A SEMINAR REPORT ON CONTEMPORARY MANAGEMENT ISSUE

RETRENCHMENT STRATEGY FOLLOWED BY BPO SECTOR

Submitted for the requirement of the subject:M-207

2011-2012

Submitted to: Mrs.Jyotshana Khandelwal

Submitted by: Anup Jangir MBA 2nd sem.

APEX INSTITUTE OF MANAGEMENT AND SCIENCE (AIMS) V.T. road, sector no. 5 mansarovar Jaipur.(Raj.) 1

PREFACE

As employee Retrenchment has become increasing everywhere in recent years, the study of this phenomenon has assumed greater significance. This article develops an integrative framework that incorporates environmental and organizational antecedents as well as the implications of Retrenchment for individuals and organizations. Key empirical studies are reviewed and major patterns and contradictions are identified. The authors identify and discuss theoretical and methodological concerns related to the extant literature and provide recommendations for future research aimed at developing a better understanding of employee Retrenchment. The thing that people need to remember is that Retrenchment may be back on the front pages, but the Retrenchment never slowed down. Retrenchment has been a constant and regular feature of the new working world, and it will continue to be.

ACKNOWLEDGEMENT

I express my sincere thanks to my project guide. Mrs.Jyotshana khandelwal APEX INSTITUTE OF MANAGEMENT AND SCIENCE for guiding me right from the inception till the successful completion of the project. I sincerely acknowledge her for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support they had provided to me with all stages of this project.

Thanks to all, Anup jangir MBA-II-SEMESTER

CONTENTS
S.No. Title page no.

1. 2. 3. 4.

INTRODUCTION RETRENCHMENT STRATEGIES OVERVIEW DEFINITION RETRENCHMENT STRATEGIES

05 15 16 17

Turnaround Strategy Divestment Strategy Liquidation Strategy Bankruptcy Recruting and retaining the Right talent 5. 6. 7. 8. 9. 10. MERITS AND DEMERITS REASON OF RETRENCHMENT IMPACT OF RECESSION ON BPO SECTOR CONTEMPORARY EXAMPLES CONCLUSION BIBLIOGRAPHY 21 22 24 34 35 36

INTRODUCTION
Meaning of Recession In economics, a Recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way. Production, as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; while bankruptcies and the unemployment rate rise. Recessions generally occur when there is a widespread drop in spending often following an adverse supply shock or the bursting of an economic bubble. Governments usually respond such to as recessions increasing by adopting expansionary increasing macroeconomic policies, money supply,

government spending and decreasing taxation

A Brief introduction on BPO (Business process outsourcing) Business process outsourcing (BPO) contains the transmission of processes along with the related operational activities and responsibilities, to a third party with at least a guaranteed the same service level and where the client contains a firm grip over the (behavior of the) vendor for mutual long term success 5

Normally, BPO is undertaken by developed firms. For example Coca Cola, where almost the total supply chain is outsourced and the company is essentially becoming a marketing organization. However, BPO is nowadays fast conquering the service oriented firms as well. A famous example is provided by the Bank of America, who outsourced their complete HR function to Exult, one of the important Human Resources BPO vendors.
BPO is often divided into two categories: back office outsourcing, which includes internal business functions such as billing or purchasing, and front office outsourcing, which includes customer-related services such as marketing or tech support. The endless opportunities IT provides, stimulates (crossborder) BPO activities. BPO that is contracted outside a companys own country is sometimes called offshore outsourcing. BPO that is contracted to a companys neighboring country is sometimes called near shore outsourcing, and BPO that is contracted within the companys own country is sometimes called onshore outsourcing. The most common examples of BPO are call centers, human resources, accounting and payroll outsourcing. Use of a BPO as opposed to an application service provider (ASP) generally also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to work the service, as a typical ASP model includes only the provision of access to functionalities and features provided or served up through the use of software, generally via web browser to the customer. BPO is a important part of the outsourcing industry. . 6

KNOWLEDGE PROCESS OUTSOURCING (KPO) As is evident from the description, BPO activities involve carrying out standardized processes for the client. KPO or Knowledge Process Outsourcing typically calls for work that needs higher levels of involvement from the worker. The worker has to employ advanced levels of research, analytical and technical skills and has to make decisions of a higher order than BPO work. Examples are pharmaceutical research and development, patent/ intellectual property research, animation and simulation. Data research and analysis, legal services, content writing and development and database development services. KPO industry is less older and mature than the BPO sector. .

What is outsourcing Outsourcing can be defined as the strategic use of outside resources to perform activities traditionally handled by internal staff and resources. Sometimes known also as facilities management, outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers, who become valued business partners. Companies have always hired contractors for particular types of work, or to leveloff peaks and troughs in their workload, and have formed long-term relationships with firms whose capabilities complement or supplement their own. However, the difference between simply supplementing resources by subcontracting and actual outsourcing, is that the latter involves substantial restructuring of particular business activities including, often, the transfer of staff from a host company to a specialist, usually smaller, company with the required core competencies

Reasons

Organizations that outsource are seeking to realize benefits or address the following issues: Cost savings The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, renegotiation, and cost re-structuring. Access to lower cost economies through off shoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

Focus on Core Business Resources (for example investment, people, and infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialized IT services companies. Cost restructuring operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable. Improve quality achieve a steep change in quality through contracting out the service with a new service level agreement. Knowledge - Access to intellectual property and wider experience and knowledge. Operational expertise Access to operational best practice that would be too difficult or time consuming to develop in-house. Access to talent Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering. Capacity management An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier. Catalyst for change An organization can use an outsourcing agreement as a catalyst for major step change that cannot be achieved alone. The outsourcer becomes a Change agent in the process. Enhance capacity for innovation Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation. 10

Reduce time to market The acceleration of the development or production of a product through the additional capability brought by the supplier. Co modification The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations. Risk management an approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation. Venture Capital Some countries match government funds venture capital with private venture capital for start-ups that start businesses in their country. Tax Benefit Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country. Scalability The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production.. Liability Organizations choose to transfer liabilities inherent to specific business processes or services that are outside of their core competencies.

Industry Profile
Genpact: A global leader in business process and technology management OVERVIEW The Company traces its beginnings to 1997, where under the name of GECIS, it was established as an independent business unit of GE Capital. The organization 11

was chartered to provide business process management capabilities that would deliver outstanding efficiencies to all businesses across GE. Genpact became an independent company in 2005 and was successfully listed on the NYSE in 2007, trading under the stock symbol G. An early innovator in the business, Genpact has been responsible for introducing many of the concepts that have given strength to the industry. Genpact was the first to leverage Six Sigma for process transitions, delivering greater process gains to clients. With Smart Enterprise Processes (SEPSM), Genpact is the first to introduce a proven, scientific approach that delivers the benefits of effectiveness in addition to efficiency and focuses on business outcomes versus only looking at transactional results. Genpacts approach puts process in the forefront, understanding the value process brings to a company in driving front end results such as customer satisfaction and retention, revenue generation and profitability. The Company couples deep process knowledge and insights with a focused IT approach, targeted analytics and pragmatic engineering to deliver an integrated process solution. Genpact has built its credentials to support this direction with the single largest pool of dedicated Lean Six Sigma experts in the industry; extensive industry-leading people processes, earning it one of the lowest attrition rates in the industry; the largest global analytics and research services organization; and the technology expertise to enable great processes

SERVICES PORTFOLIO Genpact has a broad portfolio of core enterprise and industry-specific services including:

CORPORATE FACTS

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Established: 1997 Headcount: 42,500+ Stock Symbol: NYSE: G Revenues: $1.43 Billion (2011) CLIENTS Genpact manages over 3000 processes for 400+ clients across a breadth of industries. The Companys client base is diverse in terms of industry, business size and process need. This diversity serves both the Company and client base in bringing broad, practical process expertise. Genpacts proven strategy has been to grow with its clients with revenues coming from both new and existing clients. Clients include: AstraZeneca, BUPA, Ceridian, Diebold, eBay, GE, Halifax Bank of Scotland, Hertz, Hyatt, Ashland, Kimberly Clark, Miami Childrens Hospital, National Australia Bank, Nissan, Serco, Walgreens, Wells Wellpoint/Wellchoice among others. Fargo,

TELEPERFORMANCE Founded in 1978 Employees 120000+ Revenues us$2.78bl (2010) 268+call centers Present in 50 countries We're a people company: 13

Teleperformance, the worldwide leading provider of outstanding customer experience at every single opportunity, has been serving companies around the world, providing superior results in managing their customer care, technical support and debt collection programs. In 2010, the Teleperformance Group achieved 2.058 billion revenues (US$2.78 billion average exchange rate at December 31, 2010: 1 = US$1.35). The Group operates about 83,000 computerized workstations, with more than 120,000 employees across 268 contact centers in 50 countries and conducts programs in more than 66 different languages and dialects on behalf of major international companies operating in various industries.

Retrenchment Strategies Overview

Retrenchment is something akin to downsizing. When a company or government goes through retrenchment, it reduces outgoing money or expenditures or 14

redirects focus in an attempt to become more financially solvent. Many companies that are being pressured by stockholders or have had flagging profit reports may resort to retrenchment to shore up their operations and make them more profitable. Although retrenchment is most often used in countries throughout the world to refer to layoffs, it can also label the more general tactic of cutting back and downsizing. Companies can employ this tactic in two different ways. One way is to slash expenditures by laying off employees, closing superfluous offices or branches, reducing benefits such as medical coverage or retirement plans, freezing hiring or salaries, or even cutting salaries. There are numerous other ways in which a company can employ retrenchment. These can be non-employee related, such as reducing the quality of the materials used in a product, streamlining the process in which a product is manufactured or produced, or moving headquarters to a location where operating costs are lower. The second way in which a company may practice retrenchment is to downsize in one market that is proving unprofitable and build up the company in a more profitable market. If one market has become obsolete due to modernization or technology, then a company may decide to change with the times to remain profitable. States or governments may also use retrenchment as a means to become more financially stable. In capitalist nations, retrenchment is effected by lowering taxes in the hopes of pumping more money into the economy. This tactic is always healthily debated throughout all levels of government. When applied to governments, retrenchment may also refer to a state cutting costs by making jobs obsolete, closing governmental offices, and cutting government programs and services. However, this is not a classic example of retrenchment, because when expenses are cut in one area, politicians tend to re-direct them to other areas. 15

Definition of Retrenchment
Retrenchment (French: retrenchment, an old form of retrenchment, from ret rancher , to cut down, cut short) is an act of cutting down or reduction, particularly of public expenditure. According to the Industrial Disputes Act, 1947, retrenchment is the termination by the employer of the service of the work- man for any reason whatsoever, otherwise than as a punish- ment inflicted by way of disciplinary action, but does not include (a) voluntary retirement of the workman, (b) retire- ment of the workman on reaching the retirement age of superannuation, or (bb) termination of the service of the workman as a result of the non renewal of his contract of employment, or (c) termination of the service on the ground of continued ill health.

Retrenchment strategies
A retrenchment grand strategy is followed when an organization aims at a contraction of its activities through substantial reduction or the elimination of the scope of one or more of its businesses in terms of their respective customer groups, customer functions, or alternative technologies either singly or jointly in order to improve its overall performance. 16

1.Turnaround Strategies
Turn around strategies derives their name from the action involved that is reversing a negative trend. There are certain conditions or indicators which point out that a turnaround is needed for an organization to survive. They are: Persistent Negative cash flows Negative Profits Declining market share Deterioration in Physical facilities Over manning, high turnover of employees, and low morale Uncompetitive products or services Miss management An organization which faces one or more of these issues is referred to as a sick company. There are three ways in which turnarounds can be managed The existing chief executive and management team handles the entire turnaround strategy with the advisory support of a external consultant. In another case the existing team withdraws temporarily and an executive consultant or turnaround specialist is employed to do the job. The last method involves the replacement of the existing team specially the chief executive, or merging the sick organization with a healthy one. 17

Before a turn around can be formulated for an Indian company, it has to be first declared as a sick company. The declaration is done on the basis of the Sick Industrial Companies Act (SICA), 1985, which provides for a quasi judicial body called the Board of Industrial and Financial Reconstruction (BIFR) which acts as the corporate doctor whenever companies fall sick.

2. Divestment Strategies
A divestment strategy involves the sale or liquidation of a portion of business, or a major division. Profit centre or SBU. Divestment is usually a part of rehabilitation or restructuring plan and is adopted when a turnaround has been attempted but has proved to be unsuccessful. Harvesting strategies a variant of the divestment strategies, involve a process of gradually letting a company business wither away in a carefully controlled manner Reasons for Divestment The business that has been acquired proves to be a mismatch and cannot be integrated within the company. Similarly a project that proves to be in viable in the long term is divested Persistent negative cash flows from a particular business create financial problems for the whole company, creating a need for the divestment of that business. Severity of competition and the inability of a firm to cope with it may cause it to divest. Technological up gradation is required if the business is to survive but where it is not possible for the firm to invest in it. A preferable option would be to divest Divestment may be done because by selling off a part of a business the company may be in a position to survive 18

A better alternative may be available for investment, causing a firm to divest a part of its unprofitable business. Divestment by one firm may be a part of merger plan executed with another firm, where mutual exchange of unprofitable divisions may take place. Lastly a firm may divest in order to attract the provisions of the MRTP Act or owing to oversize and the resultant inability to manage a large business.

3. Liquidation Strategies
A retrenchment strategy which is considered the most extreme and unattractive is the liquidation strategy, which involves closing down a firm and selling its assets. It is considered as the last resort because it leads to serious consequences such as loss of employment for workers and other employees, termination of opportunities where a firm could pursue any future activities and the stigma of failure The psychological implications The prospects of liquidation create a bad impact on the companys reputation. For many executives who are closely associated firms, liquidation may be a traumatic experience. Legal aspects of liquidation: Under the Companies Act 1956, liquidation is termed as winding up. The Act defines winding up of a company as the process whereby its life is ended and its property administered for the benefit of its creditors and members. The Act provides for a liquidator who takes control of the company, collect its assets, pay it debts, and finally distributes any surplus among the members according to their rights.

4. Bankruptcy
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This may also be a viable legal protective strategy. Bankruptcy without a customer base is truly a bad place. However, if one decthelares bankruptcy with loyal customers, there is at least a possibility of a turnaround.

5. Recruting and retaining the Right talent.

BPO demands high skill and knowledge the employees for carringot the work so the employees ave highly to be qualified and must possess strong academic background. For instance BPO work can be accomplished by professionals having fluency and good command of english language.

Merits and Demerits Merits :Involves minimal organizational changes and is less threatening. Enables the firm to specialize by gaining the in-depth knowledge of the Businesses. 3. Enables the firm to develop competitive advantage. 4. Decision-making can be made easily as there is a high level of productivity. 5. Systems and processes within the firm become familiar to the people in the

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Organization.

Demerits :The study might be limited by following factors: 1. Personal limitation whole interpretation is depend on my knowledge so There may be change of error. 2. Only secondary data is used in my research so validity of research is not Sure. 3. Since the topic is current thats why appropriate data is not available.

REASON OF RETRENCHMENT

Merging of two or more firms:

When a certain firm combines its operations with another firm and operates as a single entity, in order to stay in profit or expand the market reach, it is called a merger. In case of a merger, certain positions become redundant. The same work is done by two different staff members. Usually in such a case, the company cuts staff to eliminate redundancy in work. It is characterized by some employees leaving an organization voluntarily, or by lay-offs, especially in case of higher management positions.

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Acquisition : If one organization purchases another one, there is a definite

change in the management and the acquired company staff has to face unemployment. The reason for this is the same as the earlier case, viz to cut costs and and increase the revenues.

Change in management : The change in the top brass of a company can also
result in Retrenchment. The working methods and procedures vary with the management. Therefore, a significant change in the management roles may drastically affect the employee size to suit a particular style of working.

Economic crisis : This is the single biggest cause of Retrenchment. Often, it

consists of huge lay-offs by a number of organizations across various domains. The recent economic recession facing the world, has triggered a number of layoffs in many reputed and popular firms in the world. According to a survey conducted by the US Bureau of the Census, organizations consisting of higher percentage of managerial staff downsize more than the ones with higher percentage of production process employees.

Strategy changes : Some companies may reduce certain areas of operation

and focus on other areas. For example, if a company is working on a project in which there are no assured returns, it may downsize it's employees working on that particular project. It focuses its resources on specific projects, which could be profitable ventures.

Excessive workforce : In a period of high growth, a company hires excess

staff, to meet the needs of a growing business. However, in times of recession the business opportunities dwindle, leading to Retrenchment of the surplus staff that was hired.

Outsourcing practice : Organizations catering to international markets require

a huge and efficient employee base. If this labor can be obtained by 'exporting' 22

the job to other countries, a huge Retrenchment takes place in the parent country. For instance, if a certain job can be done more effectively in India and is more viable economically there, than in the United States, the business is operated from that country.

IMPACT OF RECESSION ON BPO SECTOR

The impact of global slowdown on Indias economy is impacting the employment scenario in India. In fact the rising joblessness in India has assumed worrisome proportions. With overall economic growth sharply slowing down, the ranks of those without work are growing by the day. Five hundred thousand people were rendered jobless between October and December 2008, according to a first of its kind survey conducted by the Ministry of Labour and Employment. It is often said that when the U.S sneezes the rest of the world catches a cold. Those sectors whose fortunes are closely linked to the fate of the global economy are feeling the heat.

Consequences of US recession on India job market 23

Worst affected because of US recession will be the service industry of India. Under service industries come BPO, KPO, IT, ITeS etc. Service industry contributes about 52% to India's GDP growth. Now if that is going to get hurt then it will also hurt India's overall growth but very slightly. India is not going to face a major impact due to US recession. People may say that there is going to be a huge job loss due to recession. and will cite the example of TCS firing about 500 employees but these were employees who didnt perform and for cost cutting one have to reduce Non performing asset and that exactly what has been done. There is no threat to the skilled people. According to NASSCOM India will have a shortage of about 5 million skilled people in IT/ITeS. So there are lots of opportunities.75 per cent of its revenues come from the US. Low demand for services may force most Indian Fortune 500 companies to slash their IT budgets. Zinnov Consulting, a research and offshore advisory, says that besides companies from ITeS and BPO, automotive components will be affected. During a full recession, US companies in health care, financial services and all consumers demand driven firms are likely to cut down on their spending. Among other sectors, manufacturing and financial institutions are moderately vulnerable. If the service sector takes a serious hit, India may have to revise its GDP to about 8 to 8.5 per cent or even less. As per Raman Roy, Father of Indian BPO industry, recession is not a decrease in consumption. it is just that the rate of growth has changed. Recession actually provides the opportunity to create value for customers at different price points. According to Lokendra Tomar, senior vice-president, Integreon, a BPO firm, says recession is likely to have a dual impact on the outsourcing industry. Appreciating rupee along with poor performance of US companies will affect the bottom line of the outsourcing industry. Small BPOs, which are operating at a net margin of 7-8 per cent, will find it difficult to survive. According to Dharmakirti Joshi, director and principal economist of CRISIL, along and severe recession will seriously affect the portfolio and fixed investment flows. Corporates will also 24

suffer from volatility in foreign exchange rates. The export sector will have to devise new strategies to enhance productivity.

REVENUE GENERATION IN BPO SECTOR Revenue is generated on the basis of volume / seats a BPO has or is required for any process. For eg. if a process is outsourced to a vendor, client provides the data on the volume and a charge per unit is defined in the agreement. Then the vendor is paid on the basis of volume (no. of calls*price per call). The average revenue earned by BPO industry in 2011 in India was rs 787 billion .

EFECT OF RECCESSION ON THE MARKET LEADERS IN BPO SECTOR In a year when outsourcing of application development and maintenance projects has slowed down, top customers such as Bank of America, JPMorgan and Citibank continue to send more back office projects to India, as they seek to lower their cost of operations by up to 40 percent. According to Nasscom, Indias back office outsourcing industry will grow at 18.4 percent this year to reach $14.8 billion. Outsourcing of IT services will clock a lower growth at around 13.5 percent this year, and could even decline to single digit growth if the situation does not improve.The Indian BPO industry is likely to maintain double digit growth rate as most of the work done by them is keeping the lights on or nondiscretionary, said Everest Group principal & country head Gaurav Gupta. The current recession is forcing companies from other verticals such as media, entertainment, healthcare, energy and utilities to consider outsourcing of back office work.BPO business is largely annuity in nature where the contracts are for a longer term making it slightly more immune from economic recession, said Intelenet EVP Sandeep Aggarwal says. A CFO is constantly looking at gaining 25

control on the cost structure, said Gartner senior research analyst Arup Roy. According to a Gartner study released in April, 2009, Indian BPO providers have proved to be stiff competition to western BPO providers, accounting for 5 percent of market revenue generated among the top 150 providers in 2008. Gartner expects this increase in revenue to be maintained, with the BPO market share of Indian vendors expected to nearly double by 2010.Meanwhile, Infosys BPO CEO Amitabh Chaudhry said that the BPO growth story is primarily driven by captive outsourcing. Captives have not stopped outsourcing, they have in fact increased their pie,. The sunshine industry of the Indian economy, the BPO firms is the worst hit by the current global economic turmoil. According to a report released by NASSCOM, the BPO and KPO industry together generated Rs. 1,160 crore revenue and provided employment to 7 lakh people in 2007-08. The share of the U.S in the Indian BPO-KPO export market was 61 per cent making it the largest contributor to exports in the segment in 2007. Gurgaon based KPO, The Smart cube has 130 employees at present, and it is expected that the employment rate of the firm will go down by 30% next year. The Smart cube managing director Sameer Walia says Future hiring rate of BPOs will be far worse off as compared to KPO firms. The BPO employment rate is projected to decline by 60% within a year. Lokendra Tomar, Senior Vive President, Integreon, a BPO firm says, Small BPOs, which are operating at a net margin of 7-8 percent, will find it difficult to survive

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Tammy

D.

Allen,Deena

M.

Freeman,Joyce

E.

A.

Russell,Richard

,Reizenstein,Joseph O. Rentz (2010). Survivor reactions to organizational Retrenchment: Does time ease the pain?

Journal of management- SAGE Publisher

The present study used work role transitions theory as a guiding framework for examining changes in survivors' attitudes following an organizational Retrenchment. A total of 106 managers experiencing a Retrenchment provided data regarding organizational commitment, turnover intentions, job involvement, role clarity, role overload, satisfaction with top management, and satisfaction with job security at three different times. Although the results generally indicated that Retrenchment had a significant impact on work attitudes, that the impact varied over time, and that the initial impact was generally negative; different patterns of results among the job attitudes studied were also observed. For example, satisfaction with top management increased across time, while job involvement decreased. Findings also indicated that changes in role clarity, role overload, satisfaction with top management, and satisfaction with job security were significantly related to changes in organizational commitment and turnover intentions. Changes in job involvement also moderated several relationships such that there was a stronger relationship between the independent variable and the outcome variable when job involvement was higher than when job involvement was lower. Theoretical and practical implications of the findings and directions for future research are discussed.

The hindu business line Recession impact: BPO industry sees dip in attrition rates 27

12 May 2009 ... Mumbai/New Delhi, May 11 Fewer employees are jumping jobs in the BPO industry, courtesy the ongoing global recession. ... Quarterly attrition Genpact was down by 5 percentage points to 21% EXL reported a record 12.8 percentage-point dip WNS fell to 22%, down from 29% last quarter Wipro BPO has come down to 13% from 18% Moumita Bakshi Chatterjee Adith Charlie. Mumbai/New Delhi, May 11 Fewer employees are jumping jobs in the BPO industry, courtesy the ongoing global recession. As a result, attrition rates (the number of people quitting per 100 employees) for several listed BPO firms have come down by 5-13 percentage points on a sequential basis. Genpacts employee attrition rate for the quarter, measured from day one of employment was down by 5 percentage points to 21 per cent from 26 per cent in the preceding quarter and 24 per cent for January-March 2008. If the attrition rate, were to be measured after employees completing six months of employment (as many of its competitors do), Genpacts attrition rate would be 18 per cent. EXL reported a record 12.8 percentage points dip in attrition for billable employees at 21 per cent from 33.8 per cent reported in the previous sequential quarter. Operationally, our attrition management and employee engagement programme, in combination with the weaker economy, has resulted in record low attrition levels, the company said in its earnings statement. WNS too posted a reduction in its attrition numbers this quarter. Attrition declined by 7 percentage points to 22 per cent, down from 29 per cent last quarter 28

and 38 per cent in quarter ended March 2008. The employment market in India is softer compared with this time last year, WNS said. For Firstsource, the offshore attrition (India, Argentina and the Philippines) remained unchanged at 35.8 per cent during the just ended quarter. The onshore (the US and the UK) attrition was 38.4 per cent compared with 38.8 per cent in third quarter. (While Genpact and EXL run a January to December fiscal, Firstsource and WNS follow an April to March fiscal). For Wipro BPO, the quarterly attrition has come down by 500 basis points to 13 per cent from 18 per cent in the previous sequential quarter.

How much does the industry suffer every time the rupee gets stronger against the dollar? It has been estimated that every one percent appreciation in the value of the rupee impacts the profitability of the BPO industry by 35 basis points (0.35 per cent). Similarly, every percentage of depreciation in the value of rupee will enhance the profitability by 35 basis points. The change in the value of rupee is one of the many parameters that are factored into the business model of companies.

Recession impacts salaries, attrition in Indian BPO sector 29

March 30th, 2011

Earlier this month, the association that supports and promotes Indias business process outsourcing predicted a bright future for the sector. While the past year has presented challenges, there is undoubtedly strong growth ahead, NASSCOM said at the CEO Summit 2009.In fact, Som Mittal, the president of NASSCOM, forecast that outsourcing to India is likely to increase threefold by 2020, earning aggregate revenues of 5 billion. While the short-term challenges exist, the potential for this industry is tremendous and the industry will not be demand constrained, he said.These are optimistic words for a sector that is accustomed to robust growth, with many graduates aspiring to work for one of the countrys top outsourcing companies. In recent years, salaries in the sector have grown in the double digits on an annual basis, while employees have had their pick of open positions. However, the recession has changed business as usual at Indias top BPO firms.Rethinking salariesThere are plenty of signs indicating that Indian outsourcing providers may be rethinking their hiring and salary strategies in the wake of the global downturn.The recession has resulted in declining revenues for the countrys major outsourcing providers and also had a knock-on effect with regard to employees pay. According to a BusinessWeek article, salaries are flagging in the sector. After years of continually strong salary growth, IDC noted that this year the average wage increase for outsourcing industry employees was only 1.4 percent.

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EFFECT OF INTEREST RATES ON BPO INDUSTRIE Because of the slowdown of Indian economy and BPO industries the interest rates have also gone down. Bank has reduced their interest rates due to lack of business.

REVENUE GENERATION IN BPO SECTOR Revenue is generated on the basis of volume / seats a BPO has or is required for any process. For eg. if a process is outsourced to a vendor, client provides the data on the volume and a charge per unit is defined in the agreement. Then the vendor is paid on the basis of volume (no. of calls*price per call). The average revenue earned by BPO industry in 2007 in India was $ 13,811 million.

Employee retention a key challenge for IT, BPO companies Information Technology (IT) companies and BPOs are witnessing large-scale attrition of talented employees, making retention of critical manpower resources a key challenge going forward, according to an industry expertFidelity National Financial India Country Head Sameer Dhanarajani says IT companies and BPOs are witnessing a major talent crunch. "The macro effect is balanced by one company losing its critical staff to another and a company getting critical resources in return. But aligning them to the organisation still remains a challenge," he said, adding there are hiring, training and maintenance costs associated with a new inductee, irrespective of the place in the hierarchy that the person assumes.

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"There has been an increased investment to retain the right talent and to keep the customer operations smooth. Infrastructure and maintenance costs go together to keep the organisations streamlined to their service delivery model and customer satisfaction. There have been steps taken to redefine the pricing model across organisations to keep their increase in the cost of operations low," Dhanarajani said. He said as the world recoups from a recessionary phase, the cost of operations and alarming unemployment rates gave a boost to outsourcing around the globe. "India, still a preferred location, is facing a threat from emerging geographies like China, Vietnam and Philippines," Dhanarajani said, adding that North America, South America, Eastern Europe and North Africa are other countries emerging as outsourcing destinations. "There is a fierce competition in terms of the economies of scale of operations between various organisations or between India and emerging outsourcing destinations," he said. Dhanarajani said India has been an investment option for various companies across USA, Europe and Australia for more than a decade with quality of people and output. "The economies of scale organisations are gaining within India due to three factors - Talent, Service Delivery Innovation and Value added services-- and all these, at the same cost of operations," he added. The forums like NASSCOM have various industry specialists who have predicted these issues. "This year saw a new concept of platform BPO service offerings that can integrate best in class processes to provide its a clients a one-stop location and plug-n-play service delivery," the expert said. 32

"While this is more applicable to IT, BPOs have been focusing on transforming their business practices through Process Re-engineering and Service Delivery Optimisation," he added. Dhanarajani said Indian IT-BPO industry is viewed as engine of India's growth and young blood fuels it. The average age varies from 23-25 years and has youngest CEOs at 35-36 yrs in India alone compared to the rest of the world. Recruitment Process The recruitment process has turned out to be a growing global trend. It is a form of HRO. Where an employer outsources or transfers all or part of its recruitment activities to an external service provider. RPO implies outsourcing of all or just part of recruitment functions and process. The external services provider serves as a virtual recruiting department by arranging the potential candidates for the organization who is outsourcing.

CONTEMPORARY EXAMPLES
A leasing firm offering hire- purchase services to institutional customers also starts consumer financing for the purchase of durable sot individual customers.

XEROX Company educated small business entrepreneurs to create new markets.

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Several processbased industry such as petro chemicals, steel, textiles of hydrocarbons have integrate firm A make or buy decision is then made when firms wish to negotiate with the suppliers or buyers.

CONCLUSION
In todays economy job security isnt going to be the same as employment security. When the economy predominantly consisted of government and other public sector jobs, job security(not getting sacked) was high, but employment security (finding a new job if you were sacked) was low. In the new economy, the reverse will be true people will get sacked more easily than before, but they will also find a new job more easily than before. It is just that living between the two stages will take some getting used to. For the moment, the job market appears expanding and market watchers expect momentum to sustain in the short to medium term even if economic growth tapers off marginally. It was a lesson learnt the hard way. We should concentrate and analyze the failure of economic reforms globally to be able to put a finger on the exact causes leading up the recession. That painting was never meant to be. The botched up job has already added permanent morbid shades in varying depths to the canvas. There is no magic sponge to clean in every blot of the culprit paint. But certainly a thinner can be applied to lessen further damage and brighten further vistas. New prospects can be sown into the recovering panorama. Lets hope for their blossoming into fruit bearing healthy economy in the near future. World over! "Next to the death of a relative or friend, there's nothing more traumatic than losing a job. Corporate cutbacks threaten the security and self-esteem of survivors and victims alike. They cause turmoil and shatter morale inside organizations and they confirm the view that profits always come before people." 34

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Allen, Richard Director (00123242); Feb2003, Vol. 56 Issue 7, p56, 4p, 10 Color

Photographs. 50 ways to leave your loses. 69, N.K Sharma, Alka Jain, Arnath Dey ,Business through Electronic McCormick, David International Economy; Summer2008, Vol. 22 Issue 3, p66-

Communication.SWOT analysis (with special reference to BPO in Jaipur) Durgapur Rina pandey,HRBPO, HRM Review,The ICFAI University press

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The impact of corporate downsizing on employees. By: Richey, Mark W..

Business Foru. Website:www.google.com Website: www.wikipediaencyclopedia.com 35

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