Curb attrition; don’t fuel it during recession

June 7, 2009

Every cloud comes with a silver lining. With the BPO industry this has come in the form of an improvement in the employee turnout rate. Slowdown has finally arrested attrition in the once attrition-plagued industry.

Earlier, employee churn out of 30% to 40% was considered “normal” for the BPO industry. In the September quarter of 2008 however, this dipped below 20%, according to a report carried in Mint, the financial daily of Hindustan Times.

The trend got corroborated by other reports. “Business process outsourcing (BPO) companies have struggled for years with a labour pool largely defined by young workers who hopped from one employer to another, and rarely stayed with one,” The average stint for a BPO employee before recession as 11 months. The scene however is vastly improved now. Employees are afraid of changing horses mid-stream. And among the top beneficiaries of this fear psychosis are Genpact Ltd (attrition down from 31% to 24%), 24/7 Customer, Inc. (38% to 30%) and Convergys Corp., which are using this opportunity to strengthen their mid-level positions. Mid management was earlier the thinnest layer in the BPO industry. Today, there is virtually no churn happening at the mid-riff.

Reduce BPO employee Attrition

If, now, dumb companies begin to resort to uniform wage cuts to reduce their wage bill, the opportunity to reward top performance would once again be lost, resulting in the spread of discontent, across every layer of the organization. However if your intention is to make them leave, anyhow, somehow, including your best performers, then this might be the best strategy to adopt — treat them even and reward or punish them equally!

There is considerable proof (Case Study, Attrition Project) that 40 % attrition happens in first 120 days of hiring. “The cost of replacing a front-line employee, even by conservative estimates, is roughly 0.41 times his/her salary,” according to another report. This of course does not include the opportunity lost in rewarding your top performers!

Your best bet therefore would be to curb attrition not fuel it where it hurts the most! “Develop ‘retention matrix’ to keep track of and continue to reward your best performs,” recommends one expert. Identify and suitably reward the indispensable resource you need to hang on to during difficult times. Otherwise, they will be ripe for picking even for small salary increases.

The global best practice is to measure retention and to measure the cost and causes of unplanned attrition. Remember not all attrition is bad. On the contrary, planned attrition is good and must be part of your contingency planning.


Comments

3 Responses to “Curb attrition; don’t fuel it during recession”

  1. jo on June 12th, 2009 8:29 am

    Companies are trying to reduce their head-count in the global recession, not sure, if any company is concerned about employee attrition.

  2. Radhika on June 13th, 2009 12:48 am

    Perhaps not, which is why they run the risk of bleeding talent. That would be a very short-sighted approach. This may be the best time to cut flab but not the time to lose best performers. That would be disastrous. In fact, this may be the right time to poach talent from competitors!

  3. Curb attrition; don’t fuel it during recession | Outsourcing News on June 15th, 2009 6:16 am

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