Financial Daily from THE HINDU group of publications
Wednesday, Oct 05, 2005
Info-Tech - Insight
Columns - Zero Base
The battle of attrition between labour and the BPO industry
"Wearing away by friction, and sorrow for sin falling short of contrition," are other meanings, which are no way near what baffles the ITES sector.
Attrition is "a reduction in numbers usually as a result of resignation, retirement, or death," is the fourth meaning of the word in Merriam-Webster Online Dictionary.
But `loss of personnel' comes first in Encarta (http://encarta.msn.com). "The gradual reduction of the size of a work force that occurs when personnel lost through retirement or resignation are not replaced," it says.
Thus, British Airways's new CEO Mr Willie Walsh sees savings from natural attrition, as www.personneltoday.com reports 6 minutes ago. Mr Walsh is, therefore, likely to put a freeze on new recruitments, even as he works closely with unions "to ensure that the airline had the right number of staff to deliver a world class service"
Attrition is very much in the air, it seems, because US Airways has said that it is hoping to reduce its employee count through attrition, according to a recent report on http://msnbc.msn.com.
"If attrition doesn't lower the employee number enough, many of the decisions on who is let go will be hashed out by the unions," is a quote in the report, because attrition in the sense of non-replacement of retirements and resignations works is a strategy for the long haul.
Such as what Japanese Prime Minister Mr Junichiro Koizumi wants to achieve in Japan: "Reduce the 3,31,000-strong government workforce by 27,681 between April 2006 and March 2010... by natural attrition or relocating employees," as the day's news on www.forbes.com informs.
Remember that there can be involuntary attrition too, in the form of dismissals and layoffs. The phrase `involuntary attrition' has a posting on www.jakesjokes.com that talks of laid off people opening their pay envelopes to find statements like, "This pay cheque intentionally left blank."
While ailing behemoths and governments, as in the examples above, see attrition as a solution, the Indian BPO sector fears attrition as the No. 1 cause of dwindling numbers on the payroll, even as the company tries to add to its strength through aggressive recruiting. Resignations within the first year are too common in the industry; and the question of retirement does not arise yet because the average age of a BPO employee may hover around 20s. In short, therefore, the `attrition' that the IT industry talks about is just the other name for plain-old labour turnover, traditionally defined as the rate of change in a workforce.
Employee or labour turnover is "the number of employees leaving over a period of time as a percentage of average number of employees of the period of time," says www.businessbureau-uk.co.uk and discusses the different formulae for computation of the measure. `Crude labour turnover separation rate' is worked out as (total number of leavers in a period/ average number of persons employed in period) multiplies by 100.
`Quit rate' has `total number of voluntary leavers in a period' in the numerator and `average numbers of persons employed in period' in the denominator. `Long service stability index' is calculated as `total number of employees with 1 year's service or more/ average number of persons employed at start of period' x 100. And, `fringe turnover rate' is about what bewilders the BPOs: `number of employees joining and leaving within 1 year/ average number of employees in one year' x 100.
Current attrition rate is around 50 per cent, says a 2004 report titled `Attrition in Indian BPO Industry' on www.bpoindia.org. "Analysts say attrition rates vary by 20 per cent 40 per cent in some firms, while the top ones average at least 15 per cent." A table shows the rates the world over: US 42, Australia 29, Europe 24, India 18, and Global Average 24 per cent. It seems the rates are higher in the `voice' segment, implying that attrition reduces as the BPO rises up the value chain. "The Nasscom Strategic Review 2005 puts the attrition rate in BPOs at 25-40 per cent," states a recent report on www.siliconindia.com.
Giving voice to pent-up demand from labour, the CITU President, M.K. Pandhe has now justified the need for unions in the BPO industry, because of unfair practices such as `10 to 12 hours a day or night'. "No labour law applies to them. The moment they talk about forming a union and the right to collective bargaining, the management victimises them and they are shown the door,'' he has said. If workers are thus sent out, that only adds a new `involuntary' dimension to attrition rate.
The industry has protested loudly, in response. Nasscom president Mr Kiran Karnik considers the formation of workers' union as retrograde, notes www.ciol.com. A lone voice in support seems to be of Mr Raman Roy, ex-CEO, Wipro BPO, who says he has no problems with a union in the BPO industry, as long as it guarantees that no employee will leave the organisation before one year. "The union should work with the BPO industry to control the menace of attrition," is Roy-speak on the Web site.
Battle or war of attrition, a.k.a. `attrition warfare' is a strategic concept that to win a war, one's enemy must be worn down to the point of collapse by continuous losses in personnel and materiel, says Wikipedia. "The war will eventually be won by the side with greater such reserves." That the Vietnam War has frequently been called a war of attrition, one learns on http://en.wikipedia.org. The sense of `wearing down an enemy's strength' is a World War I coinage (1914), informs Online Etymology Dictionary (www.etymonline.com). The War of Attrition, however, was a limited war fought between Egypt and Israel from 1968 to 1970, informs The Free Encyclopedia.
"The attrition battle could be won by focusing on retention, making work a fun place, having education and ongoing learning for the workforce and treating applicants and employees in the same way as one treats customers," advises www.bpoindia.org. Attrition is used in other contexts too, such as education. For example, www.ericdigests.org says, "Approximately 50 per cent of the freshmen enrolled in colleges and universities drop out before completing their programs." It exhorts colleges to use intervention strategies for raising retention rates while simultaneously lowering attrition rates.
The intervention strategy to take on attrition begins with the IT organisations first recognising the value they would forego when they are about to lose a person, according to S. Mahalingam (www.tcs.com). "This knowledge is important in taking appropriate action, in making counter-offers, in keeping up a constant preventive effort to fine-tune the compensation structure. All these should always be in line with the value being provided by the employees," he advises.
A day-old story on www.siliconindia.com has a headline that reads, `Bad hiring practices leading to BPO attrition: Study', as if calling the bluff on the attrition bogey. The cited study, of the Hay Group, conducted in the National Capital Region (New Delhi, Gurgaon and Noida), doesn't seem to be available yet on www.haygroup.com, though Silicon India offers a few snatches.
Such as, that the cost of attrition to a company is 70 per cent of an employee's annual salary, or 27 per cent of the company's operating expenses; and that `50-60 per cent of the attrition is because of bad hiring alone'. Attrition levels can be drastically reduced with careful planning and a little foresight, suggests the site. That's a thought on attrition worth some retention.
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