Earlier this week I presented at NASSCOM's ITES-BPO Strategy Summit in Bangalore on “Expanding BPO in Europe: Critical Success Factors”. The event was attended by the CEO's of most of the leading Indian BPO players, including Genpact, EXL, WNS, IBM Daksh and Wipro to name but a few. The heads of several captive and client organisations, such as Centrica, Aviva, BT, and HSBC were also in attendance.

This conference played host to a whole range of discussions and debate about the rapidly growing, but still very young Indian BPO sector. But across all the conference sessions one topic came up time and again: the need to reduce staff attrition.

Indian firms have become a lot more sensitive to the attrition issue - and for good reason. Indian BPO business leaders feel that high staff turnover is reducing their ability to “innovate” and add value to their clients' operations. This is of particular concern to those vendors that combine IT expertise with BPO to sell transformational solutions and promise ongoing incremental improvements to operations.

As Centrica's head of back office operations, Stuart Beeston, told the audience: “Once the initial labour arbitrage is complete, we [clients] expect ongoing cost savings through innovation.” The problem is that innovation can be hard for a vendor to deliver when most of their management and operational effort is being spent recruiting and training new staff.

For this reason, Indian BPO players are increasingly going to be differentiated by their ability to retain staff. But low attrition on its own is not the ideal guide to performance. Attrition levels vary across different types of BPO services (depending on how “inspiring” they are for the staff involved), and a like for like comparison between companies is not always fair. In addition, many IT-focused BPO players will try to implement systems that provide incremental cost savings in spite of high attrition levels. Meanwhile, vendors can also diversify their services and operations across new regions and countries to limit the effects of attrition in certain service lines.

The attrition challenge will not go away in BPO - and vendors and clients have to accept that high levels of staff churn are part and parcel of this business. But it is how vendors mitigate the effects of attrition that will add value to clients. For the offshore players, a lot of this is virgin ground and a lot of learning still has to be done. While clients need to keep an eye on their suppliers' attrition levels during this period, they should focus their efforts on pushing vendors to mitigate this issue and deliver other process and cost saving innovations. Getting too bogged down in the staff turnover metrics does not help.

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