Determinants of talent retention in bpo industry.

AuthorKumar, Ravinder
PositionBusiness process outsourcing - Statistical data - Abstract


Today's organizations are increasingly afflicted with the issues concerning talent shortage. The shortage in skilled workers is across the spectrum--from personal assistants and call-centre operators to researchers, engineers and accounting staff. Managers and administrators have realized that having capable staff is a competitive advantage. Efficient and productive workforce makes an organization not only survive but flourish too. With this understanding comes in view the rapidly increasing focus on retaining key talent, which represents the total of the inherent abilities, acquired knowledge, capabilities and skills. Inarguably, diversity in workforce--age, sex, qualifications, experience, competence, perception, quality etc.--has brought up more, not fewer retention issues. While a small number of employees leaving an organization is natural and acceptable, high turnover is considered a matter of serious concern. High employee turnover can be seen in almost all the sectors but it is certainly alarming in BPOs, especially in ITeS (a whopping 35-50%). In an extremely competitive market, it has become imperative for organizations to look into the causes of high employee attrition and come up with a strategy for retaining one's talented pool of employees. Increased attrition levels need to be monitored and managed carefully as they eventually affect the overall performance of the firm. The focus clearly needs a shift from recruitment to retention. Another important reason for organizations to retain their employees and curb employee turnover is the costs attached to it. The combined direct and indirect costs associated with one employee leaving the organization ranges from a minimum one year's pay and benefits to a maximum of two years' of pay and benefits including the loss of corporate memory, affecting productivity, profitability, product and service quality, negatively affecting employment relationships, morale and workplace safety. (Prakash & Chowdhury, 2004). The problem of low employee retention can be addressed through a variety of proactive retention strategies, workplace policies and practices which would not only help offset negative impact of low retention but also work proactively to increase employee retention. There is strong evidence in the literature that creative and productive employees usually look for a change and their retention is positively associated with not-so-obvious factors which are perceived under the usual control of management. This research attempts to identify determinants of talent s' retention in BPO (ITeS) sector.

Rationale of Study

Globalization has forced multinationals outsource their production and services to countries where they find a competitive advantage in lower labor costs. Global outsourcing now occurs for all types of jobs and across most industries (Gomez-Mejia et. al, 2010). The Indian BPO sector's growth and increasing maturity is reflected across multiple dimensions. In just over a decade, the industry has grown to reach nearly US$ 11 billion in export revenues, employs more than 700,000 people, and accounts for more than 35 percent of the worldwide BPO industry. Comparing past growth trends with the significant future market opportunity, the Indian BPO industry can set itself a stretch target of US$ 50 billion (nearly fivefold its present size) in export revenues by 2012. This gigantic leap in the Indian BPO market due to high growth in IT sector is likely to add nearly 2.5 percent directly to India's GDP from exports earnings and provide direct employment to about 2 million people. (Nasscom data 2010) However, this sunrise sector is struggling with containing high employee attrition, which if is left un-checked, shall have far reaching depressing implications on overall industrial growth of Indian economy as the BPO sector constitutes a sizeable part of Indian service industry, emerging propeller of the nation's financial system.

Literature Review

The literature available was reviewed to identify determinants of talent retention in BPO industry. Most of the sources consulted in the study stress that there are many determinants of talent retention depending upon priorities and life styles of employees. Causes of attrition are different in relation to the gender (Vermaand Garg, 2011). Results of this study show that female employees feel more stressed because of work life imbalances and tend to leave jobs at an early stage of their career. The top reason for talent attrition is "external inequity of compensation". 27 percent of the employees in their exit interviews mentioned compensation as primary reason whereas limited career opportunities and role stagnation are stated as top two reasons for low retention. (Ramaiya, 2008). Thus, despite the fact that there is general agreement about the importance of competitive compensation for employee retention (Ramlall, 2003), there is also a growing consensus that high or even generous compensation will not independently guarantee that an organization will be able to keep its key employees. Talent engagement is necessary to retain an employee as disengaged employee disturbs the system and multiplies the dissatisfaction levels in the organization which results in decreased motivation, high talent turnover and diminished performance. (Jeswani & Souren, 2008). Their research mentions that raising and maintaining employee engagement is in the hands of an organization and requires a perfect blend of time, effort, commitment and investment to craft a successful endeavor.

A survey by Mercer Human Resources Consulting Services (2006) showed that salaries soared higher as employers battled to attract and retain staff in the tightest labor market in 30 years. The survey revealed that the real challenge for human resources managers is to maintain the right salaries and other variable rewards in a tight market. Pillai (2006) attempted to bring out the amount of monetary losses; company suffers because of high employee attrition. According to this study major factors responsible for low employee retention are higher salary expectations, lack of promotion opportunities and work life imbalances. Raina (2006) by means of a series of surveys, observations and interviews ascertained that employees' attrition is higher in the age group of 20-25 years and within three months of joining. Young professionals leave the job because of slow career growth, poor relations with seniors/colleagues, health problems, work-life imbalance and for higher studies.

Meyer et al, (2003) stated that building "affective commitment" involved much more than paying well, and that retention based on "compensation based commitment" is of course sensitive to changes in compensation within the company. They found that employers who based their retention on compensation based commitment were always vulnerable to the possibility that their competitors may offer better wages and, thus, lure away their employees. Similarly, Smith (2001) argued that "money gets employees at the door, but it doesn't keep them there." Dibble (1999) included money in her discussion of financial incentives but she also argued that money is not always a fitting reward. In a survey that she conducted, about one-fourth of the respondents said that they changed their current jobs because they did not feel cherished or appreciated in their current organization. Lawler (1990)...

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