Business and Management IA TO: Managing Director TITLE: How can employees be retained in the BPO/KPO/RPO of an XYZ firm.

FROM: Aakanksha Khurana DATE: JUNE 2011 CC: Board of Directors Word Count: Research Proposal: 335 words Written Report: 1630 words Executive Summary: 204 words I confirm that this work is my own and that it is the final version. I have also acknowledged the use of words or ideas of another person, whether written or oral.

Acknowledgements:
1

I would like to acknowledge and thank:

Poonam Prakash my Business and Management teacher for her support and assistance in helping me with this report.. Paul Gaskin- HR Director of XYZ company- for his contribution to this report and his valuable time for my interview. Monika Khurana- Mother for her valuable support and information as and when needed to complete this research. Sakshi Sharma- Employee of the Company for her valuable time and cooperation during my Interview. Rajat Sood- Employee of the Company for his valuable time and cooperation during my Interview.

Executive Summary

Management at XYZ Company has expressed concern regarding the high staff turnover rates 1 of the company. As such the paper analyses the question, How to retain employees in the BPO/KPO/RPO of an XYZ firm? Initially a research proposal provides the rationale, theoretical framework and methodology utilized and possible constraints in answering the question along with the action plan. The introduction provides a basic background information specific to the organization in relation to the question with a brief historical background of the company. Discussion/analysis is based on primary research consisting of interviews with the management (Appendix 1 and 2) and appropriate secondary sources including financial reports of the company and various internet sites and books that allowed both financial (Profit and Loss Accounts and Balance Sheet) and non-financial analyses (Fishbone model and SWOT analysis). The possible causes and effects of the problem have been discussed and appropriate recommendations keeping in mind the needs of the employees have been made. But in this research the problem has solely been looked through an HR point of view whereas in reality the financial aspect needs to be considered before making any decision. Therefore further research is essential in terms of the financial matters before taking any concrete decision.

Research Proposal
1 Refer to Appendix 1

Research Question: How can the employees be retained in the BPO/KPO/RPO of an XYZ firm? Rationale: Majority of firms are facing the problem of retaining employees due to rising competition amongst top players in the industry. The industries are offering handsome pay packs + perks to attract/ tempt the youth to change jobs to lead a better life style. Theoretical Framework: I plan to analyze both the financial and non-financial aspects of the organization such as remuneration being offered to the employees and in addition perks offered like medical insurance for self and family, fuel re-imbursement/cab facility, etc. Key areas of syllabus: 2.1 Human Resource Planning 2.2 Organizational Structure 2.5 Motivation (financial and non-financial aspects) 2.7 Employer and Employee Relations Methodology Primary Research:

Interview the HR and Strategy Director of the XYZ firm to understand the possible causes of unfullfillment of key reasons provoking people to fluctuate jobs. Interview some of the current employees of the firm to understand their views. Interview an ex-employee of the firm to understand his reason of leaving the job.

Secondary Research:
4

Collate information from the HR Department on number of employees who have left the company in few months of joining due to lucrative offers from other players in the market.

Review Annual Report section and graphically represent the highs and lows of the company. Use the financial statements to understand the key reason of many job fluctuations i.e. salaries.

Anticipated Difficulties Possible Problems Solutions

Limitations to factual data

Will be acknowledged in the conclusion

Biased responses from the current employees If possible get in touch with some of the exof the firm. employees of the firm.

Interview questions too specific in nature A variety of open and closed questions to limiting the information available. enable depth of information.

Action Plan

Dates February 2011 9/3/2011-13/3/2011

Activities Topic Selection Write Research Proposal

Modifications

Some research criteria were added

23/3/2011 15/4/2011-17/4/2011 19/4/2011 22/4/2011 25/5/2011-15/6/2011 13/7/2011-11/8/2011 19/10/2011

Write Interview Questions Conduct the interviews Collect the secondary data Analyze secondary data Complete first draft Refine Draft Final Draft Submission

Contents Page Acknowledgements

6

Executive Summary Research Proposal... Introduction Procedure/Methodology. Main results and findings.. Current Market Position. Remuneration of Finance Director. Analysis.. Balance Sheet Non-financial analysis... Fishbone Model Conclusions and recommendations.. Bibliography. Appendix 1... Appendix 2 Appendix 3 Appendix 4.

Introduction XYZ Company, established in 1991, is a leading service provider in the international and domestic BPO markets in India.
7

XYZ delivers voice-based solutions, database management and back office support services for Indian and international customers. The key service areas include customer interaction centers, direct marketing, loyalty and fulfillment programs, and software solutions for CRM and consultancy services. However, in todays fast paced world, the shortage of skilled labor, the rapid rates of economic growth and high employee turnover figures, employee retention is the most critical issue facing corporate leaders like XYZ.As such for the long term health and success of the company, the management is looking for ways to retain employees for a longer period of time. A famous quote by Jeffrey Pfeffer2 rightly states, Profits are related to customer retention. Customer retention is related to employee retention. Thus to avoid disruption of normal operations and prevent the cost of hiring and training a newly recruited employee, XYZ company needs to chalk out some serious employee retention strategies. This has therefore led me to the following research question: How can the employees be retained in the BPO/KPO/RPO of an XYZ firm?

Procedure/Methodology:

Jeffrey Pfeffer, Professor of Organizational Behavior at the Graduate School of Business, Stanford University
2

Retention of employees is one of the major concerns of corporate leaders due to the intense amount of competition and the high financial costs incurred whenever an existing employee has to be replaced. Hence, for me this research holds importance as it is of great importance in todays world. The primary research consists of a detailed interview with various open and close questions with Paul Gaskin, HR Director of XYZ Company. An additional interview was conducted with an employee of the BPO sector of the Company to understand their views about the problem. The interviews focused on the physical working environment, employer-employee quos, problems likely to be the cause of job fluctuations and strategies being practiced to tackle this problem. A former employee of the firm was also interviewed to understand his reasons for job fluctuation. The secondary research which was undertaken consists of the reviewing of financial reports of XYZ Company and its key competitors and analyzing their recruitment strategies and staff turnover ratios. No. of employees who left the job within few months of joining and the reasons they gave for job fluctuation is also analyzed for further research. Final Accounts have been used and other non- financial tools like SWOT and fishbone model to reach to a concrete conclusion. While the primary research was taking place some questions were added on the spot to gather fruitful information.

Main results and findings: For any research to be conducted on a company its financial performance has to be carefully looked upon and appropriate results be deduced to reach on a concrete conclusion. Figure 1: XYZ recent financial performance

2010 Revenue m 4326.7

2009 3970 586.8

2008 3123.8 456.8

2007 2810.7 406.2

2006 2548.3 365.7

2005 2260.3 325

2004 1656.8 200

Gross Profit 644.3 m PBIT PAT 213.9 156.8

177.1 130.2

136.1 99.7

114.6 82.4

107.4 79.5

77.9 54.4

57.4 36.0

Figure2: Operating Profit3 of XYZ in recent years

Analyzing the financial performance of XYZ between the years 2004 and 2010, one can clearly see that until 2007 there has been a significant increase in the profits4, but from 2007 onwards the profits started declining steadily probably because the depression was at its peak. There were profits but not with a great margin as before. So there has to be something which is hindering the company from making enormous profits. Current Market Position: With a recent acquisition5 of the market leader of the domestic BPO, XYZ has emerged as the single largest player in this field. It has made the largest acquisition in the Indian BPO space till date6. Figure 3: Remuneration for the companys Chief Executive for the year 2010.

3 Operating Profit: Profit made by a business as a result of its ordinary trading activities. 4 Here we consider only revenues, gross profit and operating profit due to the differing tax rates every year. 5 About the acquisition refer to appendix 1 6 Featured articles from the Times of India.2011,viewed 13/6/11, <http://articles.timesofindia.indiatimes.com>

10

Figure4: Remuneration for the companys Finance Director for the year 2010.

41%

34% 25%

It can be evidently seen from these two pie diagrams that there is a huge amount of increase in the annual salaries of the higher officials. But for those working at the base level there is minimal done7. So clearly this is a case of a demotivated staff and thus people are left with no option 37% rather than change jobs and go to a company which is offering a higher pay package along with meaningful perks. This eventually leads to a high staff turnover rate which proves to be

39%

24%

detrimental to the companys profits.

Analysis/Evaluation Both the primary and secondary data collected point to only one direction, the company is doing well i.e. gaining profits but not marginal profits and the reason for this is a demotivated staff

7 Refer to Appendix 2.

11

due to the pay packs offered to people at the executive and trainee levels who are unsatisfied 8. The ever increasing rate of competition is giving rise to high job fluctuation rates especially after the year 2007 particularly for XYZ. Financial Analysis: Profit and Loss Account for XYZ, for the year ended 31st December 2010 PARTICULARS Sales Revenue Cost of Sales Gross Profit Less Expenses Less Depreciation of assets PBIT Tax Profit after Tax AMOUNT IN MILLION POUNDS 4326.7 (3682.4) 644.3 (413) (17.4) 213.9 (57.1) 156.8

Balance Sheet9 of XYZ as on 31st December 2010

8 Refer to Appendix 1. 9 A balance sheet gives the financial position of a business at a particular point in time

12

Fixed assets Intangible Assets Tangible Assets Total Fixed Assets Current Assets Stock Cash at hand or in bank Total Current Assets Total Current Liabilities Net Assets Loan Capital Share Capital Retained Profit Capital Employed 65.4 279.3 344.7 1675.7 841.3 262.9 9.9 568.5 841.3 1044.5 135.4 1378.2

There is sufficient amount of capital which is held by the company every year. This is proved by the financial analysis. But most of this is distributed or spent on increasing the salaries of the top most officials of the companies such as the Chief Executive or the Finance Director 10. The salaries of such top officials includes transport allowance, childrens education allowance, bonus amounts etc.11 In fact its not only this company, but The rise in the pay for the board level executives is seen to be more than twice the rate of inflation in the previous year. This also seems to be quite a unique situation for the company as most of the companies were lowering pays and slashing jobs to overcome recession.12 In such a scenario when the higher officials are being made much more than the people at the lower levels, they do not want to put any extra

10 Refer to Figure3 and Figure4 11 Refer to Appendix 1. 12 Article Basic salaries up by 10% despite bad economy, viewed 15/6/11 <http://www.financialculture.com>

13

effort because they know their effort would not bore any fruitful results. Thus, the best option they consider or rather are left with is to shift to a job which pays more than the current one and offers better perks for them. This is the major factor which is proving to be detrimental for the companys growth and profits. Concepts like profit-related pay or performance related pay can help motivate a dissatisfied workforce. Performance bonuses, loyalty bonuses, pay rises and gratuity are some such examples. These would create incentives for people to work and perform better. Workers can also focus better if their targets are clearly set out. Non-Financial Analysis Though the financial problems faced by the people working in the BPO sector of the XYZ company are the most important but there are factors other than these which are equally important and should be taken care of for a healthy working environment and a motivated and dedicated staff. To explain these the best way would be using Maslows13 Hierarchy of needs

Fishbone Model14

Polici

People

Lack of training and development programmes.

es

Lack ambition Lack training

Dull working

Insufficient motivational

Demotivated Staff

13 American psychologist Abraham Maslow focused on the psychological needs of workers since he believed that people are motivated by more than just money. He argued that these needs be met in order to motivate the employee. 14 Professor Kaoru Ishikawas fishbone model is a graphical representation of the most likely causes and effects of a particular problem.

Paraphernal

ia

14

environment.

techniques.

Procedure s

Clearly, the company needs to restructure its strategies and concentrate more on the most important aspect of a business i.e. the people. Maintenance factors should be met to prevent dissatisfaction. Motivators like job enlargement, job enrichment and job empowerment should be implied to increase the psychological growth of workers and hence increase satisfaction and performance at work. Appropriate training and development programs should be initiated for employees so that they learn something new and face more challenges so that they enjoy what they are doing. Another way to motivate workers could be making them participate in the decision making of the business. The decisions which might affect them could be taken by taking their suggestions and thoughts into consideration. In this way, workers feel that they are very much a part of the business. There is no happiness except in the realization that we have accomplished something.15 Recognition and praise of the workers for what they are doing can also be an encouraging factor. A pleasant working environment helps boost the morale of workers. As the effect of recession is now receding, slowly inflation is getting to its peak and with rising costs of living; people are demanding better salaries and other perks. XYZ should do something about this and cater to the needs of their workforce to reduce the level of staff turnover. With rising competition valuable workforce has left from XYZ and shifted to companies which are providing them with a higher pay and other factors such as suitable work hours16. This is not only increasing the companys staff turnover figure but also the added costs of recruiting and training new employees and starting the work from scratch with them.
15 Quote by Henry Ford 16 Refer to Appendix 2.

15

Nevertheless, the recent acquisition by the company

17

can prove to be a boom for the firm and

provide more employment opportunities and if the factors that have led to the high staff turnover figure are kept in mind and worked upon it can be a great success for the company.

Conclusion and Recommendations The research has enabled a deeper understanding of the situation and has looked at the problem of Employee Attrition from various views i.e. from an officials view as well as an employees view point. The companys good employer-employee relations
18

are a plus point. But the fact

19

that the workforce is not really satisfied with the training and development processes in the company is a factor to be carefully considered. Workers in todays world like challenges and repetitive work every day becomes monotonous for them so the company can work towards that. A healthy working environment and improved working space would also ensure workers serving a longer tenure in the company. Recommendations: As such my recommendations would be:

17 Refer to Appendix 1 18 Refer to Appendix 2. 19 Refer to Appendix 2.

16

Introduce better training and development programs along with better working hours if possible20. Financial and non-financial motivation techniques such as bonuses and other perks can help motivate people to serve in the company for longer. New and challenging work for employees can also help boost their morale. The company can try and take suggestions from employees when making decisions that would affect them as well take time to time reviews from them.

However my research is limited: it has looked into the matter only from an HR point of view and is a very HR oriented research. Factors such as bonuses, training and development programs have to be looked into from the financial point of view. The feasibility of such options has to be considered. Such decisions require careful and long term strategic planning for the betterment of the business and the employees both. There can be minor differences in the financial data due to confidentiality issues. But this is a serious problem and has to be looked into very carefully and appropriate solutions be deduced because if not done so it can prove to be very harmful for the business in the long run. Bibliography: Annual Reports of XYZ Company. Articles from the Times of India 2011 <http://articles.timesofindia.indiatimes.com/2011-06-01/india-business/29607751_1> Viewed on 13th June 2011 Time of access: 5:56PM

Article on rise in basic salary by 10% <http://www.financialculture.com/basic-salaries-up-by-10-for-ftse-despite-bad-economy/> Viewed on 15th June 2011 Dictionary for Reference <http://www.dictionary.com> Time of access: 1:24 PM

20 Refer to Appendix 4.

17

Viewed on 13th June 2011

Time of access: 2:54 PM

Hall, D, Jones, R, Raffo, C.2007. Business Studies (3rd Edition). Causeway Press Ltd. Interview with Mr. Paul Gaskin HR Director of XYZ Company. Interview with Mr. Rajat Sood BPO Employee of XYZ Company. Interview with Ms. Sakshi Sharma BPO Employee of XYZ Company. Interview with Ms. Sambhavna. Ex-employee of XYZ Company. NASSCOM foundation <www.naascomfoundation.org> Viewed on 15th June 2011 Time of access: 9:24 PM

Outsourcing Blog <theoutsourceblog.org> Viewed on: 14th June 2011 Time of access: 3:29 PM

Paul Hoang, 2007. International Baccalaureate Business and Management. Edition. IBID Press. Quotes <thinkexist.com Authors Jaz Jen> Red mayne <www.redmayne.co.uk> Viewed on: 13th June 2011 Top 10 BPO Companies in India
18

Time of access: 5:56PM

< www.chillibreeze.com/articles/top-BPO-companies.asp>

Appendix 1: Interview with Mr. Paul Gaskin- HR Director of XYZ Company 1) SEEING THE PRESENT SCENARIO OF THE BPO SECTOR ACROSS THE COUNTRY WHERE DO YOU SEE IT GOING? Ans) There is a lot of competition currently floating in the Indian market as far as the BPO sector is concerned. The market trend during the recession period has forced small Indian BPO companies to shut down their firms as a result of which a lot of unemployment was seen but as the recession period is fading we see opportunities and new firms coming up as well as M&A of various BPO companies providing new opportunities for workers. A recent acquisition of our firm has enabled us to become the largest domestic BPO sector in India in addition to providing jobs for almost 5000 people henceforth.

2) WHAT ARE THE REMUNERATION PACKS YOU HAVE BEEN OFFERING TO YOUR EMPLOYEES IN THE PAST THREE YEARS? Ans) Remuneration packs depend upon the qualification and experience of the person hired. Although once hired there has been a minimum increment between 10 to 20% for every employee per annum.

19

3) HAVE THE PAY PACKS AND PERKS BEING OFFERED AT DIFFERENT JOBS REMAINED CONSTANT IN THE PAST THREE YEARS? Ans) At certain levels like managers and team leaders it will be a yes but at executive and trainee levels the result has not been very satisfying and our staff turnover figures have reached about 80 -100 people leaving jobs per year.

4) WHAT DO YOU THINK CAN BE THE POSSIBLE CAUSE OF EMPLOYEES LEAVING THE FIRM? Ans) A majority of employees choose to move from one firm to another basis higher increments, better positions offered and locational issues.

5) WHAT WRE THE ALLOWANCES THAT ARE OFFERED TO YOUR TOPMOST OFFICIALS? Ans) Their allowances include medical benefits, bonus amounts, transport allowances, childrens education allowances etc. 6) HOW ARE THE EMPLOYER- EMPLOYEE RELATIONS IN THE FIRM? Ans) The XYZ firm is valued for its employee friendly relationship which is why today we are the market leaders.

7) LASTLY WHAT ARE THE STRATEGIES YOU HAVE IN MIND TO FOLLOW OR ARE FOLLOWING CURRENTLY TO RETAIN EMPLOYEES? Ans) Currently to retain employees we are offering attractive salary packages with perks and commuting facilities which makes their lives easier and ours too as the public transport system especially for female workers is not very safe in India. Also, providing them with international quality training for better prospects and formation of a strong and easily approachable ER team to understand the needs and problems if any faced by an individual employee.

20

Appendix 2: Interview with MS. Sakshi Sharma and MR. Rajat Sood combined together with valuable information 1) SINCE HOW MANY ORGANIZATION? Ans) 3 years 2) ARE YOU SATISFIED WITH WHAT THE COMPANY IS OFFERING YOU? Ans) Yes it is a great company to work with which has taught me a lot of new chapters enhancing my knowledge. 3) DO YOU PERSONALLY WANT ANY CHANGES IN THE ORGANIZATION WHICH MIGHT HELP YOU AND OTHERS LIKE YOU ADAPT MORE COMFORTABILY AND READILY TO THE WORKING ENVIRONMENT? Ans) Personally I would want more training and development programs because I believe training and development is a key source for growth for any individual employee to reach the next level. Better training and development will result in better performance which in turn will help the company grow which in turn will help the company profit so this basically a cycle which helps in better performance of the company as well as the individual. Also challenging and new work for employees is necessary to provoke a positive spirit in them. 4) WHAT DO YOU THINK COULD BE THE REASONS FOR THE EMPLOYEES LEAVING THE ORGANIZATION SERVING A SHORT SPAN OF TIME? Ans) Few reasons of employees leaving could be a) hasty decisions of not being comfortable in the environment/set up, b) higher pay packages offered by competitors, c) preferential
21

YEARS

HAVE YOU

BEEN

WORKING

IN

THE

location suitable to the employee, d) suitable working hours as per the individuals convenience eg an individual is more comfortable working during day shift timings so that he is able to spend quality time with his family but if he is positioned for a night shift duty he does not get time to spend with his family. 5) HOW ARE YOUR WORKING RELATIONS WITH YOUR EMPLOYERS? Ans) This company is a very employee friendly firm and pays genuine heed to concerns raised by its employees and tries its best to satisfy/amicably sort out issues in the best interest of the employee as well as the employer.
6) HAVE YOU BEEN FACING ANY PROBLEM IN THE FIRM AS SUCH WHICH

YOU WOULD LIKE TO DISCLOSE? Ans) NO Appendix 3: Interview with MS Sambhavna 1) WERE YOU AN EMPLOYEE OF XYZ COMPANY? Ans) Yes 2) FOR HOW MUCH TIME DID YOU WORK THERE? Ans) I worked for a very short tenure. About 5 months. 3) WHAT WAS THE REASON THAT YOU LEFT THE JOB? Ans) Well firstly I was not happy with working hours. A 9 to 5 job became a 9 to 8 job for me. It was becoming really hectic for me and adversely started affecting my health also. Moreover I could not spend quality time with my family who are my topmost priority. Also, the pay package Im getting here is far better than that provided by XYZ Company and added to that are the benefits like medical insurance, transport allowance etc.
4) APART FROM THE SALARY AND WORKING HOURS WAS THERE ANY OTHER

PROBLEM WHICH YOU WERE FACING THERE? Ans) Not really but yes I would like to say that the company definitely should introduce better training and development programs. 5) HOW WAS THE WORKING ENVIRONMENT THERE?

22

Ans) Well I can say that the working environment was pretty much the same as in any MNC. Except for the fact that the company maintains an excellent employer-employee quotient. It is really commendable.

Appendix 4: XYZ Company SWOT Analysis SWOT analysis consists of four categories, and is an analytical tool used to discover the current situation of the business and prospects for its future. Includes the businesses internal strengths and weaknesses and external opportunities and threats. Strengths Weaknesses Opportunities Threats

-Is a market leader in -Concentrates on the -The acquisition can -Big competitors in the BPO sector of the remuneration country. -Financial Status is majorly officials. appropriate and the of broaden the horizons the market and can higher and can enable increase the level of employment of highly competition efficient and valuable tremendously. staff.

relatively good and -Lacks has a large amount of training profits every year. - Maintains a good employer-employee relation.

development programs.

23