BPO blues: What HR can do

G Sankaranarayanan / Chennai

In an ideal situation, a business process outsourcing (BPO) entity—even if it’s a third party one—becomes an extended functional department of the organisations from which it gets business. The challenges in creating an outstanding outsourcing unit, which would adopt within no time to the constantly evolving strategies of its customers, are directly related to human resource management.

In its recent issue, Business Week called India as Corporate America’s “silent partner” for US organisations, who are “off-shoring” more and more white-collar jobs to India, but don’t admit it openly for the fear of public resentment over job losses. The weekly said that it had approached around 1,000 corporations for its cover story, The Rise of India, but only a few (including General Electric, Intel and Cummins) were “brave” enough to grant on-the-record interviews about their R&D and back-office operations. The magazine, however, concluded that “sooner or later, India will cease being Corporate America’s dirty little secret and instead will be hailed as a valuable strategic ally.”

But there’s a hitch. India is fast losing its cost competitiveness, on account of the increase in the infrastructure cost and salary, among other factors. The Nasscom and Hewitt Associates study, the ‘Total Rewards Management 2003’, points out the multi-fold increase in compensation. Within ITES companies, average salary increased from 12.2 percent in 2002 to 15.4 percent in 2003. For the IT sector, the average salary increase was 14.5 percent in 2003 from 12.9 percent in 2002.

Since this trend is only to continue in the future, India’s BPO units of the present look for ways to build competence in business processes of various domains.

It’s in-sourcing, so far

In the truest sense of the word, outsourcing is yet to happen in a widespread manner. The scenario is dominated by in-sourcing, wherein the processing is done at cost-effective centres by local staff.

Though financial MNCs like GE, American Express, Standard Chartered, ANZ Grindlays, HSBC, ABN Amro, Fidelity and the World Bank outsource their IT requirements to companies like TCS, Wipro, Infosys, Cognizant and Satyam, they still choose to do the business processing themselves. Companies like P&O Nedlloyd, Conesco, Convergys, Ford, HP, Bechtel Axa representing other verticals have also set up their own BPO centres.

According to a report, in-sourcing companies grew from 710 companies to 1,350 in 2002-03, whereas the third-party entities grew from 769 to just 985. The revenue contribution to export revenue of in-sourcing units is pegged at 65 percent, compared to the less than 35 percent by the third-party ones.

Departure of the dissatisfied

While there are success stories of third-party BPO companies, of India winning the hearts of customers, who were once highly reluctant to outsourcing, by proving themselves to be reliable, there also are a few failures, and quite damaging at that. Recently Dell shifted its technical support for its business customers from Bangalore to the US.

Close to the heels of this development, was the decision of Lehman Brothers, a leading financial services company, to shift call centres for its internal computer desk from India (the company had entered into a $70 million a year deal with Tata Consultancy Service and Wipro Limited to manage some of its information-technology operations) to the US, complaining about the quality of service.

HR challenges

Understandably, the companies are unhappy mainly over the high-end value added BPO operations, whose performances are largely related to human resource management.

Contrary to general perception, customer-companies tend to demand better results from outsourcing partners than what they could actually expect from their own departments. “When the job is being done 10,000 miles away, demands on parameters such as quality, turn around timeliness, information security, business continuity and disaster recovery, etc, are far higher than at home. So, how to be more efficient than the original?” says Ranjit Pisharoty, senior vice president of Lason India, who vouches that HR practices are the least of the root causes for delivery failures.

If practices are not to blame, then the crucial question pertains to the very claim of India’s talent pool. Pisharoty believes that the talent pool exists for every kind of BPO level—from plain data entry to rule-based transaction processing to more complex decision-making transformational processing or adjudication.

Indis has the talent to do some of the finest “value add back office processing work” as well as “high value add research, analysis and reporting kind of work, using appropriate technology. He observes that by and large value-added BPOs require delivery excellence through process excellence and India is the best for engineering such processes, exploiting the technology which enables them processes and most important, following process discipline.

Pisharoty however accepts that there is

hype in the IT services world of India’s great “knowledge pool,” mistaking the oceans of “programming/coding pool” with the high value works possible from here. “There are pockets of excellence, no doubt, but this is not much different from Russia or East European countries. If Dell exited because of this dichotomy, I can only say that probably they did not attract the relatively few real high value add knowledge people,” he opines.

Pisharoty sees a clear gap between the demand and supply of mid-level managerial and supervisory skills in this nascent industry. To tackle this he emphasises on appropriate training in production management, leadership, quality, statistical processes, etc. “Apart from the usual induction training, cross-functional orientation, BPO companies like Lason need to focus additionally on fairly in-depth information security awareness training with planned refreshers, industry specific general and focussed training, among others,” he says, adding that from an HR perspective the challenges facing the industry is not so much attrition but there are a few lacking. These are namely:

a) Brand equity: People still consider BPO to be “low brow”, thus making it difficult to attract the best talent.

b) Standard pre-job training: Again, due to the wide variety of the jobs, lack of general clarity on skill sets, etc, there is no standard curriculum, which could be designed and followed.

c) Benchmarks: There are hardly any benchmarks for compensation and benefits, performance or HR policies. Everyone is charting their own course.

Given this background, the recruiting and compensation challenges of HR departments are only understandable. Custo-mer-companies may take a long time to outsource and even more before ramping up the operations.

Sanjeev Misra, co-founder and vice president—operations of Secova eServices says that companies would still prefer to hire rather than go for options like flexi-staffing. He strongly believes that an innovative HR policy can be a competitive edge for a BPO unit.

“The key to success in ramping up talent in a BPO environment is rapid training modules. The training component has to be seen as an important sub-process, requiring constant re-engineering,” states Pisharoty.

As a case in point, the training perspective has been the driver in building processing applications at Lason India, which has 80 percent common processing requirement for which a common pool of trained manpower is always be kept, with just 20 percent customised training requirement which could be project specific or line-of-business specific.

This has helped Lason India to keep it’s excess capacity requirement down from 25 percent earlier to less than 5 percent now.

Also, training time and cost gets drastically reduced, not to mention affording great flexibility and scalability, so crucial for a BPO industry.

Measuring capabilities

There are several standards in the BPO world, which lend assurance to the customer on delivery capability. However, most of them are yet to gain acceptance. A study of the company’s quality management systems (whether ISO or proprietary customised) and a thriving business excellence model (Six Sigma, Deming, Malcolm Baldridge, etc) or demonstrated TQM practices, can lend such assurance. “There is an emergence of BPO specific standards like COPC 2000 evaluated on number of successful processes as against total transactions,” points out Misra.

Pisharoty adds, “The bottom line is that a model for processes, defining quality delivery of services, needs to be designed, implemented and practised with metrics based evaluation. This could be COPC or CMM or ISO, but more important to a customer is application of programmes such as Six Sigma, for over all delivery assurance.”

With inputs from M Aarthi and S Nisha