Attrition: The bottom line in BPO quality
By Dean Rock, Marketing Director, Integreon

How would you measure the quality of BPO company? Your measure must be clear, quantitative, and apply to all BPO companies in all niches anywhere in the world. Sound impossible? This article proposes that attrition can serve as a broad indicator of BPO quality.

The Background: Hype Media

In the early days of the BPO phenomenon, industry talk centred around exploding revenues and staff strengths. Political backlash and security concerns each took turns as the issue on everybody's mind. Now, as the industry finally begins to mature, executives and buyers alike are turning their attention to more practical business issues.

Because of this new maturity, much of the media coverage and sales talk is no longer newsworthy. Broadcasting fantastic growth rates and revenue projections served its purpose: to convince buyers, investors, politicians and anyone who cared to listen that BPO, especially in India, is here to stay. But enough hype. It's time to get down to business.

The Current Situation

Many new players have rushed in to grab their share of the ever-expanding BPO pie. Buyers and investors face the unenviable task of sifting through many BPO options that are increasingly saying the same things. Offshore BPO companies in many different countries offer cost savings, core business focus, scalability and quality service.

Verifying a BPO's record of success is complicated by the fact that many existing clients insist on anonymity. But there are some minimum standards that a top notch BPO company must meet:

• BS7799 information security certification
• A global presence, especially in sales and implementation
• Detailed SLAs
• Clearly defined quality assurance and continuous improvement processes
• Training resources with proven domain expertise
• Management controls and practices that integrate with existing operations

Insisting on these criteria as minimums will narrow the field considerably. But we can still learn a lot from attrition. BPO executives measure the quality of their own operations by attrition rate; buyers should too.

The Importance of Attrition

The correlation of attrition and overall quality can be demonstrated by understanding how attrition relates to several core aspects of any BPO company: service quality, training, cost, and company culture and standards.

Service Quality

Quality of service is built on training and knowledge of the customer. Developing a staff with deep domain expertise is clearly impossible if 40% of your employees quit every year. This is exacerbated by the cultural barriers most buyers experience when working with offshore BPO companies. A bright young man from Kerala or Madhya Pradesh will require some time to fully understand the mentality of a New York investment banker. It takes time for an employee to become an expert service provider.

Training

Strong training programs reduce attrition by giving the employee a focused, useful skill set. Employees that receive valuable training know that future skill development is worth sticking around for. Further, strong companies invest in broader training, such as communication skills, time management skills, and management training. A company that invests little in training is more likely to face high attrition rates. Without significant and effective training, a service company has little chance of long term success.

Cost

There are many direct monetary costs to attrition: HR costs, lost productivity, and management overhead. Precisely determining the direct costs of attrition is difficult, but a common estimate is 1.5 times the employee's annual salary. Since saving money is a major motivation for BPO buyers, cost increases harm BPO relationships. High attrition is a form of operational inefficiency and waste.

Company Morale and Standards

A more insidious cost of high attrition rates is due to overstaffing. When attrition rates exceed 20%, some degree of overstaffing is unavoidable. In addition to the monetary cost, overstaffing has the insidious effect of harming company culture and standards. Employees learn that waste and inefficiency are built into the operation. They become less likely to internalise high standards of productivity. When people are seen to be highly interchangeable, developing human capital becomes difficult and morale drops.

Conclusion

Since most costs of attrition are hidden from the customer's immediate experience, managers are tempted to see attrition as an inevitable fact of BPO life, or a statistic for HR departments to worry about. But attrition rates deserve close attention from BPO managers and buyers alike. While rates of up to 40% have been reported by BPOs in India, a reasonably successful company will have a rate no higher than 15%.

Attrition is manageable. Leading BPO companies think strategically about retaining employees. They use professional development programs, stock option grants, promotions and mentoring. Moreover, they know that well-run businesses have loyal employees. They understand that attrition is a key indicator of overall operational quality.

To get an honest measure of a BPO company, check out the bottom line in BPO quality: attrition.