attracting & retaining talent in offshored indian

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All that Glitters is not Gold: Employee Retention in Offshored Indian Information Technology Enabled Services Author Thite, Mohan Published 2010 Journal Title Journal of Organizational Computing and Electronic Commerce DOI https://doi.org/10.1080/10919390903482390 Copyright Statement © 2010 Routledge. This is an electronic version of an article published in Journal of Organizational Computing and Electronic Commerce, Vol. 20(1), 2010, pp. 7-22. Journal of Organizational Computing and Electronic Commerce is available online at: http:// www.informaworld.com with the open URL of your article. Downloaded from http://hdl.handle.net/10072/35720 Griffith Research Online https://research-repository.griffith.edu.au

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Page 1: Attracting & Retaining Talent in Offshored Indian

All that Glitters is not Gold: Employee Retention in OffshoredIndian Information Technology Enabled Services

Author

Thite, Mohan

Published

2010

Journal Title

Journal of Organizational Computing and Electronic Commerce

DOI

https://doi.org/10.1080/10919390903482390

Copyright Statement

© 2010 Routledge. This is an electronic version of an article published in Journal ofOrganizational Computing and Electronic Commerce, Vol. 20(1), 2010, pp. 7-22. Journalof Organizational Computing and Electronic Commerce is available online at: http://www.informaworld.com with the open URL of your article.

Downloaded from

http://hdl.handle.net/10072/35720

Griffith Research Online

https://research-repository.griffith.edu.au

Page 2: Attracting & Retaining Talent in Offshored Indian

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All That Glitters Is Not Gold: Employee Retention in

Offshored Indian Information Technology Enabled Services

Mohan Thite

Senior Lecturer, Department of Management,

Griffith Business School

Griffith University

170 Kessels Road

Nathan, QLD 4111

Australia

Email: [email protected]

Phone: +61 7 3735 7643

Fax: +61 7 3735 3887

Short Title: All that glitters is not gold

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ABSTRACT

Increasing offshoring of customer contact services to destinations such as India is

underpinned by the availability of low cost and good quality workforce. But this competitive

advantage is under threat with talent shortages, wage increases and most importantly, high

employee attrition. Based on empirical studies and person-organization fit literature, this

paper identifies and addresses some of the key issues and challenges in retaining talent in the

Indian business process outsourcing sector, such as pay satisfaction, work organization,

employment branding and longer term career advancement opportunities. It recognizes the

need for multi-pronged retention strategies in a highly competitive, changing and fast

growing part of the global services sector.

Key Words: Information Technology Enabled Services; Business Process Outsourcing;

Offshoring; India; Human Resource Management; Employee Turnover; Employee Retention

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INTRODUCTION

Customer contact or call centers are today the most used form of customer interface and

present the ‘personality of the firm to the customer over the phone’ [1]. While information

technologies and the internet are the main engines of growth in this industry, the quality of

the workforce is the key to customer satisfaction [2]. However, call centre work is essentially

characterized by certain inherent negative features, such as highly standardized, routine

workflows with high performance monitoring and low job discretion, creating a stressful

work environment for the customer service representatives (CSRs). Consequently, across the

industry employee satisfaction is low and turnover relatively high [3].

In response to competitive pressures and the need to reengineer the business processes in line

with their core competencies, organizations are increasingly outsourcing call centre work to

third party providers [4]. As commerce becomes more and more globalised, so is the

outsourcing of work to overseas business process outsourcing (BPO) providers, particularly

from the developing world, offering low cost and reasonably good quality services, thanks to

cheaper and powerful information technologies and relatively abundant supply of qualified

workforce.

Amidst this backdrop, India has acquired a formidable reputation as a premium offshore

destination for information technology enabled services (ITES). In 2006-2007, the exports

from the Indian ITES/BPO industry grew by 33.5% to reach US$8.4 billion and provided

employment to over half a million people [5]. This achievement is underpinned by the

success of the IT industry in offering high value global IT services; in fact most of the top

indigenous BPO/ITES providers in India are fully owned subsidiaries of reputed IT services

companies, such as Infosys, Wipro and HCL. The most compelling selling point for the

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industry is the abundant supply of young, educated, English speaking workforce fuelled by an

annual national supply of around 3 million graduates [6]. What is more, the wages in India

are a fraction of those in the Western countries, delivering a cost advantage, estimated to be

between 25-50% on the cost base in the West [5]. Generous government incentives and

relaxation of labor laws for the ITES/BPO industry have also contributed to its mushrooming

growth [7]. The industry today enjoys a demonstrated process quality and expertise in global

service delivery and employs the “largest pool of offshore talent – accounting for 28 percent

of the total suitable pool available across all offshore destinations and outpacing the share of

the next closest destination by a factor of 2.5” [8]. This scenario perfectly fits a popular

Indian political slogan: “India shining”.

But all that glitters is not gold. According to a global call centre study, Indian call centers

have the highest employee turnover of 40% against a global average of 20% and almost 60%

of employees have less than one year of tenure at work [9]. It is estimated that there may

possibly be a skill shortage of up to half million workers in the Indian IT and ITES industries

by 2009 (10, p. 19). Similarly, a comparative analysis of call centers in the Asia Pacific

region (including China, India, Philippines, Australia, Malaysia and Singapore) reveals that

while India had the second lowest average full-time customer service agent annual salary

(US$3334) behind China, it had the greatest level of agent attrition (38%), lowest average

employee tenure (11 months) and highest rate of employee absenteeism (15

days/employee/annum) [11]. Thus, it appears that young and enthusiastic Indians who get

attracted to the glitter of the ITES/BPO industry that showcases the glamour of working in a

high tech environment for global brands, get disillusioned within months of joining and quit

in large numbers mostly to join another employer in the same industry.

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This paper identifies and analyses the underlying causes for high employee turnover by

looking at both macro (industry) and micro (organizational) factors, as pinpointed by

researchers, managers and employees. It specifically focuses on work organization that

impacts on HR practices and outcomes, employees’ perception of factors that make them

stick to or leave employment and managerial opportunities and constraints with regard to

employee retention. The paper begins with a broad overview of the industry followed by

human resource management (HRM) issues and challenges. It is followed by an overview of

person-organization fit literature that underpins the conceptual framework for the study. It

then presents the methodology and results of an empirical case study of four large Indian call

centre/BPO firms. The discussion section draws managerial implications and future research

directions for HR theory and practice within an offshored service delivery environment.

WORK IN INDIAN ITES/BPO INDUSTRY

In the context of call centers, there are two main customer segments, one is mass market, low

value customers with simple, routine needs requiring cost minimization strategy and another

is high value customized market requiring innovative, relationship building strategy [12, 13].

These market segments define the key operational requirements of HRM, such as work

design that determines the nature and extent of work discretion and performance monitoring

[14]. Routine, transactional tasks require low employee discretion and high performance

monitoring as the emphasis is on minimizing costs and maximizing efficiency. On the other

hand, complex, relational tasks require employees with high levels of education, functional

expertise and discretion. In the latter market segment, employers are expected to deploy high

involvement and commitment work practices, such as autonomous teams, extensive training,

and performance based rewards.

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In between the low end mass production model and high-end professional services model,

Batt and Moynihan [3] propose a hybrid model that they call mass customization. They

suggest that mass customization strategy coupled with high involvement work practices is an

economically viable model for service and sales call centers. Kinnie, Hutchinson and Purcell

[15] found evidence for this kind of hybridization in call centers between elements of

commitment and control and call it “fun and surveillance”. Similarly, Houlihan [16] found

that the paradoxical strategy of ‘low discretion, high commitment’ operates in call centers in

a variety of forms with persistent pull towards control as a substitute for, rather than a

reflection of, commitment.

Many writers have painted a bleak picture of call centre work with dramatic labels, such as

‘electronic panopticons’ and ‘dark satanic mills of the 21st century’ [17, 18]. However,

contrary to such stereotyped images, employee well-being in call centers is found to be

similar to that in other comparable forms of work and associated with effective job design,

less intense and development-oriented performance monitoring, supportive team leader and

HR practices [19, 20]. Similarly, Zapf et al. [21] found that call centre jobs, particularly,

outbound activities, were less stressful with regard to job stressors, thanks to better

organization and investment in information technologies. However, in service jobs that

involve emotional labor, work related factors, such as lack of autonomy, length of tenure,

working hours, workload and lack of variety can lead to emotional exhaustion and

absenteeism [22, 23].

Majority of Indian BPOs are “captive” units of global companies that conduct their back

office operations from India or local “third-party” vendors that cater to international clients

with the remaining spread between joint ventures, global BPO players and global

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consultancies [24, 25]. There are important differences between the Indian and Western call

centers and they include the former mostly catering to overseas clients, employing younger

age customer service representatives (CSRs) with mostly tertiary qualifications who

predominantly work full time, during night shifts and are almost devoid of trade union

representation [25, 26, 27, 28].

Indian BPOs exhibit formal, structured and rationalized HRM systems that include tightly

controlled structures with customer focus, strategic role played by HRM function and several

employee involvement and commitment work practices [24]. Taylor and Bain [26, p. 46]

found that technological aspects of work organization in the Indian call centers are very

similar to their Western counterparts; however, in terms of work flows, “the type of calls

handled in India tends to be highly routinized, simplified in content, tightly scripted and of

short duration”. Based mainly on the cost-reduction logic associated with business process

offshoring, Taylor and Bain [25, p. 277; 26, p. 37] conclude that “India largely hosts an

extreme version of the mass production model” and “tends to replicate, if not exacerbate,

many of the difficulties experienced in the developed world”.

According to a global call centre study, “monitoring activities in Indian call centers are the

most intense of any country” and 75% of them have low job discretion (9, p. vii). Batt et al.

[28] found a pattern of relationships – between high levels of routinization and turnover in

the Indian BPO sector. What they found striking in the Indian case was that on the one hand,

employees were highly qualified and skilled but on the other hand, they had few or no

opportunities to use those skills because of “significantly lower levels of employee discretion

and problem solving opportunities, and higher levels of electronic monitoring and

performance management (p. 353)”.

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EMPLOYMENT IN INDIAN ITES/BPO INDUSTRY

Similar to their Western counterparts, Indian call centers are a “contested terrain” [25, p. 278]

and accordingly, research studies on them are characterized more by “heated debate than

systematic empirical investigation” [28, p. 335]. There is a distinct dichotomy in the way

Indian call centre employees are portrayed in the business and the HRM literature. The

business press heaps praises on the service quality, productivity, professionalism and high

skills of Indian call centre agents [29], whereas researchers point to the difficulties and bitter

experiences these agents often face in servicing overseas clients, such as locational masking,

westernized pseudonyms [30], organizational control on employee identity [31], ill effects of

extreme version of the mass production model [25], and physiological and psychological ill-

health [32].

Several studies have concluded that retention is one of the biggest challenges faced by Indian

call centers [24, 25, 27, 33, 34]. Employee turnover figures in the Indian ITES/BPO industry

vary widely between studies, from 20% to over 100% but the general consensus seems to be

around 40 to 50% [9, 11, 33], which makes it one of the highest in the global call centre

industry. More importantly, an estimated half of this turnover occurs in the first 6 months of

employment [11, 35]. Skill shortage is another major problem in the Indian ITES/BPO

industry [7]. Despite India producing nearly three million graduates every year, the

trainability and employability of the labor force is seen as the key challenge in terms of labor

supply [36, p. 6]. The problem is even more acute at the supervisory and team leader level

because of the short tenure of employees [34]. It is further exacerbated by the fact that the

booming Indian economy has created plentiful job opportunities for generic graduates,

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outside ITES/BPO industry, including retail, airline and hospitality sectors which pay equally

competitive salaries [37].

Escalating wage costs are further eroding the competitive advantage enjoyed by the Indian

ITES/BPO firms. Labor costs constitute about 50% of total call centre budget in India [11]

and for the past many years, annual wage increases in the technology and outsourcing

industry are in the range of 13 to 14 percent, one of the highest in the Asia Pacific region

[38]. Indian call centers handle a much higher percentage of outsourced as well as outbound

activities compared to their counterparts in the Asia Pacific which makes managing human

resources more challenging than captive and inbound or blended centers [11]. Media reports

suggest that some Western companies have started pulling back their offshore outsourcing

business in India “largely because of frustration over rising wages for Indian engineers and

difficulties in retaining them” but analysts believe that “India still offers IT and engineering

talent at a relative cost advantage to US firms, and so the country will retain its appeal as an

offshoring destination” [39].

Turnover is influenced by a number of variables and it is difficult to correlate it with a single

or few variables. For example, a meta analysis of employee turnover by Cotton and Tuttle

[40] across a range of industries found commitment, salary, age, sex, organizational tenure,

educational attainment, perceptions of job mobility, met expectations, work-group cohesion,

opportunities for advancement, and job performance to be highly related to turnover. In the

Indian call centre context, many studies have identified the reasons for high attrition. One

study lists limited growth and career development opportunities compared to employees’

higher educational standards, boring and monotonous work, night shift working, less pay and

management favoritism as triggers for employee turnover [27]. Another study highlights

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dissatisfaction with wages (47%), lack of career opportunities (45%), leaving to pursue

higher education (29%), illness (28%) and physical strain (22%) [41]. Wallace [11] provides

evidence to suggest that younger and particularly, male employees in call centers nominate

‘pay satisfaction’ as a key determinant of motivation and considering that Indian call centre

employees are predominantly young and male, the importance attached by them to wages is

to be expected. Thus, turnover in Indian call centers is a result of many complex factors,

including organizational characteristics, such as size, type (in-house vs outsourced services

and inbound vs outbound calls), HRM policies (such as wage level, work design and

conditions and advancement opportunities) and employee characteristics (such as age, gender

and education).

While retention strategies across different occupational groups and industries have many

common features, such as competitive pay, good working environment and progressive HR

policies that offer opportunities for advancement, they need to be context-specific and

evidence based to be more effective [42]. Studies on employee retention in call centers have

highlighted various factors relating to person, job and organization. They include

organizational commitment, job involvement, role clarity, reasonable work load, challenging

tasks, distributive justice, group cohesion, task variety and diversity, extensive training and

flexible working hours [43, 44]. Batt et al. [28, p. 20] suggest that greater work discretion,

self-directed groups and high-involvement work and HR practices may go some way in

reducing turnover and increase service quality in call centers.

Since the paper deals with a sun rise industry that is young and evolving and particularly, the

offshoring environment that is even younger and more dynamic, it is important to test the

research findings against an established theoretical framework. In management literature, the

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person-organization (P-O) fit theory with its various manifestations has attracted the attention

of scholars for over 100 years as a predictor of various employment outcomes, including

employee turnover and retention [45, 46, 47]. The following section provides a brief

overview of fit literature.

PERSON-ORGANIZATION “FIT” THEORY & ITS IMPLICATIONS FOR

EMPLOYEE TURNOVER

It is well established in organization research literature that both individuals and

organizations engage in a mutual process of matching each others’ expectations before and

during employment [47, 48]. Researchers have used different

dimensions/conceptualizations/levels of fit, namely, Person-Environment (P-E) fit, Person-

Organization (P-O) fit, Person-Vocation (P-V) fit, Person-Job (P-J) fit, Person-Preferences

(P-P) for Culture fit, and Person-Team (P-T) fit as a predictor of various employment

outcomes, such as job satisfaction, organizational commitment and intent to turnover [46].

Wheeler et al [46] argue that the various dimensions of fit need to be considered from both

supplementary and complementary perspectives, that is, the individual characteristics should

match not only the existing organizational environment but also enrich it by adding what is

missing.

Person-organization (P-O) fit is the most popular dimension in the fit literature, which

according to Chatman [49] is “the congruence between the norms and values of organizations

and the values of persons” (p. 339). P-O fit also refers to the individual and the organization

meeting each other’s demands and needs. Accordingly, Kristoff [47] defines P-O fit as “the

compatibility between people and organizations that occurs when: (a) at least one entity

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provides what the other needs, or (b) they share similar fundamental characteristics, or (c)

both” (p. 4).

Of the various forms of P-O fit (i.e., objective fit, perceived fit and subjective fit), the

subjective fit is seen to be the strongest predictor of intent to turnover [50]. The P-O fit has

been shown to significantly predict employee retention in call centre jobs [51]. Similarly,

researchers have found positive correlation between individual personality types and

vocations that fit them [52]. The person-job (P-J) fit highlights the congruence between

individual abilities, such as knowledge, skills and abilities (KSAs) and organizational

demands for a particular job or occupation [47].

Extending the “fit” literature, Mitchell, Holtom, Lee and Erez [53] propose a holistic model

of employee turnover that includes both on and off the job factors and are collectively called

‘job embeddedness’. It not only includes person-organization fit but also off the job fit, such

as location, climate, social amenities and activities. It is shown to predict intent to turnover

across a range of knowledge-intensive occupations, such as technical professionals [54]. A

meta analysis of fit literature concludes that “fit matters” and different dimensions of fit are

quite distinct and measure corresponding aspects of fit [45].

One of the limitations of the fit literature is that it may be seen as a “static construct that

cannot be manipulated by either the person or the organization” [46, p. 286] but today, both

individuals and organizations face constant pressure to adopt to change. When a significant

change occurs, such as organizational restructuring, the individuals might decide to quit or

accept change, depending on what choices are available and acceptable to them. Similarly,

economic cycles influence the availability of jobs. For example, when there are plenty of job

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opportunities in a high growth industry, individuals may choose to switch jobs for any

number of reasons. Thus, environmental change can seriously affect the existing ‘fit’

triggering a response from the individual and/or the organization. The implications of fit

literature to offshored BPO industry will be discussed later in the paper.

CASE STUDY

Conducting social research in the Indian ITES/BPO industry is challenging, primarily

because of the political sensitivity associated with the loss of jobs in the West due to

offshoring of services. Most of the empirical studies on Indian call centers are based on

managerial interviews as permission for access to employees is normally denied on the

pretext of client confidentiality. The research study referred to in this paper adopts a “mixed

method case study approach”, combining employee survey and managerial interviews. Based

on convenience sampling, four large Indian ITES/BPO firms participated in the study,

involving 638 customer service representatives (CSRs), the largest of its kind for this industry

to date, and 15 HR and operations managers as subject matter experts.

All the four firms that participated in the study are indigenous third-party providers and spin-

offs of the major Indian IT companies. They catered only to overseas clients in a range of

industry segments, including financial services, health care, telecommunications, internet

service and IT service/support. All the firms were less than 10 years old but 3 of them had

already become the top 15 ITES/BPO firms in India at the time of the study in 2005. The

number of CSRs employed in these firms ranged from 1700 to 12,500 across multiple sites,

located in different cities in India. Reflecting the multi-functional character of their

operations, they had a mix of inbound and outbound activities as well as front office customer

care and back office processing, managed by process teams with a team size of about 15

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CSRs. The proportion of voice based work ranged from 20 to 50 percent. The key

performance indicators (KPIs) and targets for each process were governed by the service

level agreement (SLA) with the principal client.

Of the 638 CSRs who responded to the survey, an overwhelming 90 percent were between 20

and 30 years of age and 83% were singles. 61% were male and 98% worked full time. 72%

did not have previous experience as a CSR. 67% had a graduate degree and 23.5% had a

post-graduate degree, taking the total number of graduates to 90%. On an average, these

employees had put in 11 months of service with the employer they worked for at the time of

the survey. While 63.5% worked in an in-bound call area, 16% worked for out-bound and

20% worked in both types.

The employee survey was composed of five-point Likert scale questions on various aspects

of call centre work and employment, including training, career, work design and

organization, workplace relations and occupational health and safety. Keeping in mind the

focus of this paper, the results reported here are limited to only those aspects that have an

influence on employee turnover/ retention. As very few items in the survey related to

turnover/retention, there was not much scope to probe the data deeply and the results should

be seen as tentative first steps towards developing a deeper understanding of the issues

covered and to identify further research directions. To enrich the quantitative data from

employee survey and to increase the breadth and depth of analysis of the complex

phenomenon of turnover/retention, the results section includes insights from semi-structured

managerial interviews with HR and operations managers.

RESULTS

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Extent of Employee Turnover

To the question in the employee survey ‘whether you see yourself staying in your current job

for the next 3 years’, 38% of employees said, yes; 26% said, no and 36% were unsure.

Combining ‘no’ and ‘unsure’ responses, the potential employee turnover amounts to 62%

over 3 years. However, this figure on ‘turnover intention’ reveals little when we consider the

‘actual turnover’ data obtained from the HR managers in our interviews.

In the four large Indian call centers that were covered in the study, the HR managers revealed

that their employee attrition was running at above 100% per annum, except one where it was

35%, possibly because it was mostly a non-voice operation. In line with other studies, the

average tenure of CSRs in these call centers was 11 months. One HR manager stated that

some call centers try to artificially reduce the turnover figure by not including those who

leave during the initial induction period and those who are fired for poor performance

(involuntary turnover).i

The extent of the problem and its repercussions on recruitment, training and productivity can

be judged by the figures given by a HR manager at one call centre where the turnover was

running at 100% (including 25% involuntary turnover) and just to keep the workforce

numbers at even keel, the company which employed about 3000 CSRs at the time was

recruiting 300 new employees per month.ii

In this firm, 50% of the turnover occurred in the

first 90 days of employment. It was no wonder that the company simply looked to recouping

its employee costs in the first 5 months of an employee joining the company and any tenure

thereafter was regarded as a bonus.

Factors Influencing Turnover/ Retention

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In the employee survey, the respondents were asked to identify the three most important

factors from a given list which made them to ‘stay in their current employment’ or ‘look for

other career options’. The employees listed satisfaction with wages (27%), enjoyment of the

work (20%), and chances for advancement (17%) as three most important factors that made

them stay in their current job. These were followed by employment security (13%), lack of

other career opportunities (8%), flexible working hours (7%), fair treatment from

management (5%) and friendships at work (4%). Similarly, they listed dissatisfaction with

wages (39%), lack of chances for advancement (22%) and the routine/boring nature of job

(7%) as three most important factors that motivated them to look for other career options.

Clearly, ‘satisfaction with wages’ emerged as the most important factor that influenced

employees’ decision to stick to or leave their job. This was closely followed by ‘chances for

advancement’ and ‘nature of the job’. Surprisingly, neither employment security nor flexible

working hours were seen as relatively important.

With regard to remuneration, the only question covered in the employee survey was about the

importance of ‘performance bonuses’ to which an overwhelming 79% employees responded

that they are very important to them. When asked about the likelihood of layoff or

retrenchment in their current employment, only 23% said it was likely. Again, reflecting the

availability of plentiful jobs in the Indian ITES/BPO industry, 62% of employees agreed to

the statement ‘if I were to lose my job here, it would be relatively easy for me to get as good

a job at another call centre straight away’.

The managerial interviews revealed that the management did not seem to be aware of the

importance that employees attached to wages as no HR manager recognized it as an issue.

They identified employment branding, career pathing, pursuing higher education and

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marriage as the main reasons for attrition. Since most of the work is carried out during night

times, many employees, particularly women tended to leave their employment after getting

married. Other retention issues identified by the managers are described in the following

sections.

Work Organization

In terms of workload, employees generally agreed that management expectations with regard

to call handling had increased (60%) and that their call centre required more number of

employees given the general levels of call demand (50%); however, with regard to their own

workload, employees seemed to be quite happy with their work targets (69%) as well as pace

of work (63%). With regard to job discretion, employee feedback yielded mixed results. On

the one hand, they were quite satisfied with the time given to meet the expectations of the

caller (57%), the number of breaks during the working day (60%), encouragement given to

come up with new and better ideas (71%) and with the opportunities to advance in the call

centre (61%). On the other hand, only 25% of employees believed that their job made full

use of their education and experience and accordingly, only 43% were satisfied with the

opportunities that their job gave them to make use of their skills.

Employment Branding

During managerial interviews, the social stigma attached to call centre employment was seen

by managers as a growing and worrying feature. As explained by an HR manager, “call

centre employment is certainly not seen as a stable, long-term, socially prestigious

employment; rather as an adhoc, low esteem job”.iii This was seen to be particularly so with

regard to women entering the workforce as in India, women working during night times are

frowned upon. Adverse media reports about call centre employment, such as sexual attacks

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on women while commuting to and from work at night, increasing perceived promiscuity

amongst young employees, customer abuse on the phones and ill effects of night time

working on employee well-being have tarnished call centre employment branding. Since

there are fewer opportunities for advancement into supervisory/managerial positions for call

centre employees, the long-term attractiveness of the job is also poor.

Naturally, poor employment branding makes the task of talent attraction and retention that

much more difficult. One firm covered in the study addressed the problem by visiting college

campuses by using the employees who were also the alumni of the colleges visited as

“campus ambassadors” to educate students to improve the image of BPO employment.iv

Another firm conducts “open days” for family and friends of employees to visit the call

centre offices to see for themselves the facilities provided in the hope that it would improve

the social image of call centre employment.v

Career Management/ Retention Strategies

Even though employees nominated ‘chance of advancement’ as the third most important

factor to remain in their current job, mangers interviewed in the study identified career

pathing as a major issue in retention. In terms of opportunities for promotion, HR managers

in all the four ITES/BPO firms stated that they promoted people from within to the extent

possible but also identified limitations in pursuing this policy, such as lack of supervisory

skills/ potential in existing employees due to limited work experience/ tenure. Most of the

people join the industry as CSRs at a very young age with no experience and get promoted as

team leaders after just about 2 years’ experience. One manager likened the situation to

“trying to make a 10 year old wine in 2 years”! vi The managers found it frustrating that many

employees expected promotion based on tenure and believed that promotion meant no more

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telephone handling and only supervision. One firm offered horizontal movement across

different processes and clients as a means to address the problem of monotony in the job.vii

However, in the words of one manager, “the BPO industry lacks the flexibility of IT industry

in providing job enrichment, job enlargement, job rotation and task variety as motivational

measures.viii

According to the managers, the industry has put in place some of the best practices in people

management, such as frequent performance bonuses, organizing social events to reduce stress

and increase workplace social cohesion, flexible work hours to the extent possible, transport

services to and from home, cafeteria, tenure bonus, educational scholarships to pursue higher

studies, promotion from within, loan schemes, open day for parents and friends, referral

bonus, and town-hall meetings to listen to grievances and suggestions for improvement.

Going up the value chain is seen as one way to engage and retain employees. However,

according to one manager, “specialist call centre services in data mining, accountancy, equity

research and other specialized services require special domain knowledge and expertise and

are out of bound for generalists which most CSRs are”. ix

Even though the employee survey did not cover team leaders and supervisors, they figured

prominently during managerial interviews with most of the managers expressing concern

about the supervisory skill vacuum. Due to high attrition of CSRs, typically after a short

tenure of less than a year, HR managers found it difficult to develop team leaders/ supervisors

who needed about five years’ experience at the front line to be effective leaders and therefore,

employers were forced to promote CSRs with just two years’ experience to make up the

shortfall. As explained by the managing director of a reputed BPO firm,

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“The industry is growing at the rate of 50%/annum, i.e., doubling every 2 years,

which means in the next 5 years it will have 5 million employees and to manage them

we need at least 30% i.e., 400,000 supervisors. Where will we get them at such short

notice? You can’t grow managerial talent overnight!”x

DISCUSSION

It is clear from the literature and the results of the case study that while human resources are a

key strength of Indian ITES/BPO industry, they are also its biggest challenge in terms of

attracting, retaining and engaging talent. The industry is hardly ten years old but has been

growing rapidly creating huge demand for employees. Compared to the Indian IT industry,

the ITES/BPO industry has had much less time to mature. The industry analysts and

consultancy reports suggest that on the supply side of the labor market, it is not the quantity

but the quality of “employable” people that worries recruitment managers. They are therefore

forced to spread their recruitment network wider and deeper and in the process, the quality is

likely to suffer.

What is most worrying though is that even those who join the industry leave after a short stint

to join another employer in the same industry. This puts additional pressure on HR managers

who have to not only cater to the demand for human resources created by rampant growth but

also fill the void left by those who quit. Even though the employee turnover figures vary

between studies, it is clear that the problem is huge by global call centre industry standards

and if continued unabated, will slowly but surely blunt the competitive advantage the industry

enjoys in terms of the availability and quality of labor.

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The literature on call centers suggests that certain inherent negative characteristics of call

centre work, such as routine workflows, tighter control, higher performance monitoring and

less job discretion tend to contribute to lower employee satisfaction and higher turnover. It is

said to be more so in offshored call centers which tend to offer even more standardized

workflows and inferior HR practices due to their focus on cost minimization. The case study

in this paper reveals that while employees are quite happy with their workload, they have

mixed opinion about job discretion with relative satisfaction about many aspects of work

design but not with regard to their ‘job making full use of their education and experience’.

Compared to Western call centers, Indian CSRs are younger and more educated and

therefore, likely to feel more dissatisfied about job discretion and opportunities for career

advancement. While HR managers can be justifiably proud of work organization and

progressive HR practices, clearly they need to focus on the long term by offering employees

opportunities to improve their ‘employability’ through continuous training that enhances skill

base and offering a clear but credible career path within the call centre environment.

The fit literature discussed before, particularly person-job fit aspect of it, resonates with the

findings of this study where we find people performing tasks that do not match their

qualifications in terms of knowledge, skills and abilities (KSAs). The fit theory also provides

several practical guidelines to HR professionals in the offshored BPO industry to hire and

retain personnel. At the time of entry, it is highly desirable to provide a “realistic job

preview” to prospective hires so that they can decide whether the BPO environment and jobs

meet their personality traits and career needs. For example, the job preview should highlight

not only the glossy picture of BPO employment (e.g., working for reputed global clients in a

high-tech environment) but also the not-so-glossy aspects of the job, such as working during

odd hours, stressful and demanding work requirements. Even though this assessment is

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subjective, it is empirically shown to be a useful means of assessing fit. Similarly, employee

selection strategies that specifically look for fit, such as structured interviews should be

included in the battery of selection tests [55]. This recommendation is particularly relevant to

call centre jobs as reinforced by McCulloch and Turban’s [51] empirical study in the call

centre industry which recommended that firms use actual measures of person-organization

(P-O) fit in their selection battery to maintain a stable workforce in historically high turnover

jobs (p.68).

The fit literature also highlights that workforce socialization practices can enhance or embed

fit during employment. In this regard, Chatman’s [49] study is particularly important as it

demonstrated that mentorship and attendance at social events increased person-organization

(P-O) fit within one year of organizational entry. Accordingly, organizations need to provide

various on and off the job opportunities for BPO employees to increase team cohesiveness

and camaraderie. Job sculpting is another useful means to fit the job to the individual [56].

For example, extroverted and sales oriented people may be more suitable to handle outbound

calls where persuasion and persistence are desirable job traits.

However, any effort or practice to increase person-organization fit is always a ‘work-in-

progress’ as economic environment, organizational requirements, job demands and individual

preferences keep changing. At the time of the study, the Indian economy in general and the

ITES/BPO industry in particular were growing so rapidly that there were plentiful job

opportunities. This was evident in employee responses where they indicated that employment

security was not a high priority for them and that that they were confident of securing another

job straight away if they were to lose their present job. The current global recession has

however changed the employment dynamics.

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In the case study, satisfaction with wages emerged as the most important factor influencing

turnover/ retention, in line with previous studies. Performance based incentives are common

across the industry and constitute up to 15% of employee earnings and are highly valued by

employees. The wage growth in the Indian ITES/BPO industry is already one of the fastest

across the global offshored call centre industry, where the ability to contain costs is a key

determinant of future business. In this scenario, increasing profit margins by going up the

value chain and offering niche services in the knowledge process outsourcing (KPO) can be a

strategic option for Indian call centers to retain employees and compete against other

emerging low cost competitors in countries, such as China and Philippines. Indian ITES/BPO

firms have started setting up operations in tier 3 and 4 cities in India to exploit lower

infrastructure costs as well as entering other low cost countries. Thus, Indian ITES firms

seem to be following their IT counterparts in developing a ‘global services delivery model’

whereby their operations can be onshore, nearshore or offshore, depending on shifting

competitive trends.

A major managerial implication of this study is that employers need to study the turnover

data very carefully and methodically in order to identify suitable retention strategies. For

example, it is noteworthy that a considerable portion of turnover occurs in the first few

months of employment underscoring the urgency to focus retention strategies in the early part

of employment. Similarly, anecdotal evidence suggests that those call centers that are big,

captive and engage in non-voice operations seem to fare relatively better in retaining

employees. It has been suggested that big and captive call centers offer better client and

process stability putting less pressure on the need to learn new products and services. Non-

voice operations are said to be less stressful with lesser employee turnover. This leads to one

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of the limitations of the study as it does not cover captives nor distinguish between voice and

non-voice employees. It also omits those call centers that serve the domestic Indian market.

Further, it does not take into account external labor market data on relative turnover and

compensation in other industries and occupations in India which are important from a

comparative perspective.

Another managerial implication is with regard to the recruitment and selection of the CSRs.

The employers need to assess the turnover intention of prospective employees by paying

specific attention to person-organization fit. In view of the overwhelming research evidence

that Indian CSRs have less job discretion compared to their education, employers need to pay

careful attention to work design and organization. By moving up the value chain, Indian

ITES/BPO firms can command better profit margins and offer more challenging work and

better pay. They also need to offer flexible work practices to better balance work and life.

Established and reputed call centers have an edge in enabling work-life balance for

employees, as their client base is more global and geographically wide spread which means

they operate in different time zones reducing the need to work mainly at night. Even other

call centers can offer better working hours, performance and other incentives, such as tuition

reimbursement to pursue higher education, to those with longer tenure and better

performance. Offering job rotation by moving employees horizontally across processes is a

good idea to reduce boredom.

It is also clear that call centre employment in India suffers from poor employment branding.

This problem needs to be tackled at the industry level with the industry association and major

employers coming together to work on improving the social image of the industry by

encouraging call centre employees to work as brand ambassadors during recruitment

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campaigns. Since community and family perceptions play a major role in the career choices

of Indian youth, it is important to engage the society at large via initiatives, such as public

open days to understand and appreciate the positive aspects of call centre employment, such

as facilities offered at work, strategic HRM practices and the benefits of working in a global

high technology services environment.

It needs to be stressed that the offshored services industry is hardly 10 years’ old and is

rapidly evolving and changing. Accordingly, the HRM issues and challenges will also change

over time. With advancements in information and communication technologies and

technology savvy customers, jobs can be further enriched and employees more empowered.

In many ways, the Indian IT industry can show the way forward for the ITES/BPO industry

as it too enjoyed dizzy growth during Y2K boom period and suffered from high employee

attrition. The recession in the global IT industry in 2002 however, lead to downsizing and

retrenchment following which employee attrition came down considerably. When the

industry recovered from downturn, it had become quite mature in handling ups and downs in

business cycles and consequent impact on HRM. Recent media reports suggest that after

rampant growth over many years, the current global recession is having an effect on the

Indian ITES/BPO industry with signs of first rounds of retrenchments. This may lead to

major restructuring within the industry and realistic employment expectations on the part of

call centre employees.

No doubt, India still holds the “gold” as a premier offshore destination in ITES/BPO but the

glitter on the gold dims somewhat when the ground realities of work and employment are

taken into account. Retention in any industry or occupation is multifaceted and situation

specific; accordingly, retention strategies need to be evidence based, grounded in

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organizational, industry and occupation specific realities and reviewed periodically. There is

no silver bullet when it comes to employee retention as it will always be a moving target.

i Interview with the Senior Manager, HRD of a call centre in Bangalore on 17th October, 2005.

ii Interview with the General Manager, HR of a call centre in Bangalore on 13th October, 2005.

iii Interview with Senior Manager, Talent Engagement and Development of a call centre in Pune on 27th June,

2005.

iv Interview with Senior Manager, HRD of a BPO firm in Bangalore on 17th October, 2005.

v Interview with Senior Manager, Talent Engagement and Development of a call centre in Pune on 27th June,

2005.

vi Interview with the Managing Director and CEO of a BPO firm in Bangalore on 20th July, 2005.

vii Interview with HR Manager of a call centre firm in Hyderabad on 18th October, 2005.

viii Interview with Senior Manager, Talent Engagement and Development of a call centre in Pune on 27th June,

2005.

ix Interview with Senior Vice President – HR of a call centre in Bangalore on 22nd July, 2005.

x Interview with the Managing Director and CEO of a BPO firm in Bangalore on 20th July, 2005.

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