2, we provide a listing of the variety of service lines for which
NASSCOM (the industry association) has been collecting data, while we discuss
current and newly emerging service lines below.
Customer care and support services for a number of different industries comprise
the largest service line, accounting for almost 40 per cent of the industry’s employee
1
For a more detailed study of policy responses, see Kuruvilla and Ranganathan (2008).
2
Note that the term ‘outsourcing industry’ refers to software services, hardware, research and development
services, and business process outsourcing (also called ITES-BPO) by the industry association
(NASSCOM), which is the only reliable source of data on the outsourcing industry.
137 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
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138 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
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139 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
base and a third of its revenues. Typical examples include customer care for airline
reservations, credit card companies etc. (all of which involve direct telephonic contact
with the customer). In contrast, a BPO company that focuses on forms processing (in
insurance or tax) does not require any contact with the customer and also does not
require well-educated English-speaking workers. The ?nance and accounting service
line includes the standard business processes of transaction management, general
accounting, statutory reporting, and compliance work while the payment services line
includes a variety of billing services, insurance claims processing and tax processing.
The HR outsourcing service line is experiencing rapid growth—this typically com-
prises payroll and bene?ts administration, travel and expense processing, and
employee communication services. In addition, there is a growing ‘medical and legal
transcription’ service line.
New service lines involving very high-skilled work have emerged recently, especially
in the ?nancial sector (e.g. analysis of ?nancial data, management of foreign com-
modity accounts, as well as lower-end services such as processing home loans and
mortgage services, debt collection and recovery), medicine (creating medical educa-
tion databases and doctors desk reference guides, but more recently, reading and
analysing patient X-rays), printing (pre-publication of scienti?c journals) and remote
education (such as providing math tutorials to US school children), leading to new
‘service line’ categories known as ?nancial process outsourcing and knowledge
process outsourcing (KPO) (Kuruvilla and Ranganathan, 2008).
Engineering services outsourcing is another important line in which India has 15
per cent of the worldwide market share according to a recent study (see NASSCOM,
2006). R&D outsourcing, too, is growing particularly in two industries: life sciences
and ?nance.
Pro?le of employees
The nature of the employees (in terms of their skills distribution) should vary in
accordance with the nature of the work done in the BPO industry. For example, a
company such as Prodapt deals primarily with forms processing, a low-skill activity.
According to their HR manager, they largely hire students who have completed their
‘+2’ (secondary school education) but have not entered college, but also focus on
hiring older married women and handicapped people. Typically, their employees tend
to be from the ‘lower middle class’ (interview, Nupur). The pro?le of employees in
BPO ?rms that provide a range of services in the customer care arena (especially call
centres for client ?rms from the United States and the UK that demand a working
pro?ciency in English) is quite different from those at Prodapt. As Remesh’s (2004)
survey suggests, 75 per cent of workers in this type of BPO ?rm are graduates,
educated in convent schools (noted for their superior and English-based education).
94 per cent of their fathers and 63 per cent of their mothers were also graduates, many
of them working for the government. These employees are drawn from the ‘upper
classes’. A BPO ?rm called Aptech, for example, provides content development for
companies such as Thompson and McGraw Hill’s online and distance education
courses. According to the founder of this company, the skills required in this type of
BPO are varied, including postgraduates who are computer programming and lan-
guage experts, postgraduates who act as tutors for various online courses, and gradu-
ates to correct exams and provide customer service to online students. This workforce
tends to be drawn from the English-speaking middle (middle to upper middle) class
140 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
and is highly educated (interview, Suresh). At the higher-end KPO level of work, most
employees have postgraduate and/or doctoral quali?cations.
The prototypical BPO ?rm therefore employs a largely young middle class cross-
section of India’s population, often well versed in English. The age ranges from 18 to
24, while the average age at ?rms employing postgraduates tends to be in the mid-20s.
Note that the average wage at a typical BPO ?rm is around Rs. 12,000 per month
(which is about $300 or 200 pounds). Prior to the advent of the BPO industry, young
middle-class graduates would have found it impossible to ?nd a job paying so much
soon after ?nishing a basic undergraduate degree, and most would have gone for a
professional quali?cation before entering the job market. For middle-class employees
who live with their parents, this earning capacity represents a massive increase in
‘disposable’ income. However, this pro?le of employees also suggests several peculiar
problems that require managerial attention.
In the section below, we highlight two particular human resource problems that the
industry has to deal with. These include the very high levels of turnover and the
diminishing supply of skilled graduates for the industry, both of which threaten
industry growth. The turnover problem is primarily within the control of ?rms, while
resolution of the supply of skilled labour problem requires concerted action on the
part of several actors in the labour market: state governments, the central govern-
ment, the industry association, labour market intermediaries, as well as individuals to
create a stable skills equilibrium. We are focusing here on the average BPO ?rm (not
those in highly specialised niche markets that employ only postgraduates). Note,
however, that turnover and skills shortages are a general problem in India’s ‘out-
sourcing’ industry, including the much larger ‘software services’ segment. In the
section following this one, we highlight how ?rms are dealing with these issues.
HUMAN RESOURCE PROBLEM 1: EMPLOYEE TURNOVER
A wide variety of turnover estimates are currently available. Most reports talk about
an average of 30–40 per cent (per year). Commercial and popular reporting tends to
focus on the extremes (the range here is between 12 and 90 per cent). A 2004 study of
turnover in seven large ‘third-party’ call centres showed a wide variation in turnover
rates, ranging from as low as 12 per cent to as high as 62 per cent, with a mean
turnover of 30 per cent (Remesh, 2004). A key challenge for future research is to
explain why there is such a great variation in turnover across ?rms in the industry. We
have some preliminary ideas regarding the factors causing such variation, but our
?eldwork is not yet complete. For example, we know that turnover in ‘captive’ BPOs
is typically much lower than in ‘third-party’ BPOs.
3
In our ?eldwork, we found
turnover rates in ?ve captive ?rms being between 15 and 20 per cent.
There is job-based variation in turnover as well. Average turnover in ‘voice-based
processes’ is between 45 and 50 per cent, while in ‘non-voice’ operations, it is 15–20
per cent. Further, ‘infant mortality’ (turnover in the ?rst 45 days of employment after
training) in voice-based processes is about 20 per cent (although anecdotal evidence
3
A ‘captive’ BPO ?rm is one that is wholly owned by the client ?rm and provides services to only that
?rm . . . essentially it is like a separate ‘in-house’ operation. American Express, for example, has its own
captive ?rm in India doing its back-of?ce work. A ‘third-party’ ?rm is one that provides services to a
multitude of clients. Infosys’s BPO ?rm (formerly called Progeon) is one such example. In general,
‘captives’ have a more stable market for their services relative to ‘third-party’ ?rms.
141 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
suggests that this ?gure may vary to a signi?cant extent). We also know that the type
of work the BPO is engaged in and the attendant demographic pro?le of employees
matters, as do efforts by corporations (which we discuss later). For example, Infosys
BPO, which has many voice-based processes serving the US market and employs
mostly ‘well educated young middle class graduates’ experienced turnover levels that
range between 27–28 per cent and 40–45 per cent in 2006–07 (interview, Samit). On
the other hand, Prodapt and Laserwords, engaged in forms processing and in pre-
production work for the printing and publishing industry, respectively, report turn-
over rates as low as 6–10 per cent, and they tend to employ people who have ?nished
high school and not gone on to college (interviews, Nupur and Anthony).
Causes of turnover
Although there have been no systematic studies regarding the causes of turnover in
the outsourcing industry, our research, based on our interviews with HR managers,
reveal the following two general categories of causal factors.
Job-related reasons
An important cause here stems from dissatisfaction with the immediate supervisor
(the ‘lousy boss syndrome’). Because the BPO industry is just ?ve years old, employ-
ing mostly young people between the ages of 19 and 27 and experiencing high
turnover, often young people with only six months of BPO experience are promoted
as supervisors of teams of 10–15 people. There is relatively little time spent on training
these people to be effective managers and leaders of people. To add to this, top-down
methods dominate companies’ staff communication systems (NASSCOM, 2003).
These middle managers do not have the required experience to manage teams of
young people who themselves do not have a history of work experience and who bring
a variety of expectations and aspirations with them when they enter the industry. HR
managers refer to this as the ‘managerial bandwidth’ problem and liken it to the
problem of trying to create a ‘10 years old scotch in 2 years’.
A second key job-related problem lies with the nature of the work itself. Taylor and
Bain (2005) observe that 50 per cent of those who exit a call centre leave the industry
altogether. There is considerable agreement in international research (Batt et al. 2006;
Deery and Kinnie, 2004) that call centre jobs are organised in a ‘tayloristic’ fashion:
highly repetitive, with tightly regulated lunch and restroom breaks, targets in terms of
number of calls to be made and a very high degree of monitoring of employee activity.
Indian call centres are apparently no different (Remesh, 2004; Taylor and Bain, 2005).
A number of articles on coercive and normative control and ‘sweatshop practices’ in
Indian BPO ?rms are emerging almost daily (see D’Cruz and Noronha, 2006a). These
aspects, in combination with working on the night shift (to service the US market by
day) has resulted in an outgrowth of what the industry calls burnout stress syndrome,
an important cause of turnover. There is growth in the number of employees seeking
counselling services and psychological help, and there is an increase in the number of
organisations (including trade unions) offering such help. The Young Professional
Collective in Mumbai, for example, is organised by a well-known labour lawyer and
staffed by well-known labour activists.
Third, there is a widespread expectation that there are limited avenues for career
advancement in a BPO ?rm (although the shortage to some extent alleviates this
problem). This is supported by our own research and other available evidence. Batt
142 Sarosh Kuruvilla and Aruna Ranganathan
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Journal compilation © Blackwell Publishing Ltd. 2010
et al.’s (2006) survey of 60 call centres revealed that 15 per cent of call centre
workers were promoted to higher positions within the call centre organisation, but
only 1 per cent of call centre workers were promoted to upper management levels
beyond the call centre section of the organisation. Our research suggests a more
nuanced picture: captive call centres are able to provide more promotions to higher
levels than ‘third-party’ call centres because the market stability that ‘captive’ call
centres enjoy permits the envisioning of longer career paths relative to ‘third-party’
call centres.
Thus, dissatisfaction with supervisors, working conditions, the intrinsic aspects of
the job itself, and the apparent lack of career advancement prospects abound in the
BPO industry, although there is a high degree of pay satisfaction.
Demographic pro?le of workers
A number of demographic features contribute to turnover as well. First, many female
employees leave the labour force to get married and have children. Second, many
young employees ‘mark time’ in this industry to save some money before going on to
graduate school or to better jobs. Third, young employees are willing to move from
organisation to organisation (using exit instead of voice) for the smallest possible
reason, including a very minor increase in pay or a slightly different of?ce atmosphere,
because they do not really see a long-time career with the industry. Such lateral
movement is easy given the shortage of trained people in the industry and the clus-
tering of BPO ?rms in major metros. Fourth, there is the category of ‘psycho-social’
factors: young people ?nd working in the night shift alienating as they are not able to
meet their friends in the evenings or see their families. By the time they get home, other
family members have gone to work. Fifth, some face ‘dissonance’ from a number of
sources such as parental disapproval. Pradhan and Abraham (2005) argue that using
a different name and adopting a different persona during work hours can cause
questioning of one’s identity and can lead to what they term the ‘multiple personality
disorder’. For example, Anjali becomes Angie during the night and talks with an
American accent to American customers. This apparently leads to cultural self-
alienation and a sense of dissonance (see D’Cruz and Noronha, 2006b for an argu-
ment regarding how the different name helps people deal with some workplace issues).
Given these factors and the shortage of adequately trained people, the preference for
the use of ‘exit’ strategies rather than using voice mechanisms (representative organi-
sations such as trade unions are largely absent) is not surprising.
HUMAN RESOURCE PROBLEM 2: SHORTAGE OF APPROPRIATELY
SKILLED LABOUR
For the prototypical BPO, well-educated, English-speaking ‘manpower’ has been the
key source of competitive advantage. This large HR ‘pipeline’ has been prized by
clients and has contributed to the Indian ?rms’ reputation of being able to ‘ramp up
quickly’ (Raja, interview, 2005). However, there are critical labour shortages in the
BPO segment (see The Economic Times, 2006). The BPO segment currently employs
553,000 people directly, growing from a total of 415,000 in 2005–06. Estimating future
demand in this industry is problematic, given the rapid growth rates (50 per cent
average annually), the increasing interest in outsourcing in the West and the expan-
143 Globalisation and outsourcing
© 2010 The Author(s)
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sion of India’s outsourcing ‘footprint’.
4
A NASSCOM–McKinsey study projects that
there will be a stock of 1 million jobs by 2008–09, while a NASSCOM–KPMG study
forecasts a stock of 1.41 million by 2009. To the extent that past growth is an
indication of future growth (at least in the next three years), the above estimates seem
reasonable. After taking into account the current available pool, the annual intake,
productivity improvements and current rates of turnover, the KPMG study estimates
a shortage of 262,000 people by 2009.
5
There are no readily available data (published or otherwise) regarding the supply of
English-speaking graduates (particularly important for customer service jobs) to the
BPO segment. Two problems make accurate forecasting dif?cult here. The ?rst is
the absence of good statistics regarding the output of graduates generally
6
, while the
second and more critical problem is the dif?culty in estimating the number of English
speakers available for the BPO call centres. Most human resources managers we
talked with tend to feel that the shortfall will be much greater than estimated by
NASSCOM
7
, probably because of differential estimates of available English-speaking
graduates. Table 3, which shows my own estimates of HR supply for the low-end BPO
4
One example of the dif?culty of making estimates in this rapidly growing industry (and of using the past
as a basis for future predictions) can be seen in the experience of the last two years. In 2003–04, the BPO
industry added 55,000 jobs. At that time, NASSCOM predicted that over the next two to three years, the
industry would grow by about 55–70,000 jobs. But in the next year alone (2004–05), 95,000 jobs were
added.
5
NASSCOM’s estimates are that 1.416 million workers would be required. Productivity increases would
reduce this ?gure by about 413,000, leaving 1.003 million. The expected supply by 2009 is 741,000 leaving
a projected shortfall of 262,000.
6
The absence of ?gures stems from the division of responsibility in the education sector of India. For one,
this sector is on the ‘concurrent’ list, which means that it falls under the jurisdiction of central and state
governments (Dossani, 2006). In addition, several states permit the private sector to operate schools and
colleges. And there is no central statistics agency that covers all these sectors.
7
It is important to note that several things could mitigate the shortfall. For one, the number of English-
speaking graduates could increase as more and more attention is paid to spoken English in educational
institutions and private training institutes. Second, it is possible that graduates who have not been
attracted to this industry will be motivated to join in the future, especially given the growth in salaries.
Finally, the number of educational institutions may increase, consistent with prior trends, although it is
unclear as to where the faculty are coming from (there is a shortage of faculty). In fact, the number of
private training institutes claiming to provide training for the BPO industry has grown dramatically over
the last few years.
Table 3: Estimates of HR supply for low-end BPO segments 2005
Output of graduates (253 universities and 13,150 colleges) 2,460,000
a
Some English-speaking capability (30%) 738,000
Labour force participation (65%) 480,000
b
Effective English-speaking ability for employability in call centre (50%) 240,000
Effective supply of labour in 2005 168,000
c
Source: Kuruvilla and Ranganathan (2008)
a
Institute of Applied Manpower Research.
b
NASSCOM-KPMG
c
This ?gure appears to gel with those obtained from our interviews with human resource
managers (who already claim that there is saturation in the English-speaking market). The
?gure is also consistent with another recent estimate that 5–10 per cent of the total graduate
pool (between 123,000 and 246,000 people) speak English and are available to work in the
industry.
144 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
industry, suggests that there is a pool of 250,000 graduates who are potentially
available for work in this industry. Making provision for various ‘unaccountables’, it
may be more conservative to put the supply estimate at between 150,000 and 200,000.
Not all of these are capable of being hired, though (as recruitment conversion factors
are typically in the 2–4 per cent range, that is, ?rms hire only 2–4 of 100 applicants).
And given that the annual intake into the BPO segment is about 120,000 and growing,
a shortage of 262,000 bodies (without attention to quality, purely based on whether
they can be hired or not) by 2008–09 is a certainty. The high turnover rates are not
entirely a function of current shortages, however.
Beyond the shortage of English-speaking bodies, industry representatives highlight
shortages in ‘industry-ready’, ‘industry-relevant’ manpower, that is, a scarcity of
professionals who are equipped with the necessary ‘domain’ knowledge to cater to
speci?c ‘verticals’ (industry segments) such as banking, insurance, telecom, retail and
manufacturing (Mitra, 2004). And there are shortages in the supply of foreign-
language skills, notably in French, Spanish, Mandarin, German, and Italian, which
makes it dif?cult for Indian BPOs to expand their presence in European and Asian
markets (Indian BPOs derive 82 per cent of their business from the United States and
the UK).
Note that the high levels of turnover interacts with the shortage to also increase
employee costs rapidly (these have been growing at about 10–15 per cent per year over
the last ?ve years). Fortunately, the increases in costs have been more than offset by
reductions in bandwidth prices. But the sheer shortage of people implies that India is
losing some opportunities as ?rms unable to hire employees look elsewhere (particu-
larly the Philippines, South Africa and China) to locate their offshore service
operations. And many Indian ?rms too are outsourcing some of their work to these
locations.
CONFRONTING HUMAN RESOURCE PROBLEMS
Firm-level responses
Indian BPO ?rms are experimenting with a variety of strategies to deal with the
turnover problems as well as labour shortage issues. As we discuss below, attempts to
solve the turnover problem re?ect a variety of strategies, some traditional, that is,
generally used in most industries, and some speci?cally designed to suit the demo-
graphics of the workforce, that is, young, educated people.
General approaches
The traditional approaches include a variety of strategies that are consistent with the
voluminous prior research on alleviating turnover. First, to counteract the perception
that BPO jobs do not offer career growth, employers are investing considerable efforts
in articulating career growth opportunities. One widely used strategy is job rotation
where employees are trained in a variety of jobs within the BPO (both to relieve
monotony and to develop human resources). Incorporating lateral movements in
vertically oriented career plans thus meet both individual and organisational needs.
Most companies have begun to develop and publicise speci?c career paths while
ensuring that a high percentage of management positions are ?lled by promotions
from within. At GAVS, a small BPO, career planning is taken very seriously and
onsite placements, promotions, and skills training for all employees are planned close
145 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
to a year in advance, giving the employees a sense of stability (interview, Sridhar).
Second, allied to career development, BPO ?rms are also investing heavily in leader-
ship training. While the motivation here is clearly one of self-interest, that is, ?rms
would like to increase ‘managerial bandwidth’ (and thus simultaneously reduce turn-
over), there is an element of development and longer-term career planning here that
is of mutual interest to both the employer and the employee. From the employer’s
perspective, leadership development is key to establishing a strong middle manage-
ment cadre but also increases the loyalty of employees who go through the training.
From the employee’s perspective, management training complements the career
development process and binds the employee more closely to the organisation in the
longer term. At Take Solutions, a BPO in life sciences, leaders are identi?ed early on
among the entry-level employees and accelerated career paths are made available to
them (interview, Sri). Solving the low ‘managerial bandwidth’ problem justi?es the
focus on leadership, but in many companies, leadership training is supported in other
ways too. Infosys, for example, is training leaders but also making sure that they can
practice leadership effectively by reducing spans of control to 1:15 rather than 1:30
(interview, Samit).
Then, there includes some attempts to counter the repetitive nature of work in the
call centres. One strategy is to outsource ‘boring’ work like data entry and seasonal
work to smaller companies so that their employees get to do high value-added work.
This way, BPO operators get to work on new technologies. This is not possible in all
cases, but the principles are transferable. According to the HR manager at Infosys
BPO, they rank both the projects they receive as well as their employees in order to
assign ‘Tier 1’ workers to the most interesting projects with the hope that the right ?t
will reduce turnover (interview, Samit).
Finally, some ?rms have paid attention to the work environment and employee
voice. LaserWords, for instance, spends considerable time and effort in crafting
ergonomic work spaces with adequate lighting, noise controls, and the creation of a
democratic organisational culture that is participatory, with workers being able
to exercise voice through a variety of institutional mechanisms. To this end, they
have ‘maintained a ?at organizational structure with no middle management so
that employees feel comfortable approaching VPs with any concerns’ (interview,
Anthony). This partly accounts for their lower turnover rates. Microland, a BPO in
remote infrastructure, has also consciously cultivated an ‘open-door policy’ where
entry-level employees mingle with senior management freely (interview, Sowjanya).
Other traditional methods of dealing with turnover such as good pay and bene?ts
(which do not vary much across the industry for similar jobs) and good human
resource management practices (which varies quite a lot) in the industry continue to
exist. Indian BPO ?rms are also engaged in a number of other strategies such as
targeting older workers who might be more willing to see this as a long-term career
and creating new channels of communication with their employees.
Novel strategies geared to workforce demographics
These strategies re?ect an effort by ?rms to tailor policies speci?cally to the needs of
the particular demographic pro?le, the young middle-class workforce. First, given
that many young people see BPO jobs as a stopgap between graduation and applying
for postgraduate quali?cations, BPO ?rms are trying to provide higher education
opportunities tied to their employment. This is a risky strategy because they are
providing access to educational opportunities that will almost certainly result in the
146 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
employees leaving after they complete those opportunities. At best, these efforts will
result in prolonging an employees’ decision to leave by about two or three years. On
the other hand, the ‘war for talent’ is so acute that even two or three years of stability
in terms of reduced turnover is important in this extremely ‘tight’ labour market.
At Microland, there are tie-ups with the prestigious Indian Institute of Manage-
ment (Bangalore) where Microland co-designs a programme suitable for their
employees. Fifty per cent of the course fees are borne by the company to encourage
employees to avail of this option while ensuring that employees still put effort into the
course. The courses last 12–18 months and the hope is that the employees will grow
and the company will be able to retain them. However, Microland also institutes a
one-year bond once employees have ?nished their course, during which time employ-
ees are not allowed to quit (interview, Sownjanya).
Second, a key development is the recent focus of several BPOs in positioning
themselves as ‘fun’ places to work in order to retain their predominantly young
workforce. The goal of these activities is to create an ambience in which the educated
and middle-class workforce will enjoy the work atmosphere and hopefully will not
leave. As the founder of SSI, a BPO, suggests, ‘We make sure to communicate the
message that work is serious, work is light and work is fun’ (interview, Suresh). Thus,
BPOs are increasingly setting aside a budget for ‘fun’ so as to keep their employees
‘happy’, coordinated by a new cadre of ‘fun of?cers’.
Creating a balance between work and fun in the workplace requires a signi?cant
organisational commitment. There is focus on the physical environment, with BPOs
making sure that their physical layouts appeal to their trendy workforce. According
to the HR manager at Laserwords, ‘The workplace or workstation is given lots of
importance at LaserWords as comfort of working is a priority. We use bright
colours as much as possible and our chairs are ergonomically designed’ (interview,
Anthony).
Similarly, there is a focus on recreational facilities that appeal to the workforce. For
example, Infosys’s campus houses a state-of-the-art gym, golf course, sauna, swim-
ming pool, lake with paddling boats, pool tables and ping pong tables (interview,
Samit). Food is also an important aspect of the environment. The Infosys campus
contains food courts that serve Chinese, North Indian, South Indian and Western
cuisine (interview, Samit). Then there is the focus on wellness. The negative aspects of
the call centre environment including night shifts, sedentary work, talking on the
phone for hours together and their associated ailments are now well known. There-
fore, speci?c initiatives are being taken by some BPOs to address nutritional and
stress-related concerns that employees might have. For example, Prodapt offers yoga
classes six days a week to help employees achieve work-life balance (interview,
Nupur). To complement the physical attributes of the workplace catering to the
young is a focus on an informal atmosphere at work. Many BPOs try to keep the work
atmosphere quite informal so that employees loosen up, feel comfortable and have
fun at work. With this in mind, Wipro Spectramind has no dress code. And there is a
focus on ‘fun-?lled activities’ at the workplace. At Prodapt, an Annual Fun Day is held
and preparations for this start 10 days in advance. Events on this day include rangoli
competition, ?ower arrangement competitions, skits and fancy dress competition,
birthdays of employees as well as Christmas and other festivals are celebrated at
Prodapt too (interview, Nupur). At Microland, employees look forward to the end-
of-the-week Thank God It’s Fridays get-together with pizza and beer (interview,
Sowjanya).
147 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
And after work, there are parties sponsored by many BPOs at a nightclub or a
discotheque, with unlimited food and drink. BPO workers enjoy this immensely as it
legitimises partying by making it ‘of?cial’ and therefore allows them to elude late-
night curfews imposed by strict parents. Further, BPOs organise regular outings for
their employees to bond with one another and with their company outside of work.
For example, at LaserWords, once a year a picnic is organised, the most recent one
being to Munnar (interview, Anthony). Third, a key new element is the effort to
integrate the employee’s family into the enterprise in some way. The underlying
notion here is that if the family is engaged, then there is greater likelihood of employee
retention, as the employee’s family is also in some way ‘embedded’ in the
organisation. This is also a response to middle-class family disapproval of BPO
careers. Infosys BPO and Transworks have instituted periodic family days that serve
as an educational experience for family members as they learn about the various facets
of life in the BPO industry and are introduced to team leaders. At Microland, when
new employees are hired, the company organises family days where presentations are
made to show parents what the work is about as this reduces pressure on the young,
new employees (interview, Sowjanya).
Integrating the family at the time of hiring is also common. Accenture’s BPO arm
has re-engineered its hiring process to involve employees’ families right from the
interview stage to the post-recruitment phase. During the advanced stages of an
interview, the company asks the prospective candidate to bring his or her family or
spouse along. And speci?cally geared to retention, many BPOs offer family rewards
for longer service. Infosys BPO offers insurance packages for the family (interview,
Samit). GAVS organises picnics and get-togethers for employees and their families
(interview, Sridhar).
There is also the notion of work–family balance, a response to the problems
expressed by young people. For example, at Wipro Spectramind, there are times when
an employee needs temporary leave from work when his or her partner has been
posted abroad. Such requests are accommodated as far as possible. When a husband
and wife pair works for Wipro, the company tries to ensure that both of them are
always placed at the same location.
In summary, BPO ?rms are experimenting with a variety of approaches to control
turnover. At this point in time, we do not have any good cross-sectional data to
determine which class of approaches work better than others in helping control
turnover. On the one hand, high levels of turnover re?ect a general shortage of skills.
On the other hand, some ?rms experience lower turnover than others. We know, for
example, that at Sitel, the attrition rate is down to 30 per cent from 37 per cent in just
eight months as a result of the part-time educational opportunities (Shrinate, 2004).
Also, we are told that the novel strategies at 24/7 Customer has reduced ‘infant
mortality turnover’ to less than 2 per cent (Menon et al., 2004). As a result of Motif ’s
fun-at-work strategies, 97 per cent of Motif employees said in the same Dataquest-
IDC survey that they ‘look forward to coming to work.’
However, there is some recent evidence of disillusionment with these novel strategies
as well. According to the HRmanager at Infosys BPO, ‘Fun doesn’t create engagement
with the company—fun can only help if done simultaneously with the core HR
functions’ (interview, Samit). Also, the HR manager at Microland said, ‘Fun culture
helps but it isn’t a differentiator—in order to be successful, a differentiator is needed!’
(interview, Sowjanya). The founder of TakeSolutions echoes this sentiment: ‘the fun
culture etc is “hygiene factors” which the company has to ful?l’ (interview, Sri).
148 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Finally, some BPOs are also making small but noticeable attempts at trying to
increase the pool of skilled workers available to the BPO industry. Infosys BPO,
inspired by their sister organisation Infosys Technologies’ initiative, now has a pro-
gramme called Genesis that trains professors in arts and science colleges in second-tier
cities in soft skills such as communication, problem solving, team building etc. (inter-
view, Samit). These professors then conduct workshops for students in their respec-
tive colleges, thus creating ‘industry-ready’ students who are also enthusiastic about
entering the BPO industry. Similarly, Microland is trying to promote an ITES special
curriculum in schools and colleges for all students interested in the industry (inter-
view, Sowjanya).
Macro-level responses: governments and industry association
Central and state government
Governments have a signi?cant role to play in creating skills equilibria (Kuruvilla
et al., 2002). Speci?cally, the problem in the BPO industry is the supply of skilled
labour. Governments could, for example, introduce courses of study in government-
funded universities and colleges that are relevant to industry needs and provide
incentives for the private sector to enhance language and communication skills for the
industry (the industry has demanded this for quite some time). State governments
with large BPO clusters have been more responsive than the central government in
this regard (e.g. West Bengal, Orissa, Kerala, Karnataka and Andhra Pradesh),
although their efforts are preliminary and variable. The West Bengal government, in
association with NASSCOM and the Confederation of Indian Industry, is providing
a platform to facilitate exchanges between representatives from the information tech-
nology (IT) industry and academia. Because industry is the end-user of the human
resources, the government feels that it should have more say regarding the curriculum
and the process of delivery in colleges and universities. In this way, universities also
become aware of the needs of the industry to churn out readily employable
professionals. The government of Orissa, realising that there’s a dearth of graduates
with expertise in IT and pro?ciency in English, has started a training programme
in collaboration with Bangalore-based BPO companies like MA-FOI and NEXT
(InfotechOnline, 2004).
8
Governments could also assist with reducing both recruitment and training costs for
the BPO industry by screening college graduates for their readiness to be part of the
IT-ITES industry. Some state governments have introduced various assessment tests
to test for industry ‘readiness’, helping streamline the ?ow of college graduates to the
BPO industry. The government of Karnataka has introduced an aptitude test called
the BPO-SAT or BSAT to measure verbal and analytical skills, which is administered
through a private service provider called MeriTrac (KPMG, 2004). Similarly, the
government of Andhra Pradesh has introduced a Graduate Employability Test
(GET) that speci?cally caters to certi?cation for the IT-ITES industry (KPMG,
2004).
8
Note that the governments have done considerably more for the software industry. Two state govern-
ments (Andhra Pradesh and Karnataka) have opened well-funded new institutes of IT to supply more
graduates to the high-end software industry. The central government has been slower to respond but has
recently established a nodal agency at the national level called Consortium for Indian Information Tech-
nology Education, which is supposed to coordinate and standardise education in the IT arena, and has
already established two more Indian Institute of Technology and has agreed to ?nance one more Institute
for Science.
149 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Focusing on the low-cost BPO industry, state and city governments have a key
role to play in reducing transportation costs by improving the public transportation
infrastructure. Providing safe, reliable public transportation would reduce about
40 per cent of human resource costs in the low-end BPO industry (for more details
on the transportation costs incurred by BPOs, see Ranganathan and Kuruvilla,
2007).
For both the KPO and software sectors, governments have a signi?cant role
to play in developing long-term high skills human resource capability. The central
government and its various agencies have considerably more to do in terms of
improving the higher education infrastructure to produce more highly-skilled and
doctoral-level researchers, scientists, engineers, and postgraduates in a number of
different disciplines for the knowledge processing and R&D segments. In short,
governments must create the ‘self-sustaining high skills eco-systems that are
found in Silicon Valley (a model for Bangalore and Hyderabad as Saxenian, 2000
notes), the Boston high technology Corridor, Cambridge (UK) and the ‘high mech’
clusters in Emilia Romagna in Italy (Finegold, 1999; Locke, 1996). The key chal-
lenge for governments is to improve second- and third-tier institutions to train stu-
dents, do more research, attract better faculty, and establish symbiotic ties with the
industry, following the pattern of the ?rst-tier institutions (such as the IITs). This
will require a complete re-evaluation of a heavily entrenched higher education
establishment to produce high-quality professors, high-quality students and better
research.
9
Industry association
NASSCOM has been more proactive in taking a longer-term view regarding skills
development for the outsourcing industry, although unlike the government, it has
limited in?uence over various policy arenas. To address labour supply and reduce
recruitment and training costs for the BPO segment, NASSCOM has introduced
a certi?cation programme for building frontline managers in response to the ‘mana-
gerial bandwidth’ problem. Managed by NASSCOM’s executive development
programme and QAI (the leading ‘quality’ consultancy in India), they offer industry-
relevant certi?cations (e.g. Certi?ed BPO Quality Analyst, Certi?ed BPO Team
Leader, Level 1), which have become popular among participants as well as
businesses. To identify the right talent pool for the industry, a new assessment tool,
the National Assessment of Competence for the BPO industry
10
, has been developed
that can be used to identify new talent pools in various parts of the country, but also
provide the industry, universities, and governments with information regarding key
training and development needs. NASSCOM’s long-term strategy is also evidenced
in its desire to start English-language training schools (Sengupta, 2006), given the
9
Obviously large-scale reform in public universities is necessary because almost every dimension of higher
education needs change. Financial issues and pay of professors and research associates are particularly low.
As a matter of interest the gross monthly salary for a senior professor at the IITs is roughly $675 per month,
not very different from what his or her student would earn at an entry-level job in the high-tech industry.
While professors are allowed to consult (they retain 65 per cent of the revenues), not many professors do
the cutting-edge research that provides consultancy opportunities.
10
The programme will test the aptitude of a candidate on seven different skill sets. This includes listening
and keyboard skills, verbal ability, spoken English, comprehension and writing ability, of?ce software
usage, numerical and analytical skills, and concentration and accuracy.
150 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
industry’s dissatisfaction with a whole host of labour market intermediary ?rms
11
,
who have not been able to meet the industry’s needs thus far.
12
Finally, NASSCOM
has created a National Skills Registry—a centralised database of all employees
working in IT services and BPO companies in India.
13
These are examples of
NASSCOM’s initiatives (there are many more). NASSCOM’s biggest achievement,
however, is that it has managed (through a variety of methods) to put these issues on
a slow-moving government’s policy agenda.
Note, however, that high turnover and shortages of skilled labour is hurting the
industry in terms of its ability to gain a greater market share and in terms of increasing
costs. A 2007 NASSCOM report shows that the total cost to company for BPO
associates who have been employed for six months to one year has gone up by 19 per
cent in 2006 compared with just 3–4 per cent in 2005. And employees leaving in the
?rst 12 months are quite irksome, as many of them would have just completed their
training (on average, training for voice-based processes takes roughly six to eight
weeks). Thus, India’s BPO ?rms are caught in the ironic position where India is the
preferred BPO destination in the world
14
yet the labour shortage is making it dif?cult
for India to further capitalise on this competitive advantage.
CONCLUSION
This article brie?y described the growth and associated HR problems of the business
process segment of India’s burgeoning outsourcing industry. The outsourcing indus-
try (including software services) has come to be viewed as the ‘primary engine of the
country’s development over the next few decades, contributing broadly to GDP
growth, employment growth and poverty alleviation’ (Srinivasan, 2006: 204). Within
the outsourcing industry, the BPO segment has witnessed the fastest growth and will
be larger than the much older software segment. The BPO segment is also growing in
terms of diversity with increasingly variegated ‘service lines’ both at the high end
(KPOs) and at the low end. The industry’s growth prospects, however, are threatened
by both high turnover and a shortage of suitably skilled personnel. At the high-end
KPO ?rms (particularly in ?nancial services, engineering services and life sciences),
the problem is primarily a lack of a pipeline of adequately trained employees, espe-
cially for the longer-term development of the industry. For the lower-end BPOs, the
problem is a shortage of English-speaking employees. Both ends of the industry are
experiencing high turnover.
11
Hero Mindmine, Akiko Callnet, Planetworkz (NIIT) that seek to provide trained people to the BPO
industry.
12
However, interviews with BPO HR managers suggest that the quality provided is highly variable: some
?rms tell me that they only take in one out of ?ve people provided by the intermediary ?rms. The problem
is that the intermediary ?rms have not developed a consistent set of standards that they can use to meet the
needs of the BPO ?rms.
13
This database contains third-party veri?ed personal, quali?cation, and career information of IT profes-
sionals and thus helps improve recruitment practices (and reduces recruitment costs) in the IT and BPO
industry. Prospective employers are also able to view the veri?ed resumes of IT professionals.
14
India’s leadership position is best demonstrated by the consulting ?rm AT Kearney’s comprehensive
evaluation tool developed to help corporations with their offshore location strategies. Their analysis
indicates that India has a clear and signi?cant lead over its major competitors, particularly with regard to
the dimensions of costs and the quantity and quality of skills. India’s score on their index is a 7.12, while
all of the other BPO competitors (China, Malaysia, Czech Republic, Singapore, Philippines, Canada, Chile
and Poland) scores range from 5.33 to 5.61. For a more detailed discussion of the methodology, see
http://Knowledge.wharton.upenn.edu/article/922.cfm
151 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Although India has no dearth of managerial education and talent, the particular
demographic pro?le of BPO employees is posing several challenges for managers.
Established human resource practices that have been successful in building employee
commitment and loyalty generally and in reducing attrition do not seem to work as
effectively with this particular demographic group, and HR managers are experiment-
ing with a variety of novel approaches.
The current global economic downturn has hit the BPO industry hard, especially
for the large number of smaller ?rms in the business. This industry was growing at an
annual average rate of 30 per cent prior to the slowdown, but growth rates in 2009 are
hovering at about 15–18 per cent. The slowdown has resulted in considerable ‘resiz-
ing’, that is, many smaller companies have laid off people. Large companies have
slowed recruitment, and many have temporary hiring freezes in place, but on the
whole are still expanding, as more and more work gets offshored during this
slowdown. The average turnover rate in BPO ?rms has reduced by about 6–7 per cent
(NASSCOM). Yet industry experts remain very positive regarding the industry’s
growth prospects and predict high growth rates after 2011. Thus, despite the tempo-
rary respite, the problem of high turnover is bound to return. Therefore, future
research must inquire more formally into the effectiveness of different strategies to
reduce turnover for this demographic group in the Indian labour market.
References
Batt, R., V. Doellgast, H. Kwon, M. Nopany, P. Nopany and A. da Costa (2006), The Indian
Call Centre Industry: National Benchmarking Report Strategy, HR Practices, & Performance,
CAHRS Working Paper #05-07 (Ithaca, NY, Cornell University, School of Industrial and
Labor Relations, Center for Advanced Human Resource Studies), http://digitalcommons.
ilr.cornell.edu/cahrswp/7.
D’Cruz, P. and E. Noronha (2006a), ‘Being Professional: Organizational Control in Indian Call
Centers’, Social Sciences Computer Review, 24, 3, 342–361.
D’Cruz, P. and E. Noronha (2006b, 27 May), ‘Organising Call Centre Agents: Emerging
Issues’, Economic and Political Weekly, Retrieved 27 February 2007 from http://www.epw.
org.in
Deery, S. and N. Kinnie (2004), Call Centres and Human Resource Management (Hampshire,
Palgrave Macmillan).
Dossani, R. (2006), ‘Origins and Growth of the Software Industry in India’, in H. S. Rowen,
W. F. Miller and M. G. Hancock (eds) Making IT: The Rise of Asia in High-Tech (Stanford,
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Finegold, D. (1999), ‘Creating Self-Sustaining High Skill Ecosystems’, Oxford Review of
Economic Policy, 15, 1, 60–90.
InfotechOnline (2004), ‘BPO Workers More Satis?ed Now’, Retrieved 10 November 2006 from
http://infotech.indiatimes.com/articleshow/msid-919912.cms
KPMG (2004), ‘Strengthening the human resource foundation of the Indian IT enabled
services/IT industry’ (Mumbai, KPMG).
Kuruvilla, S., C. Erickson and A. Hwang (2002), ‘An Assessment of the Singapore Skills
Development System: Lessons for Developing Countries’, World Development, 30, 8, 1461–
1476.
Kuruvilla, S. and A. Ranganathan (2008), ‘Economic Development Strategies and Macro and
Micro Level Human Resource Policies: The Case of India’s Outsourcing Industry’, Industrial
and Labor Relations Review, 62, 1, 39–72.
Locke, R. M. (1996), ‘Remaking the Italian Economy’ (Ithaca, Cornell University Press).
Menon, S., S. Sinha and A. Urs (2004, 1 August), ‘Tug of Talent’, The Economic Times,
7–8.
152 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Mitra, P. (2004), ‘Boom Boom BPO’, The Telegraph, December 15.
NASSCOM (National Association of Software and Services Companies) (2003), NASSCOM
Strategic Review 2003 (New Delhi, NASSCOM).
NASSCOM (National Association of Software and Services Companies) (2006), NASSCOM
Strategic Review 2006, http://www.nasscom.org/Nassscom/templates/LandingPage.aspx
?id=4946.
NASSCOM (National Association of Software and Services Companies) (2007), NASSCOM
Strategic Review 2007 (New Delhi, NASSCOM).
Pradhan, J. and V. Abraham (2005), ‘Social and Cultural Impact of Outsourcing: Emerging
Issues from Indian Call Centres’, Harvard Asia Quarterly, Summer pp. 1–11.
Ranganathan, A. and S. Kuruvilla (2007), ‘Managing Low Skilled Employees in a High Tech
Environment: Human Resource Practices in India’s Outsourcing Industry’, in D. Jemelniak
and J. Kociatkiewicz (eds), Management Practices in High Tech Environments (New York,
Information Science Reference) pp. 110–113.
Remesh, B. P. (2004), ‘Cyber Coolies’ in BPO: Insecurities and Vulnerabilities of Non-Standard
Work’, Economic and Political Weekly, January 31, pp. 492–497.
Saxenian, A. (2000), ‘Bangalore: The Silicon Valley of Asia?’ Retrieved from http://www.
people.ischool.berkeley.edu/~anno/papers/bangalore_svasia.html
Sengupta, S. (2006), ‘Skills Gap Hurts Technology Boom in India’, New York Times, Technol-
ogy Section, October 17.
Shrinate, S. (2004, 6 June), ‘Truly, a Learning Experience’, Business Today, 156–157.
Srinivasan, T. N. (2006), ‘Information Technology and India’s Growth Prospects’, in L.
Brainard and S. M. Collins (eds), Offshoring White-Collar Work—The Issues and Implica-
tions, The Brookings Trade Forum, 2005 (Washington, DC, The Brookings Institution)
pp. 203–240.
Taylor, P. and P. Bain (2005), ‘India Calling to The Far Away Towns’: The Call Centre Process
and Globalization’, Work, Employment and Society, 19, 2, 261–282.
The Economic Times (2006), ‘BPOs’ No-Poaching Pacts Fall Apart’, Retrieved 26
November 2006 from http://economictimes.indiatimes.com/BPOs_nopoaching_pacts_fall_
apart/articleshow/498749.cms
The Economic Times (2007), ‘How to Bell the BPO Cat’, Retrieved 10 March 2007 from
http://economictimes.indiatimes.com/articleshow/msid-1736650,prtpage-1.cms
List of Companies Interviewed: 2007
1. LaserWords
2. Microland
3. Prodapt
4. Infosys BPO
5. TakeSolutions
6. GAVS
7. SSI
8. Infosys
Note: Interviews referred to in the text (Sowjanya, Suresh, Samit, Nupur, Anthony,
Sridhar, Sri and Samit) are managers at these companies.
153 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Copyright of Industrial Relations Journal is the property of Blackwell Publishing Limited and its content may
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doc_993933481.pdf
It is well established that globalisation, particularly in terms of the mobility of capital and the spread of communication technologies, has had a profound effect on employment relations in countries that are well integrated into the global economy.
Globalisation and outsourcing: confronting
new human resource challenges in India’s
business process outsourcing industry
Sarosh Kuruvilla and Aruna Ranganathan
ABSTRACTirj_559 136..153
In this article, we argue that the rapid growth of the outsourcing industry has resulted
in both high turnover and labour shortages and at the same time provided employ-
ment opportunities to a new group of employees: young upwardly mobile college
graduates. We argue that this particular demographic pro?le is prone to high turnover
and presents new managerial challenges. We then examine the variety of recruitment
and retention strategies that companies in the business process outsourcing industry
are experimenting with and show that many novel HR strategies are being crafted to
address the needs of this young middle-class workforce. We also examine macro
efforts by state and central governments and the industry association to help resolve
some of these problems.
INTRODUCTION
It is well established that globalisation, particularly in terms of the mobility of capital
and the spread of communication technologies, has had a profound effect on employ-
ment relations in countries that are well integrated into the global economy. The rapid
increase in service sector ‘outsourcing’ and ‘offshoring’ during the last decade has
created a new and rapidly growing ‘business process outsourcing’ (BPO) industry in
India. While this industry has experienced phenomenal growth rates and has contrib-
uted signi?cantly to India’s export earnings, it has also thrown up new employment
relations challenges.
At the level of the ?rm, the challenge is to manage a new breed of employees: young,
middle-class, ‘upwardly mobile’ college graduates (who form the bulk of employment
in this industry) who historically have not played a signi?cant role in the labour
market at their age (prior to the growth of this industry, middle-class college gradu-
ates would normally have continued onwards for postgraduate quali?cations before
entering the labour market). At the level of the economy, the challenge is to solve the
problem of adequate supply of skilled labour, one that contributes to record high
levels of turnover and rapidly increasing costs that are a threat to the long-term
sustainability of the industry.
? Sarosh Kuruvilla is Professor of Industrial Relations, Asian Studies and Public Affairs at Cornell
University and Aruna Ranganathan is Doctoral Candidate, Sloan School of Management, MIT; email:
[email protected]
Industrial Relations Journal 41:2, 136–153
ISSN 0019-8692
© 2010 The Author(s)
Journal compilation © 2010 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St.,
Malden, MA 02148, USA.
This article traces the growth of the BPO industry in India and argues that the
demographic pro?le of employees in the industry contributes to rising turnover but
also presents Indian HR managers with particular challenges in attracting and retain-
ing employees. We then highlight the variety of strategies that ?rms are experimenting
with in responding to these challenges.
The research in this article is the result of ?ve months of intensive ?eldwork across
the metropolitan cities in India conducted in 2004 as part of a larger research project
on outsourcing. That ?eldwork included extensive interviews with a sample of 20 HR
managers of BPO ?rms that was the primary source of information for this article. In
addition, follow-up interviews were conducted with a second sample of eight HR
managers from larger BPOs who were attending a conference on HR issues sponsored
by the National Association of Software and Services Companies (NASSCOM) in the
summer of 2007. The two sets of interviews, along with some participant observation
of the ?ow of BPO work in four BPOs and some archival research and regular reading
of the ‘trade’ journals, provided the basis for our argument in the article. Given that
the companies that we interviewed were the larger BPOs, with most of them having at
least 500 employees, our article might re?ect a large company bias.
In the section below, we brie?y describe the pro?le of the industry and its new
workforce, and in later sections, we identify key HR problems and describe employer
and public policy responses.
1
INDIA’S BUSINESS PROCESS OUTSOURCING INDUSTRY
India enjoys a dominant position in the global market for business process
outsourcing—a 48–50 per cent market share (The Economic Times, 2007). Growing at
an annual average rate of over 50 per cent since 1999, this industry has seen employ-
ment rise from 50,000 in 1999–2000 to 553,000 by mid-2007. Table 1, which reports
basic industry data for the outsourcing industry
2
, shows that the BPO industry is
growing very rapidly (columns 5 and 6). The BPO segment was valued at $9.5 billion
in 2006–07 and contributed $8.4 billion of the outsourcing industry’s total exports of
$31 billion. By 2012, the BPO segment is expected to overtake the software services
segment in terms of overall value (Ranganathan and Kuruvilla, 2007).
Although typi?ed by call centres, the BPO industry is actually a highly variegated
industry. Many ?rms engage in ‘low-end’ ‘services’ (involving low skill) such as
insurance forms processing and customer service call centres, but there is a discernible
and growing ‘high-end’ services outsourcing market that involves very advanced skills
(of which many are in short supply). The variability in ‘service lines’ in the BPO
industry is great, and there is a mushrooming of new service lines on almost a weekly
basis, making accurate categorisation of the work in the BPO industry dif?cult.
However, in Table 2, we provide a listing of the variety of service lines for which
NASSCOM (the industry association) has been collecting data, while we discuss
current and newly emerging service lines below.
Customer care and support services for a number of different industries comprise
the largest service line, accounting for almost 40 per cent of the industry’s employee
1
For a more detailed study of policy responses, see Kuruvilla and Ranganathan (2008).
2
Note that the term ‘outsourcing industry’ refers to software services, hardware, research and development
services, and business process outsourcing (also called ITES-BPO) by the industry association
(NASSCOM), which is the only reliable source of data on the outsourcing industry.
137 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
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© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
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139 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
base and a third of its revenues. Typical examples include customer care for airline
reservations, credit card companies etc. (all of which involve direct telephonic contact
with the customer). In contrast, a BPO company that focuses on forms processing (in
insurance or tax) does not require any contact with the customer and also does not
require well-educated English-speaking workers. The ?nance and accounting service
line includes the standard business processes of transaction management, general
accounting, statutory reporting, and compliance work while the payment services line
includes a variety of billing services, insurance claims processing and tax processing.
The HR outsourcing service line is experiencing rapid growth—this typically com-
prises payroll and bene?ts administration, travel and expense processing, and
employee communication services. In addition, there is a growing ‘medical and legal
transcription’ service line.
New service lines involving very high-skilled work have emerged recently, especially
in the ?nancial sector (e.g. analysis of ?nancial data, management of foreign com-
modity accounts, as well as lower-end services such as processing home loans and
mortgage services, debt collection and recovery), medicine (creating medical educa-
tion databases and doctors desk reference guides, but more recently, reading and
analysing patient X-rays), printing (pre-publication of scienti?c journals) and remote
education (such as providing math tutorials to US school children), leading to new
‘service line’ categories known as ?nancial process outsourcing and knowledge
process outsourcing (KPO) (Kuruvilla and Ranganathan, 2008).
Engineering services outsourcing is another important line in which India has 15
per cent of the worldwide market share according to a recent study (see NASSCOM,
2006). R&D outsourcing, too, is growing particularly in two industries: life sciences
and ?nance.
Pro?le of employees
The nature of the employees (in terms of their skills distribution) should vary in
accordance with the nature of the work done in the BPO industry. For example, a
company such as Prodapt deals primarily with forms processing, a low-skill activity.
According to their HR manager, they largely hire students who have completed their
‘+2’ (secondary school education) but have not entered college, but also focus on
hiring older married women and handicapped people. Typically, their employees tend
to be from the ‘lower middle class’ (interview, Nupur). The pro?le of employees in
BPO ?rms that provide a range of services in the customer care arena (especially call
centres for client ?rms from the United States and the UK that demand a working
pro?ciency in English) is quite different from those at Prodapt. As Remesh’s (2004)
survey suggests, 75 per cent of workers in this type of BPO ?rm are graduates,
educated in convent schools (noted for their superior and English-based education).
94 per cent of their fathers and 63 per cent of their mothers were also graduates, many
of them working for the government. These employees are drawn from the ‘upper
classes’. A BPO ?rm called Aptech, for example, provides content development for
companies such as Thompson and McGraw Hill’s online and distance education
courses. According to the founder of this company, the skills required in this type of
BPO are varied, including postgraduates who are computer programming and lan-
guage experts, postgraduates who act as tutors for various online courses, and gradu-
ates to correct exams and provide customer service to online students. This workforce
tends to be drawn from the English-speaking middle (middle to upper middle) class
140 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
and is highly educated (interview, Suresh). At the higher-end KPO level of work, most
employees have postgraduate and/or doctoral quali?cations.
The prototypical BPO ?rm therefore employs a largely young middle class cross-
section of India’s population, often well versed in English. The age ranges from 18 to
24, while the average age at ?rms employing postgraduates tends to be in the mid-20s.
Note that the average wage at a typical BPO ?rm is around Rs. 12,000 per month
(which is about $300 or 200 pounds). Prior to the advent of the BPO industry, young
middle-class graduates would have found it impossible to ?nd a job paying so much
soon after ?nishing a basic undergraduate degree, and most would have gone for a
professional quali?cation before entering the job market. For middle-class employees
who live with their parents, this earning capacity represents a massive increase in
‘disposable’ income. However, this pro?le of employees also suggests several peculiar
problems that require managerial attention.
In the section below, we highlight two particular human resource problems that the
industry has to deal with. These include the very high levels of turnover and the
diminishing supply of skilled graduates for the industry, both of which threaten
industry growth. The turnover problem is primarily within the control of ?rms, while
resolution of the supply of skilled labour problem requires concerted action on the
part of several actors in the labour market: state governments, the central govern-
ment, the industry association, labour market intermediaries, as well as individuals to
create a stable skills equilibrium. We are focusing here on the average BPO ?rm (not
those in highly specialised niche markets that employ only postgraduates). Note,
however, that turnover and skills shortages are a general problem in India’s ‘out-
sourcing’ industry, including the much larger ‘software services’ segment. In the
section following this one, we highlight how ?rms are dealing with these issues.
HUMAN RESOURCE PROBLEM 1: EMPLOYEE TURNOVER
A wide variety of turnover estimates are currently available. Most reports talk about
an average of 30–40 per cent (per year). Commercial and popular reporting tends to
focus on the extremes (the range here is between 12 and 90 per cent). A 2004 study of
turnover in seven large ‘third-party’ call centres showed a wide variation in turnover
rates, ranging from as low as 12 per cent to as high as 62 per cent, with a mean
turnover of 30 per cent (Remesh, 2004). A key challenge for future research is to
explain why there is such a great variation in turnover across ?rms in the industry. We
have some preliminary ideas regarding the factors causing such variation, but our
?eldwork is not yet complete. For example, we know that turnover in ‘captive’ BPOs
is typically much lower than in ‘third-party’ BPOs.
3
In our ?eldwork, we found
turnover rates in ?ve captive ?rms being between 15 and 20 per cent.
There is job-based variation in turnover as well. Average turnover in ‘voice-based
processes’ is between 45 and 50 per cent, while in ‘non-voice’ operations, it is 15–20
per cent. Further, ‘infant mortality’ (turnover in the ?rst 45 days of employment after
training) in voice-based processes is about 20 per cent (although anecdotal evidence
3
A ‘captive’ BPO ?rm is one that is wholly owned by the client ?rm and provides services to only that
?rm . . . essentially it is like a separate ‘in-house’ operation. American Express, for example, has its own
captive ?rm in India doing its back-of?ce work. A ‘third-party’ ?rm is one that provides services to a
multitude of clients. Infosys’s BPO ?rm (formerly called Progeon) is one such example. In general,
‘captives’ have a more stable market for their services relative to ‘third-party’ ?rms.
141 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
suggests that this ?gure may vary to a signi?cant extent). We also know that the type
of work the BPO is engaged in and the attendant demographic pro?le of employees
matters, as do efforts by corporations (which we discuss later). For example, Infosys
BPO, which has many voice-based processes serving the US market and employs
mostly ‘well educated young middle class graduates’ experienced turnover levels that
range between 27–28 per cent and 40–45 per cent in 2006–07 (interview, Samit). On
the other hand, Prodapt and Laserwords, engaged in forms processing and in pre-
production work for the printing and publishing industry, respectively, report turn-
over rates as low as 6–10 per cent, and they tend to employ people who have ?nished
high school and not gone on to college (interviews, Nupur and Anthony).
Causes of turnover
Although there have been no systematic studies regarding the causes of turnover in
the outsourcing industry, our research, based on our interviews with HR managers,
reveal the following two general categories of causal factors.
Job-related reasons
An important cause here stems from dissatisfaction with the immediate supervisor
(the ‘lousy boss syndrome’). Because the BPO industry is just ?ve years old, employ-
ing mostly young people between the ages of 19 and 27 and experiencing high
turnover, often young people with only six months of BPO experience are promoted
as supervisors of teams of 10–15 people. There is relatively little time spent on training
these people to be effective managers and leaders of people. To add to this, top-down
methods dominate companies’ staff communication systems (NASSCOM, 2003).
These middle managers do not have the required experience to manage teams of
young people who themselves do not have a history of work experience and who bring
a variety of expectations and aspirations with them when they enter the industry. HR
managers refer to this as the ‘managerial bandwidth’ problem and liken it to the
problem of trying to create a ‘10 years old scotch in 2 years’.
A second key job-related problem lies with the nature of the work itself. Taylor and
Bain (2005) observe that 50 per cent of those who exit a call centre leave the industry
altogether. There is considerable agreement in international research (Batt et al. 2006;
Deery and Kinnie, 2004) that call centre jobs are organised in a ‘tayloristic’ fashion:
highly repetitive, with tightly regulated lunch and restroom breaks, targets in terms of
number of calls to be made and a very high degree of monitoring of employee activity.
Indian call centres are apparently no different (Remesh, 2004; Taylor and Bain, 2005).
A number of articles on coercive and normative control and ‘sweatshop practices’ in
Indian BPO ?rms are emerging almost daily (see D’Cruz and Noronha, 2006a). These
aspects, in combination with working on the night shift (to service the US market by
day) has resulted in an outgrowth of what the industry calls burnout stress syndrome,
an important cause of turnover. There is growth in the number of employees seeking
counselling services and psychological help, and there is an increase in the number of
organisations (including trade unions) offering such help. The Young Professional
Collective in Mumbai, for example, is organised by a well-known labour lawyer and
staffed by well-known labour activists.
Third, there is a widespread expectation that there are limited avenues for career
advancement in a BPO ?rm (although the shortage to some extent alleviates this
problem). This is supported by our own research and other available evidence. Batt
142 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
et al.’s (2006) survey of 60 call centres revealed that 15 per cent of call centre
workers were promoted to higher positions within the call centre organisation, but
only 1 per cent of call centre workers were promoted to upper management levels
beyond the call centre section of the organisation. Our research suggests a more
nuanced picture: captive call centres are able to provide more promotions to higher
levels than ‘third-party’ call centres because the market stability that ‘captive’ call
centres enjoy permits the envisioning of longer career paths relative to ‘third-party’
call centres.
Thus, dissatisfaction with supervisors, working conditions, the intrinsic aspects of
the job itself, and the apparent lack of career advancement prospects abound in the
BPO industry, although there is a high degree of pay satisfaction.
Demographic pro?le of workers
A number of demographic features contribute to turnover as well. First, many female
employees leave the labour force to get married and have children. Second, many
young employees ‘mark time’ in this industry to save some money before going on to
graduate school or to better jobs. Third, young employees are willing to move from
organisation to organisation (using exit instead of voice) for the smallest possible
reason, including a very minor increase in pay or a slightly different of?ce atmosphere,
because they do not really see a long-time career with the industry. Such lateral
movement is easy given the shortage of trained people in the industry and the clus-
tering of BPO ?rms in major metros. Fourth, there is the category of ‘psycho-social’
factors: young people ?nd working in the night shift alienating as they are not able to
meet their friends in the evenings or see their families. By the time they get home, other
family members have gone to work. Fifth, some face ‘dissonance’ from a number of
sources such as parental disapproval. Pradhan and Abraham (2005) argue that using
a different name and adopting a different persona during work hours can cause
questioning of one’s identity and can lead to what they term the ‘multiple personality
disorder’. For example, Anjali becomes Angie during the night and talks with an
American accent to American customers. This apparently leads to cultural self-
alienation and a sense of dissonance (see D’Cruz and Noronha, 2006b for an argu-
ment regarding how the different name helps people deal with some workplace issues).
Given these factors and the shortage of adequately trained people, the preference for
the use of ‘exit’ strategies rather than using voice mechanisms (representative organi-
sations such as trade unions are largely absent) is not surprising.
HUMAN RESOURCE PROBLEM 2: SHORTAGE OF APPROPRIATELY
SKILLED LABOUR
For the prototypical BPO, well-educated, English-speaking ‘manpower’ has been the
key source of competitive advantage. This large HR ‘pipeline’ has been prized by
clients and has contributed to the Indian ?rms’ reputation of being able to ‘ramp up
quickly’ (Raja, interview, 2005). However, there are critical labour shortages in the
BPO segment (see The Economic Times, 2006). The BPO segment currently employs
553,000 people directly, growing from a total of 415,000 in 2005–06. Estimating future
demand in this industry is problematic, given the rapid growth rates (50 per cent
average annually), the increasing interest in outsourcing in the West and the expan-
143 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
sion of India’s outsourcing ‘footprint’.
4
A NASSCOM–McKinsey study projects that
there will be a stock of 1 million jobs by 2008–09, while a NASSCOM–KPMG study
forecasts a stock of 1.41 million by 2009. To the extent that past growth is an
indication of future growth (at least in the next three years), the above estimates seem
reasonable. After taking into account the current available pool, the annual intake,
productivity improvements and current rates of turnover, the KPMG study estimates
a shortage of 262,000 people by 2009.
5
There are no readily available data (published or otherwise) regarding the supply of
English-speaking graduates (particularly important for customer service jobs) to the
BPO segment. Two problems make accurate forecasting dif?cult here. The ?rst is
the absence of good statistics regarding the output of graduates generally
6
, while the
second and more critical problem is the dif?culty in estimating the number of English
speakers available for the BPO call centres. Most human resources managers we
talked with tend to feel that the shortfall will be much greater than estimated by
NASSCOM
7
, probably because of differential estimates of available English-speaking
graduates. Table 3, which shows my own estimates of HR supply for the low-end BPO
4
One example of the dif?culty of making estimates in this rapidly growing industry (and of using the past
as a basis for future predictions) can be seen in the experience of the last two years. In 2003–04, the BPO
industry added 55,000 jobs. At that time, NASSCOM predicted that over the next two to three years, the
industry would grow by about 55–70,000 jobs. But in the next year alone (2004–05), 95,000 jobs were
added.
5
NASSCOM’s estimates are that 1.416 million workers would be required. Productivity increases would
reduce this ?gure by about 413,000, leaving 1.003 million. The expected supply by 2009 is 741,000 leaving
a projected shortfall of 262,000.
6
The absence of ?gures stems from the division of responsibility in the education sector of India. For one,
this sector is on the ‘concurrent’ list, which means that it falls under the jurisdiction of central and state
governments (Dossani, 2006). In addition, several states permit the private sector to operate schools and
colleges. And there is no central statistics agency that covers all these sectors.
7
It is important to note that several things could mitigate the shortfall. For one, the number of English-
speaking graduates could increase as more and more attention is paid to spoken English in educational
institutions and private training institutes. Second, it is possible that graduates who have not been
attracted to this industry will be motivated to join in the future, especially given the growth in salaries.
Finally, the number of educational institutions may increase, consistent with prior trends, although it is
unclear as to where the faculty are coming from (there is a shortage of faculty). In fact, the number of
private training institutes claiming to provide training for the BPO industry has grown dramatically over
the last few years.
Table 3: Estimates of HR supply for low-end BPO segments 2005
Output of graduates (253 universities and 13,150 colleges) 2,460,000
a
Some English-speaking capability (30%) 738,000
Labour force participation (65%) 480,000
b
Effective English-speaking ability for employability in call centre (50%) 240,000
Effective supply of labour in 2005 168,000
c
Source: Kuruvilla and Ranganathan (2008)
a
Institute of Applied Manpower Research.
b
NASSCOM-KPMG
c
This ?gure appears to gel with those obtained from our interviews with human resource
managers (who already claim that there is saturation in the English-speaking market). The
?gure is also consistent with another recent estimate that 5–10 per cent of the total graduate
pool (between 123,000 and 246,000 people) speak English and are available to work in the
industry.
144 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
industry, suggests that there is a pool of 250,000 graduates who are potentially
available for work in this industry. Making provision for various ‘unaccountables’, it
may be more conservative to put the supply estimate at between 150,000 and 200,000.
Not all of these are capable of being hired, though (as recruitment conversion factors
are typically in the 2–4 per cent range, that is, ?rms hire only 2–4 of 100 applicants).
And given that the annual intake into the BPO segment is about 120,000 and growing,
a shortage of 262,000 bodies (without attention to quality, purely based on whether
they can be hired or not) by 2008–09 is a certainty. The high turnover rates are not
entirely a function of current shortages, however.
Beyond the shortage of English-speaking bodies, industry representatives highlight
shortages in ‘industry-ready’, ‘industry-relevant’ manpower, that is, a scarcity of
professionals who are equipped with the necessary ‘domain’ knowledge to cater to
speci?c ‘verticals’ (industry segments) such as banking, insurance, telecom, retail and
manufacturing (Mitra, 2004). And there are shortages in the supply of foreign-
language skills, notably in French, Spanish, Mandarin, German, and Italian, which
makes it dif?cult for Indian BPOs to expand their presence in European and Asian
markets (Indian BPOs derive 82 per cent of their business from the United States and
the UK).
Note that the high levels of turnover interacts with the shortage to also increase
employee costs rapidly (these have been growing at about 10–15 per cent per year over
the last ?ve years). Fortunately, the increases in costs have been more than offset by
reductions in bandwidth prices. But the sheer shortage of people implies that India is
losing some opportunities as ?rms unable to hire employees look elsewhere (particu-
larly the Philippines, South Africa and China) to locate their offshore service
operations. And many Indian ?rms too are outsourcing some of their work to these
locations.
CONFRONTING HUMAN RESOURCE PROBLEMS
Firm-level responses
Indian BPO ?rms are experimenting with a variety of strategies to deal with the
turnover problems as well as labour shortage issues. As we discuss below, attempts to
solve the turnover problem re?ect a variety of strategies, some traditional, that is,
generally used in most industries, and some speci?cally designed to suit the demo-
graphics of the workforce, that is, young, educated people.
General approaches
The traditional approaches include a variety of strategies that are consistent with the
voluminous prior research on alleviating turnover. First, to counteract the perception
that BPO jobs do not offer career growth, employers are investing considerable efforts
in articulating career growth opportunities. One widely used strategy is job rotation
where employees are trained in a variety of jobs within the BPO (both to relieve
monotony and to develop human resources). Incorporating lateral movements in
vertically oriented career plans thus meet both individual and organisational needs.
Most companies have begun to develop and publicise speci?c career paths while
ensuring that a high percentage of management positions are ?lled by promotions
from within. At GAVS, a small BPO, career planning is taken very seriously and
onsite placements, promotions, and skills training for all employees are planned close
145 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
to a year in advance, giving the employees a sense of stability (interview, Sridhar).
Second, allied to career development, BPO ?rms are also investing heavily in leader-
ship training. While the motivation here is clearly one of self-interest, that is, ?rms
would like to increase ‘managerial bandwidth’ (and thus simultaneously reduce turn-
over), there is an element of development and longer-term career planning here that
is of mutual interest to both the employer and the employee. From the employer’s
perspective, leadership development is key to establishing a strong middle manage-
ment cadre but also increases the loyalty of employees who go through the training.
From the employee’s perspective, management training complements the career
development process and binds the employee more closely to the organisation in the
longer term. At Take Solutions, a BPO in life sciences, leaders are identi?ed early on
among the entry-level employees and accelerated career paths are made available to
them (interview, Sri). Solving the low ‘managerial bandwidth’ problem justi?es the
focus on leadership, but in many companies, leadership training is supported in other
ways too. Infosys, for example, is training leaders but also making sure that they can
practice leadership effectively by reducing spans of control to 1:15 rather than 1:30
(interview, Samit).
Then, there includes some attempts to counter the repetitive nature of work in the
call centres. One strategy is to outsource ‘boring’ work like data entry and seasonal
work to smaller companies so that their employees get to do high value-added work.
This way, BPO operators get to work on new technologies. This is not possible in all
cases, but the principles are transferable. According to the HR manager at Infosys
BPO, they rank both the projects they receive as well as their employees in order to
assign ‘Tier 1’ workers to the most interesting projects with the hope that the right ?t
will reduce turnover (interview, Samit).
Finally, some ?rms have paid attention to the work environment and employee
voice. LaserWords, for instance, spends considerable time and effort in crafting
ergonomic work spaces with adequate lighting, noise controls, and the creation of a
democratic organisational culture that is participatory, with workers being able
to exercise voice through a variety of institutional mechanisms. To this end, they
have ‘maintained a ?at organizational structure with no middle management so
that employees feel comfortable approaching VPs with any concerns’ (interview,
Anthony). This partly accounts for their lower turnover rates. Microland, a BPO in
remote infrastructure, has also consciously cultivated an ‘open-door policy’ where
entry-level employees mingle with senior management freely (interview, Sowjanya).
Other traditional methods of dealing with turnover such as good pay and bene?ts
(which do not vary much across the industry for similar jobs) and good human
resource management practices (which varies quite a lot) in the industry continue to
exist. Indian BPO ?rms are also engaged in a number of other strategies such as
targeting older workers who might be more willing to see this as a long-term career
and creating new channels of communication with their employees.
Novel strategies geared to workforce demographics
These strategies re?ect an effort by ?rms to tailor policies speci?cally to the needs of
the particular demographic pro?le, the young middle-class workforce. First, given
that many young people see BPO jobs as a stopgap between graduation and applying
for postgraduate quali?cations, BPO ?rms are trying to provide higher education
opportunities tied to their employment. This is a risky strategy because they are
providing access to educational opportunities that will almost certainly result in the
146 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
employees leaving after they complete those opportunities. At best, these efforts will
result in prolonging an employees’ decision to leave by about two or three years. On
the other hand, the ‘war for talent’ is so acute that even two or three years of stability
in terms of reduced turnover is important in this extremely ‘tight’ labour market.
At Microland, there are tie-ups with the prestigious Indian Institute of Manage-
ment (Bangalore) where Microland co-designs a programme suitable for their
employees. Fifty per cent of the course fees are borne by the company to encourage
employees to avail of this option while ensuring that employees still put effort into the
course. The courses last 12–18 months and the hope is that the employees will grow
and the company will be able to retain them. However, Microland also institutes a
one-year bond once employees have ?nished their course, during which time employ-
ees are not allowed to quit (interview, Sownjanya).
Second, a key development is the recent focus of several BPOs in positioning
themselves as ‘fun’ places to work in order to retain their predominantly young
workforce. The goal of these activities is to create an ambience in which the educated
and middle-class workforce will enjoy the work atmosphere and hopefully will not
leave. As the founder of SSI, a BPO, suggests, ‘We make sure to communicate the
message that work is serious, work is light and work is fun’ (interview, Suresh). Thus,
BPOs are increasingly setting aside a budget for ‘fun’ so as to keep their employees
‘happy’, coordinated by a new cadre of ‘fun of?cers’.
Creating a balance between work and fun in the workplace requires a signi?cant
organisational commitment. There is focus on the physical environment, with BPOs
making sure that their physical layouts appeal to their trendy workforce. According
to the HR manager at Laserwords, ‘The workplace or workstation is given lots of
importance at LaserWords as comfort of working is a priority. We use bright
colours as much as possible and our chairs are ergonomically designed’ (interview,
Anthony).
Similarly, there is a focus on recreational facilities that appeal to the workforce. For
example, Infosys’s campus houses a state-of-the-art gym, golf course, sauna, swim-
ming pool, lake with paddling boats, pool tables and ping pong tables (interview,
Samit). Food is also an important aspect of the environment. The Infosys campus
contains food courts that serve Chinese, North Indian, South Indian and Western
cuisine (interview, Samit). Then there is the focus on wellness. The negative aspects of
the call centre environment including night shifts, sedentary work, talking on the
phone for hours together and their associated ailments are now well known. There-
fore, speci?c initiatives are being taken by some BPOs to address nutritional and
stress-related concerns that employees might have. For example, Prodapt offers yoga
classes six days a week to help employees achieve work-life balance (interview,
Nupur). To complement the physical attributes of the workplace catering to the
young is a focus on an informal atmosphere at work. Many BPOs try to keep the work
atmosphere quite informal so that employees loosen up, feel comfortable and have
fun at work. With this in mind, Wipro Spectramind has no dress code. And there is a
focus on ‘fun-?lled activities’ at the workplace. At Prodapt, an Annual Fun Day is held
and preparations for this start 10 days in advance. Events on this day include rangoli
competition, ?ower arrangement competitions, skits and fancy dress competition,
birthdays of employees as well as Christmas and other festivals are celebrated at
Prodapt too (interview, Nupur). At Microland, employees look forward to the end-
of-the-week Thank God It’s Fridays get-together with pizza and beer (interview,
Sowjanya).
147 Globalisation and outsourcing
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Journal compilation © Blackwell Publishing Ltd. 2010
And after work, there are parties sponsored by many BPOs at a nightclub or a
discotheque, with unlimited food and drink. BPO workers enjoy this immensely as it
legitimises partying by making it ‘of?cial’ and therefore allows them to elude late-
night curfews imposed by strict parents. Further, BPOs organise regular outings for
their employees to bond with one another and with their company outside of work.
For example, at LaserWords, once a year a picnic is organised, the most recent one
being to Munnar (interview, Anthony). Third, a key new element is the effort to
integrate the employee’s family into the enterprise in some way. The underlying
notion here is that if the family is engaged, then there is greater likelihood of employee
retention, as the employee’s family is also in some way ‘embedded’ in the
organisation. This is also a response to middle-class family disapproval of BPO
careers. Infosys BPO and Transworks have instituted periodic family days that serve
as an educational experience for family members as they learn about the various facets
of life in the BPO industry and are introduced to team leaders. At Microland, when
new employees are hired, the company organises family days where presentations are
made to show parents what the work is about as this reduces pressure on the young,
new employees (interview, Sowjanya).
Integrating the family at the time of hiring is also common. Accenture’s BPO arm
has re-engineered its hiring process to involve employees’ families right from the
interview stage to the post-recruitment phase. During the advanced stages of an
interview, the company asks the prospective candidate to bring his or her family or
spouse along. And speci?cally geared to retention, many BPOs offer family rewards
for longer service. Infosys BPO offers insurance packages for the family (interview,
Samit). GAVS organises picnics and get-togethers for employees and their families
(interview, Sridhar).
There is also the notion of work–family balance, a response to the problems
expressed by young people. For example, at Wipro Spectramind, there are times when
an employee needs temporary leave from work when his or her partner has been
posted abroad. Such requests are accommodated as far as possible. When a husband
and wife pair works for Wipro, the company tries to ensure that both of them are
always placed at the same location.
In summary, BPO ?rms are experimenting with a variety of approaches to control
turnover. At this point in time, we do not have any good cross-sectional data to
determine which class of approaches work better than others in helping control
turnover. On the one hand, high levels of turnover re?ect a general shortage of skills.
On the other hand, some ?rms experience lower turnover than others. We know, for
example, that at Sitel, the attrition rate is down to 30 per cent from 37 per cent in just
eight months as a result of the part-time educational opportunities (Shrinate, 2004).
Also, we are told that the novel strategies at 24/7 Customer has reduced ‘infant
mortality turnover’ to less than 2 per cent (Menon et al., 2004). As a result of Motif ’s
fun-at-work strategies, 97 per cent of Motif employees said in the same Dataquest-
IDC survey that they ‘look forward to coming to work.’
However, there is some recent evidence of disillusionment with these novel strategies
as well. According to the HRmanager at Infosys BPO, ‘Fun doesn’t create engagement
with the company—fun can only help if done simultaneously with the core HR
functions’ (interview, Samit). Also, the HR manager at Microland said, ‘Fun culture
helps but it isn’t a differentiator—in order to be successful, a differentiator is needed!’
(interview, Sowjanya). The founder of TakeSolutions echoes this sentiment: ‘the fun
culture etc is “hygiene factors” which the company has to ful?l’ (interview, Sri).
148 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Finally, some BPOs are also making small but noticeable attempts at trying to
increase the pool of skilled workers available to the BPO industry. Infosys BPO,
inspired by their sister organisation Infosys Technologies’ initiative, now has a pro-
gramme called Genesis that trains professors in arts and science colleges in second-tier
cities in soft skills such as communication, problem solving, team building etc. (inter-
view, Samit). These professors then conduct workshops for students in their respec-
tive colleges, thus creating ‘industry-ready’ students who are also enthusiastic about
entering the BPO industry. Similarly, Microland is trying to promote an ITES special
curriculum in schools and colleges for all students interested in the industry (inter-
view, Sowjanya).
Macro-level responses: governments and industry association
Central and state government
Governments have a signi?cant role to play in creating skills equilibria (Kuruvilla
et al., 2002). Speci?cally, the problem in the BPO industry is the supply of skilled
labour. Governments could, for example, introduce courses of study in government-
funded universities and colleges that are relevant to industry needs and provide
incentives for the private sector to enhance language and communication skills for the
industry (the industry has demanded this for quite some time). State governments
with large BPO clusters have been more responsive than the central government in
this regard (e.g. West Bengal, Orissa, Kerala, Karnataka and Andhra Pradesh),
although their efforts are preliminary and variable. The West Bengal government, in
association with NASSCOM and the Confederation of Indian Industry, is providing
a platform to facilitate exchanges between representatives from the information tech-
nology (IT) industry and academia. Because industry is the end-user of the human
resources, the government feels that it should have more say regarding the curriculum
and the process of delivery in colleges and universities. In this way, universities also
become aware of the needs of the industry to churn out readily employable
professionals. The government of Orissa, realising that there’s a dearth of graduates
with expertise in IT and pro?ciency in English, has started a training programme
in collaboration with Bangalore-based BPO companies like MA-FOI and NEXT
(InfotechOnline, 2004).
8
Governments could also assist with reducing both recruitment and training costs for
the BPO industry by screening college graduates for their readiness to be part of the
IT-ITES industry. Some state governments have introduced various assessment tests
to test for industry ‘readiness’, helping streamline the ?ow of college graduates to the
BPO industry. The government of Karnataka has introduced an aptitude test called
the BPO-SAT or BSAT to measure verbal and analytical skills, which is administered
through a private service provider called MeriTrac (KPMG, 2004). Similarly, the
government of Andhra Pradesh has introduced a Graduate Employability Test
(GET) that speci?cally caters to certi?cation for the IT-ITES industry (KPMG,
2004).
8
Note that the governments have done considerably more for the software industry. Two state govern-
ments (Andhra Pradesh and Karnataka) have opened well-funded new institutes of IT to supply more
graduates to the high-end software industry. The central government has been slower to respond but has
recently established a nodal agency at the national level called Consortium for Indian Information Tech-
nology Education, which is supposed to coordinate and standardise education in the IT arena, and has
already established two more Indian Institute of Technology and has agreed to ?nance one more Institute
for Science.
149 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Focusing on the low-cost BPO industry, state and city governments have a key
role to play in reducing transportation costs by improving the public transportation
infrastructure. Providing safe, reliable public transportation would reduce about
40 per cent of human resource costs in the low-end BPO industry (for more details
on the transportation costs incurred by BPOs, see Ranganathan and Kuruvilla,
2007).
For both the KPO and software sectors, governments have a signi?cant role
to play in developing long-term high skills human resource capability. The central
government and its various agencies have considerably more to do in terms of
improving the higher education infrastructure to produce more highly-skilled and
doctoral-level researchers, scientists, engineers, and postgraduates in a number of
different disciplines for the knowledge processing and R&D segments. In short,
governments must create the ‘self-sustaining high skills eco-systems that are
found in Silicon Valley (a model for Bangalore and Hyderabad as Saxenian, 2000
notes), the Boston high technology Corridor, Cambridge (UK) and the ‘high mech’
clusters in Emilia Romagna in Italy (Finegold, 1999; Locke, 1996). The key chal-
lenge for governments is to improve second- and third-tier institutions to train stu-
dents, do more research, attract better faculty, and establish symbiotic ties with the
industry, following the pattern of the ?rst-tier institutions (such as the IITs). This
will require a complete re-evaluation of a heavily entrenched higher education
establishment to produce high-quality professors, high-quality students and better
research.
9
Industry association
NASSCOM has been more proactive in taking a longer-term view regarding skills
development for the outsourcing industry, although unlike the government, it has
limited in?uence over various policy arenas. To address labour supply and reduce
recruitment and training costs for the BPO segment, NASSCOM has introduced
a certi?cation programme for building frontline managers in response to the ‘mana-
gerial bandwidth’ problem. Managed by NASSCOM’s executive development
programme and QAI (the leading ‘quality’ consultancy in India), they offer industry-
relevant certi?cations (e.g. Certi?ed BPO Quality Analyst, Certi?ed BPO Team
Leader, Level 1), which have become popular among participants as well as
businesses. To identify the right talent pool for the industry, a new assessment tool,
the National Assessment of Competence for the BPO industry
10
, has been developed
that can be used to identify new talent pools in various parts of the country, but also
provide the industry, universities, and governments with information regarding key
training and development needs. NASSCOM’s long-term strategy is also evidenced
in its desire to start English-language training schools (Sengupta, 2006), given the
9
Obviously large-scale reform in public universities is necessary because almost every dimension of higher
education needs change. Financial issues and pay of professors and research associates are particularly low.
As a matter of interest the gross monthly salary for a senior professor at the IITs is roughly $675 per month,
not very different from what his or her student would earn at an entry-level job in the high-tech industry.
While professors are allowed to consult (they retain 65 per cent of the revenues), not many professors do
the cutting-edge research that provides consultancy opportunities.
10
The programme will test the aptitude of a candidate on seven different skill sets. This includes listening
and keyboard skills, verbal ability, spoken English, comprehension and writing ability, of?ce software
usage, numerical and analytical skills, and concentration and accuracy.
150 Sarosh Kuruvilla and Aruna Ranganathan
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
industry’s dissatisfaction with a whole host of labour market intermediary ?rms
11
,
who have not been able to meet the industry’s needs thus far.
12
Finally, NASSCOM
has created a National Skills Registry—a centralised database of all employees
working in IT services and BPO companies in India.
13
These are examples of
NASSCOM’s initiatives (there are many more). NASSCOM’s biggest achievement,
however, is that it has managed (through a variety of methods) to put these issues on
a slow-moving government’s policy agenda.
Note, however, that high turnover and shortages of skilled labour is hurting the
industry in terms of its ability to gain a greater market share and in terms of increasing
costs. A 2007 NASSCOM report shows that the total cost to company for BPO
associates who have been employed for six months to one year has gone up by 19 per
cent in 2006 compared with just 3–4 per cent in 2005. And employees leaving in the
?rst 12 months are quite irksome, as many of them would have just completed their
training (on average, training for voice-based processes takes roughly six to eight
weeks). Thus, India’s BPO ?rms are caught in the ironic position where India is the
preferred BPO destination in the world
14
yet the labour shortage is making it dif?cult
for India to further capitalise on this competitive advantage.
CONCLUSION
This article brie?y described the growth and associated HR problems of the business
process segment of India’s burgeoning outsourcing industry. The outsourcing indus-
try (including software services) has come to be viewed as the ‘primary engine of the
country’s development over the next few decades, contributing broadly to GDP
growth, employment growth and poverty alleviation’ (Srinivasan, 2006: 204). Within
the outsourcing industry, the BPO segment has witnessed the fastest growth and will
be larger than the much older software segment. The BPO segment is also growing in
terms of diversity with increasingly variegated ‘service lines’ both at the high end
(KPOs) and at the low end. The industry’s growth prospects, however, are threatened
by both high turnover and a shortage of suitably skilled personnel. At the high-end
KPO ?rms (particularly in ?nancial services, engineering services and life sciences),
the problem is primarily a lack of a pipeline of adequately trained employees, espe-
cially for the longer-term development of the industry. For the lower-end BPOs, the
problem is a shortage of English-speaking employees. Both ends of the industry are
experiencing high turnover.
11
Hero Mindmine, Akiko Callnet, Planetworkz (NIIT) that seek to provide trained people to the BPO
industry.
12
However, interviews with BPO HR managers suggest that the quality provided is highly variable: some
?rms tell me that they only take in one out of ?ve people provided by the intermediary ?rms. The problem
is that the intermediary ?rms have not developed a consistent set of standards that they can use to meet the
needs of the BPO ?rms.
13
This database contains third-party veri?ed personal, quali?cation, and career information of IT profes-
sionals and thus helps improve recruitment practices (and reduces recruitment costs) in the IT and BPO
industry. Prospective employers are also able to view the veri?ed resumes of IT professionals.
14
India’s leadership position is best demonstrated by the consulting ?rm AT Kearney’s comprehensive
evaluation tool developed to help corporations with their offshore location strategies. Their analysis
indicates that India has a clear and signi?cant lead over its major competitors, particularly with regard to
the dimensions of costs and the quantity and quality of skills. India’s score on their index is a 7.12, while
all of the other BPO competitors (China, Malaysia, Czech Republic, Singapore, Philippines, Canada, Chile
and Poland) scores range from 5.33 to 5.61. For a more detailed discussion of the methodology, see
http://Knowledge.wharton.upenn.edu/article/922.cfm
151 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
Although India has no dearth of managerial education and talent, the particular
demographic pro?le of BPO employees is posing several challenges for managers.
Established human resource practices that have been successful in building employee
commitment and loyalty generally and in reducing attrition do not seem to work as
effectively with this particular demographic group, and HR managers are experiment-
ing with a variety of novel approaches.
The current global economic downturn has hit the BPO industry hard, especially
for the large number of smaller ?rms in the business. This industry was growing at an
annual average rate of 30 per cent prior to the slowdown, but growth rates in 2009 are
hovering at about 15–18 per cent. The slowdown has resulted in considerable ‘resiz-
ing’, that is, many smaller companies have laid off people. Large companies have
slowed recruitment, and many have temporary hiring freezes in place, but on the
whole are still expanding, as more and more work gets offshored during this
slowdown. The average turnover rate in BPO ?rms has reduced by about 6–7 per cent
(NASSCOM). Yet industry experts remain very positive regarding the industry’s
growth prospects and predict high growth rates after 2011. Thus, despite the tempo-
rary respite, the problem of high turnover is bound to return. Therefore, future
research must inquire more formally into the effectiveness of different strategies to
reduce turnover for this demographic group in the Indian labour market.
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List of Companies Interviewed: 2007
1. LaserWords
2. Microland
3. Prodapt
4. Infosys BPO
5. TakeSolutions
6. GAVS
7. SSI
8. Infosys
Note: Interviews referred to in the text (Sowjanya, Suresh, Samit, Nupur, Anthony,
Sridhar, Sri and Samit) are managers at these companies.
153 Globalisation and outsourcing
© 2010 The Author(s)
Journal compilation © Blackwell Publishing Ltd. 2010
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