Retrenchment Strategies Followed by BPO Sector during the Time of Recession

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REPORT

ON

Retrenchment Strategies Followed by BPO Sector during the Time of Recession 

Submitted by:

Rahul Saini

MBA-II Semester

POORNIMA SCHOOL OF BUSINESS MANAGEMENT

ISI-6, RIICO Institutional Area,Goner Road, Sitapura, Jaipur

                                       

ACKNOWLEDGEMENT

I express my sincere thanks to my project guide. MISS Priyanka Khandelwal and Karishma Sharma , Designation Faculty, Department of management studies Poornima School of business management, Jaipur, 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.

I would also like to thanks Mr. R.K. Agarwal and supporting staff faculty members of Department of Management Studies Poornima School of business  management, jaipur, for their help and cooperation throughout our project.                                                  

                               

                                                                                 Thanks to all,

                                                                             Rahul Saini

                                                                     MBA-II-SEMESTER

                                                                              

CONTAIN

1.  PREFACE

2.  EXECUTIVE SUMMARY

3.  INDUSTRY PROFILE

4.  OBJECTIVE OF STUDY

5.  SCOPE AND PURPOSE

6.  RESEARCH AND METHODOLOGY

7.  FINDING DATA AND ANALYSIS

8.  CONCLUSON

9.  RECOMMENDATION

10.          LIMITATION

11.          BIBLIOGRAFY

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.

 

                                  

                            

EXECUTIVE SUMMARY

Meaning of retrenchment

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

Employees are often the casualty of retrenchment, as the tactic does not take their interests into account. They are often considered simply as commodities that are either profiting or costing the company, and are therefore either a necessary expense or a financial liability.

Definition of retrenchment

Retrenchment (French: retrenchment, an old form of retranchement, from retrancher, 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.

There are five activities that characterize retrenchment:

Captive Company. Essentially, a captive company's destiny is tied to a larger company. For some companies, the only way to stay viable is to act as an exclusive supplier to a giant company. A company may also be taken captive if their competitive position is irreparably weak.

Turnaround. If your company is steadily losing profit or market share, a turnaround strategy may be needed. There are two forms of turnarounds: First, one may choose contractions (cutting labor costs, PP&E and Marketing). Second, they may decide to consolidate

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

Divestment. This is a form of retrenchment strategy used by businesses when they downsize the scope of their business activities. Divestment usually involves eliminating a portion of a business. Firms may elect to sell, close, or spin-off a strategic business unit, major operating division, or product line. This move often is the final decision to eliminate unrelated, unprofitable, or unmanageable operations.

Liquidation. This is very simple. Take the book value of assets, subtract depreciation and sell the business. This may be hard for some companies to do because there may be untapped potential in the assets.

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 to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

                                     

INTRODUCTION TO THE BUSINESS SCENARIO OF BPO

BPO [Business Process Outsourcing] has been the latest mantra in India today. As the current sources of revenue face slower growth, software companies are trying new ways to increase their revenues. BPO is top on their list today. IT services companies are making a quick entry into the BPO space on the strength of their existing set of clients. We hope to address all issues related to BPO in India on this portal.

We will attempt to explain what it takes to setup a BPO facility in India. Actually, setting up a call center is capital intensive. An ordinary BPO center that takes care of pure back office operation [e.g. payroll, data entry] will not be as expensive as a call center.

The philosophy behind BPO is specific, do what you do best and leave everything else to business process outsourcers. Companies are moving their non-core business processes to outsource providers. BPO saves precious management time and resources and allows focus while building upon core competencies. The list of functions being outsourced is getting longer by the day. Call centres apart, functions outsourced span purchasing and disbursement, order entry, billing and collection, human resources administration, cash and investment management, tax compliance, internal audit, pay roll...the list gets longer everyday. In view of the accounting scandals in 2002 [Enron, WorldCom, Xerox etc], more and more companies are keen on keeping their investors happy. Hence, it is important for them to increase their profits. BPO is one way of increasing their profits. If done well, BPO results in increasing shareholder value.

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.

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
• Mis 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.

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
• 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 company’s 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

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

IMPACT OF RECESSION ON BPO SECTOR

The impact of global slowdown on India’s 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

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

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.

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, India’s 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 non-discretionary,” 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 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”

                                  

Implications:

      Workers in the globalized sectors who earn more than 30 per cent of foreign exchange are thrown to the volatility of global market without any protection.

      The impact is not short term, the recovery will take time to go back to the original employment and wage levels.

      Small producers / own account workers are the worst sufferers among the producers in the recession.

      No institutionalized arrangements to help workers to look for alternative jobs, leading to wastage of skills.

      The work force in the private sector in their – 20s, 30s and 40s is largely unprotected in terms of security of jobs, investments, retirement and children’s education.

      Increased depressions, cases of suicides by workers, a few times with family.

Counter strategies:

• Karthik Ananth, Senior consultant, business development Zinnov says, “There is already a shift in business strategies of corporate India. Large IT and BPO firms have started looking at other markets like Europe and domestic markets to spread risk and reduce the impact of the rising rupee.
• Diversification of export markets, improving internal efficiencies to maintain cost competitiveness in a tight export market situation and moving up in the value chain to impart resilience.
• Corporate India will have to spend lot more to develop markets and supply chain links in alternate markets like Asiaand Europe.

• This is the right time to hire as salary expectations of people have become realistic and referral system (giving referral bonus-an incentive to employees who refer people for slot that companies look for) helps identify suitable people.

Recession begins to fade:     

Economic times said that “Many companies have started reworking their hiring mandate. Infosys technologies, which previously planned to hire 18,000 persons this year, has said it will hire an additional 2000 during the third and fourth quarters of the current fiscal. A large number of product firms, R& D companies and mid tier MNCs have also started hiring.

A survey that Manpower Inc. released, covering 71,000 interviewees across 35 nations and 5,109 companies in India, showed that “ Indian companies are the most optimistic in the world” about hiring this January to March quarter”.

“Most companies are coming out of their shell”, said Cherian kuruvila, director operations at Manpower Services India Pvt. Ltd “2009 has been a year of restructuring. 2010 will see a mix of replacement hiring, to fill up vacant positions and hiring for new positions, signifying expansion.

• Fresh jobs are being created in most sectors that depend on domestic consumption.
• FMCG, Retail, Media and entertainment in particular are seeing aggressive recruitment.
• Robust increments are being given to retain talent across sectors.
• IT and ITES companies have pared recruitment, but are still doling out (decent) hikes.

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.

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 lay-offs 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.

Increase in efficient work flow and computerized services:

 If an organization work process is extremely fast and easily meets the requirements of the market, it may downsize some of its workforce. Similarly, if manual work can be done by a machine, in a much better and cost-efficient way, it also results in the reduction in the number of employees.

Outsourcing practice:

Organizations catering to international markets require a huge and efficient employee base. If this labor can be obtained by 'exporting' 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.

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

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.

Genpact’s 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), Genpact’s 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 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.

Headcount                      

BPO firms seem to be hiring in smaller numbers as they prefer to work with on-board employees in a bid to cut costs.

WNS ended the quarter with an employee base of 21,356, higher only by some 28 employees over the quarter ended December 2008. WNS’ smaller rival EXL posted a net increment of 32 employees during January-March quarter. “We continue to hire about 200-300 employees each month spread across India and the Philippines,” a company spokesperson said without going into details.

EXL, which runs a January-December fiscal, had 9,563 employees on its rolls against 9,531 in the previous quarter.

An HR head of a large BPO player pointed out that while the industry was hiring fewer numbers, companies were also cleaning up their bench. “Companies are not retaining non-performers. Also, one has to see the employee count in the backdrop of growth of these companies,” the official said.

Mumbai-based Firstsource saw a net reduction of 950 employees in the just-ended quarter compared with net addition of 2,944 employees in the preceding quarter (October-December), and a net addition of 279 in the year-ago period.

“Reduction in headcount in the fourth quarter is due to large ramp up in previous quarter getting in to production mode and headcount stabilising,” its CEO, Mr Ananda Mukerji, said in a recent interaction with analysts.

The quarterly gross hiring numbers for both WNS and Firstsource for the fourth quarter were not available. The sole exception to this pack was Genpact, where growth remained more or less intact on a sequential basis. The company’s net addition stood at 300 employees against 200 employees in the last quarter.

However, the gross addition for January-March quarter stood at 2,200 employees, with hiring largely focused on BFSI and India-to-India business, sources said.

In fact its gross hiring in the first quarter of 2009 is a tad higher than the gross hiring in the fourth quarter of 2008 at 2,100 employees.

Genpact had about 36,500 employees globally, as on March 31, 2009.

 

Could the recession in the United States affect the Indian BPO sector badly?

The possible recession in US has, both, positive and negative effects for the BPO sector in India. On the positive side, the need to cut-costs and enhance margins will accelerate the off-shoring of outsourcing of business process which will have a beneficial effect.

However, the uncertain economic climate in the US may delay the decision process on outsourcing which may have a negative impact on the growth of the Indian BPO sector. In sum, the BPO industry in India will continue to grow, though at a marginally reduced rate.

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.

Outsourcing Chak De (Lift Them) or Chuck Them BPO India (By Ajay

Ohri)

1)Outsourcing Chak De (Lift Them) or Chuck Them BPO India (By Ajay Ohri) The Business Process Outsourcing (BPO) Industry is one of the largest providers of employment in India. They employ an estimated half-a-million Indians, mostly in the 20-35 age groups, and these numbers are only increasing. Thus, the number of people who are directly affected by the Indian call centre industry is nearly 1.5 million Indians including dependents. For a vast majority of them, the BPO industry is considered a boon as it enables them to earn wages much more than was possible previously. The industry is by large un-regulated compared to other industries and has grown rapidly unchecked over the few past years. It has had systematic issues, especially related to coping with human resource management, in times of rapid growth .Indeed most BPO Human resource personnel are either recruiting or trying to control attrition.

A Few Issues The BPO industry is marked with some operational issues and they are enumerated as follows: -Lack of Labor Guidelines: There is very little over-time pay and it, thus, leads to systematic overworking or understaffing of resources in both small and big BPOs. The understaffing is also responsible for the erratic quality or projects due to rush jobs. Labor regulation has been avoided because historically Indian regulations have been misused to offer hassles to industry rather than relief or solutions. Recently, a committee headed by Arjun Sengupta had submitted a draft of the Unorganized Sector Workers’ Bill to cover the workers in this sector. Lack of Health Guidelines: There can be medical counseling (without too much expenses) to cope with effects of prolonged night-shifts, or sitting in chairs, especially chronic back-aches, and personality counseling. This shall help especially when there are project requirements for extended over times.

Employee Retrainabilty: There can be career counseling to help young employees plan a career in a still turbulent sector (Not everyone will be a team leader). There is no provision for re-training for workers being laid off and there is little chance of unemployment benefits in India. Retrenchment in this sector happens at a larger scale usually when companies lose a few big clients as in the recent mortgage subprime crisis or even earlier when a big computer maker of American-origin shifted. The insecurity of being laid off leads to further attrition. In this scenario, companies that offer skill enhancement and re-training are likely to have a sustainable edge in human resource management Attrition - An urban legend: Despite the noise about attrition by industry players, most of the attrition is actually and subtly encouraged to keep operating margins down. This is because attrition enables middle managers to cut down costs temporarily by making other team members stretch, and replacing them by un-experienced younger members. It is also very easily explained as due to market conditions or poaching by other companies. The solution for having an industry wide database lacks sensitivity to individual personal rights and seems to point the finger almost entirely on employees for attrition.

 Growth of BPO in Indian Economy (By Akinchan Buddhodev Sinha)

In spite of tough competition, India has emerged as a global leader in the Business Process Outsourcing (BPO) industry. India has the advantage of having large English speaking and computer literate workforce, which are considered as important perquisites for the success of BPO sector. It explores the factors that have contributed to the success of BPO industry in India. Sound infrastructure is crucial for the success of any industry including BPO. The author throws light on the improvements achieved in the telecom, aviation, power, offices, hotels and
road facilities that have facilitated the growth of the BPO industry. He examines the role played by the human resource in making India a BPO hub. The article also discusses the initiatives taken by the government including policy concessions, tax exemptions and removal of procedural hurdles to enable the growth of the BPO sector. In the last section the article throws light on the future of BPO industry in India, especially its contribution towards GDP, exports and employment generation. The author observes that BPO industry has witnessed transformation from back office service operations to handling core functions and is playing a significant role towards growth of the economy. The author emphasizes the need for continued
efforts to maintain the lead in this industry.

Recession impacts salaries, attrition in Indian BPO sector

March 30th, 2011        

Earlier this month, the association that supports and promotes India’s 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 country’s 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 India’s 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 country’s 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.

                                                                                                               

Title name - Retrenchment and the changing role of HR

Author name – sahdev

Magazine –Journal of management

Publisher – SAGE Publisher

Date – Oct-5-1999         

This paper examines the changing role of Human Resources (HR) in the specific context of Retrenchment. It highlights the key dilemmas facing HR professionals - on the one hand, the contribution of Human Resources Management (HRM) to the achievement of business results has come under increasing scrutiny and, on the other hand, most of the challenges of Retrenchment are people-related issues that require sophisticated HR interventions. The paper reports the key findings of a pilot study conducted in sixty organisations in the UK that downsized in the last three years. The key conclusion of the study is that the role of HR has become wide ranging, covering the strategic as well as implementation aspects. The clear message from the study suggests that, unless there is alignment between the two aspects, the envisaged benefits of Retrenchment are unlikely to take place. Key challenges facing HR professionals are managing middle managers, managing careers and managing employee expectations. There are indications to suggest that the process role of HR is likely to become more important in the medium and longer terms.

Title name - The impact of Retrenchment on organizational career development activities and employee career development opportunities

Author name -   Daniel C. Feldman

 Publisher - University of South Carolina, USA

Date  -   29 April 2002. 

                       

While most of the human resource management research on Retrenchment has focused on the short term impact on laid-off workers and survivors, the long term, systematic impact of Retrenchment on organizational career development activities and employees' career development opportunities has received much less attention. This article argues that the rationale for Retrenchment the workforce, the goal of the Retrenchment and the rate, size and scope of the Retrenchment differ dramatically across organizations shrinking their workforces. Consequently, this article presents a theoretical framework for understanding when organizations are likely to pursue different strategies for reducing their core workforces, why Retrenchment organizations are likely to pursue different strategies for changing the emphasis of their career development activities and which employees are most likely to experience deteriorating career development opportunities as a result. Hypotheses to guide future theory development and empirical research in this area are discussed as well.

Title name -  Career Anchors Revisited: Implications for Career Development in the 21st Century

Author name -   Edgar h. schein

Magazine –Journal of management

Publisher – SAGE Publisher

Date-  Nov. 1996

                                     

Organizations are undergoing a metamorphosis today. Whether one speaks of "Retrenchment," "rightsizing," "flattening," becoming a "learning organization," or simply of a "transformation" into something as yet unknown, no one would deny that profound changes are occurring worldwide. These changes in the occupational environment have implications for career development in the future. Will there even be such a concept as an "organizational career," or will careers become a more fragmented set of jobs held together far more by what I have labeled the "internal career?" The internal career involves a subjective sense of where one is going in one's work life, as contrasted with the "external career," the formal stages and roles defined by organizational policies and societal concepts of what an individual can expect in the occupational structure. In studying careers longitudinally, it became evident that most people form a strong self-concept, a "career anchor," that holds their internal career together even as they experience dramatic changes in their external career. But will the concept of career anchor still be applicable in this rapidly changing world? What are the implications for career development as we look at several future scenarios of how the world might evolve further in the 21st Century

 

 

Title name -  Survivor reactions to organizational Retrenchment: Does time ease the pain?

Author name -  Tammy D. Allen,Deena M. Freeman,Joyce E. A. Russell,Richard C ,Reizenstein,Joseph O. Rentz

Magazine –Journal of management

Publisher – SAGE Publisher

Date -  16. DEC. 2010

                                             

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.

Title name - The difference between rightsizing and wrongsizing: 

Author name -  Davison, Barbara

Book – employee Retrenchment

Publisher – ICFAI publisher  

Date -  July 01, 2002 

               

DECREASED SALES, INCREASED COMPETITION, ECONOMIC downturn, lost customers, cost-cutting mandates, and disproportionate workforces. These are some of the sad facts of business life today. In the response to these challenges, many businesses are repositioning and reallocating both human and financial resources through a process called "rightsizing."

Rightsizing, or "resizing" as it's currently known, takes on many different meanings within organizations. It can mean reducing the workforce, "Retrenchment" or eliminating functions, reducing expenses, or redesigning systems and policies. It can also involve "upsizing" (increasing the workforce in certain areas), and "sidesizing" (repositioning the workforce to other areas). Unfortunately, it can also include "wrongsizing," or losing key talent that a company can't afford to lose.

These days, workforce reduction is one of the most common rightsizing activities -- a decision sometimes driven by the need for short-term profits. According to consulting firm Challenger, Gray and Christmas, close to two million jobs in the U.S. were lost in 2001. The firm reported an additional 255,000 job cuts in first quarter of 2002. And it's not over.

Title name - Relationships between firm attributes and Retrenchment.

Author name - Friedman, Sam

Magazine –Journal of management

Publisher – SAGE Publisher

 Date - May 2, 1994  

                 

Based on the conventional view that employee Retrenchment reduces labor costs and boosts profitability, several studies belonging to this link have examined the effects of firm performance (accounting, market-based, and efficiency measures) on Retrenchment decisions.

 There is general agreement across studies that firm performance is an important factor in Retrenchment decisions, with performance declines often resulting in employee reductions (Ahmadjian & Robinson, 2001; Baumol et al., 2003; Budros, 2002, 2004; Coucke et al., 2007; Hillier, Marshall, McColgan, & Werema, 2006; Kang & Shivdasani, 1997; Tsai et al., 2006; Yu & Park, 2006). However, a few studies (Iqbal & Shetty, 1994; Perry & Shivdasani, 2005; Yoo & Mody, 2000) have found no significant relationship between firm performance and employee Retrenchment.

Title name -  Relationships between firm strategies and Retrenchment.

Author name - Joseph P. Daly

Magazine –Journal of management

Publisher – SAGE Publisher

                   

 A majority of the 11 studies categorized in this link have investigated the effects of M&As on subsequent employee Retrenchment. In these studies, Retrenchment is seen as an avenue by which firms eliminate redundancies resulting from M&As. Findings, however, have been mixed.

Specifically, whereas Budros (2002), Conyon, Girma, Thompson, and Wright (2002), and Lehto and Bockerman (2008) observed significant employment declines following M&As, studies by Budros (1997, 2004), and Wagar (1997) did not. In examining the relationship between M&As and Retrenchment, O’Shaughnessy and Flanagan (1998) observed that the relationship between the two was contingent on M&A type, with the likelihood of employee reductions being greater in the context of related transactions.

Title name - Relationships between firm governance, CEO characteristics, and Retrenchment.

Author name – Deepak k data

Magazine –Journal of management

Publisher – SAGE Publisher

Studies belonging to this link have primarily used agency theory arguments in assessing the effects of governance mechanisms (board characteristics, ownership structures, and compensation systems) on employee Retrenchment. In an early attempt at understanding the relationships between ownership structures and Retrenchment, Bethel and Liebeskind (1993) found that firms with greater blockholder ownership experienced higher levels of employee reductions. In contrast, Filatotchev et al. (2000), in their study of layoffs among firms in Russia, Ukraine, and Belarus, observed no relationship between institutional ownership and Retrenchment.

Title name -  Relationships between Retrenchment, perceptions of trust and justice, and work  environment changes.

Author name - Deepak K. Datta, James P. Guthrie, Dynah Basuil and Alankrita Pandey

Magazine –Journal of management

Publisher – SAGE Publisher

 The limited research belonging to this link explores the effects of Retrenchment on organizational trust, perceived justice, workplace conflict, and changes in the work environment. The role of perceived justice in the context of Retrenchment was first highlighted by Brockner et al. (1994). They found that layoff severity did not have a perceptible impact on organizational trust and support when survivors perceived high procedural fairness.

However, under conditions of low perceived procedural fairness, layoff severity had a

significant deleterious effect on organizational trust. In a subsequent study, Mansour-Cole and Scott (1998) found that survivors perceive greater procedural fairness when they learn about impending layoffs from their managers and not from other sources.

Title name -  Relationships between Retrenchment and turnover intent and absenteeism.

Author name - Kalimo, Raija; Taris, Toon W.; Schaufeli, Wilmar B.

Magazine –Journal of management

Publisher – SAGE Publisher

Date – Apr. 2003

Most of the studies belonging to this link have examined the effects of Retrenchment on the likelihood of voluntary turnover among survivors. Findings suggest that although Retrenchment increases the likelihood of such turnover (Allen et al., 2001; Trevor & Nyberg, 2008), the effects are less pronounced when employees have greater task self-esteem, are more optimistic, and/or exhibit greater organizational commitment (Armstrong-Stassen, 1994; Mone, 1994; Spreitzer & Mishra, 2002). In addition, Armstrong-Stassen’s (1994) findings suggested that turnover intent is lower when employees feel a sense of powerlessness; with the opposite being true when they have a greater sense of mastery (i.e., they believe that they have greater control of their destiny) or when they perceive greater threat of job loss.

Title name - Relationships between Retrenchment and work performance.

Author name - Shaw, J. D., Gupta, N., & Delery,

 Magazine –Journal of management

Publisher – SAGE Publisher

Date  - 2005

The studies here primarily focus on the effects of Retrenchment on the quantity and quality of survivors’ work. Studies indicate that Retrenchment results in reduced creativity (Amabile & Conti, 1999) and also has a negative impact on different aspects of quality improvement (Mishra & Mishra, 1994). Amabile and Conti (1999) attributed the reduced creativity to the deterioration in the Downloaded from work environment following Retrenchment. In addition, there is some evidence that Retrenchment results in a significant decline in other dimensions of work performance (Amabile & Conti, 1999; Gilson et al., 2004; Mishra & Mishra, 1994; Travaglione & Cross, 2006).

Title name -  Organizational Outcomes of Employee Retrenchment

Author name -  Cameron, K. S.

Magazine –Journal of management

Publisher – SAGE Publisher

Date - 1994                

Much of the research belonging to this stream is geared toward addressing the basic question, “Does employee Retrenchment result in improved organizational performance?”

Proponents of employee Retrenchment have long argued that Retrenchment represents a rational tool that managers can use to improve organizational productivity and efficiency (Cascio & Young, 2003). Improved firm performance can come from reduction of labor costs (which, in many organizations, is the largest component of the cost structure), provided reductions result in the remaining employees working at higher productivity levels.

Title name -  Relationships between employee Retrenchment and market returns.

Au Magazine –Journal of management

Publisher – SAGE Publisher

thor name - Chalos, P., & Chen, C. J. P.

Date -   2002

                     

 Our review identified 12 studies that have used the event study methodology to examine shareholder wealth effects associated with employee Retrenchment announcements.

The wealth effects have been typically measured as cumulative abnormal returns (CARs) or cumulative prediction errors (CPEs) around the announcement day. Examination of research belonging to this reveals that, on average, Retrenchment announcements have a negative effect on stock price.

Title name -  Relationships between employee Retrenchment and firm profitability.

Author name - S. J., & Mishra, A. zK.

Magazine –Journal of management

Publisher – SAGE Publisher

Date - 1993      

A number of studies in Stream IV have sought to examine whether Retrenchment leads to improved firm profitability. Findings, however, have been mixed. Studies by Bruton, Keels, and Shook (1996); Chen et al. (2001); Espahbodi, John, and Vasudevan (2000); Kang and Shivdasani (1997); Palmon et al. (1997); and Yu and Park (2006) suggest that employee reductions lead to performance improvements. Interestingly, Espahbodi et al. (2000); Kang and Shivdasani (1997); Palmon et al. (1997); and Perry and Shivdasani (2005) observed that such improvements occurred 2 to 3 years after Retrenchment.

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 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.   Genpact’s 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

Established: 1997

Headcount: 42,500+

Stock Symbol: NYSE: G

Revenues: $1.12 Billion (2009)

CLIENTS

Genpact manages over 3000 processes for 400+ clients across a  breadth of industries. The Company’s 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. Genpact’s 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 Children’s  Hospital, National Australia Bank, Nissan, Serco, Walgreens, Wells  Fargo, Wellpoint/Wellchoice among others.

TELEPERFORMANCE

Founded in 1978

Employees 120000+

Revenues us$2.78bl (2010)

268+call centers

Present in 50 countries 

We're a people company:

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.

OBJECTIVE OF STUDY

The main objective of the study is to evaluate the Retrenchment strategies followed by the BPO sector during the time of recession. The study has aim to cover following objectives.

1.    To study the Retrenchment strategies followed by BPO sector during the time of recession.

2.    To study the HR issues arises due to Retrenchment strategies.

3.    To study the ethical v/s unethical Retrenchment strategies.

4.    To study the limitation of Retrenchment strategies.

                       

SCOPE AND PURPOSE

                       

The scope of study is very wide and when the economy is in down point of trade cycle the scope of retrenchment become very wider. Retrenchment strategies are used in all corporate sector. At the time of rescission retrenchment strategies are widely used by company. Determine the size and scope of any work force restructuring, including potential Retrenchment

Improve targeting in any labor restructuring program, including identification of skilled workers critical to the operations of the enterprise. Enter into more informed negotiations and discussions with trade unions and labor representatives. Ensure fairness and transparency of the process

RESEARCH METHODOLOGY

The data for the study will by collected by using secondary sources. The data will collect by using various techniques and sources which are briefly described below. This study will be primarily focused on what were the retrenchment strategies of BPO sector during the time of recession.

·         HR reviews

·         Journals

·         Magazines

·         Websites

·         News paper

               FINDINGS, DATA & ANALYSIS

·         Planned Retrenchment: A Sustainable Alternative

·         Causes and Effects of Employee Retrenchment

·         The effect of gender and organizational level on how survivors appraise and cope with organizational Retrenchment.

·         Taking a positive approach to organizational Retrenchment.

                                                

CONCLUSON

            In today’s economy job security isn’t 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. Let’s 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."

RECOMMENDATION

ü      Universal social protection to workers – need to ensure legal, institutional and financial support.

ü      Ensure employment services to all workers.

ü      Use employment guarantee to address such crisis.

ü      Skill training and skill up-gradation.

ü      Problems of small producers need to be addressed.

                                              

LIMITATION

The study might be limited by following factors:

1.    Personal limitation – whole interpretation is depend on my knowledge so there may be a chance of error.

2.    Only secondary data is used in my research so validity of research is not sure.

3.    Since the topic is current that’s why appropriate data is not available.

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·         Planned Downsizing: A Sustainable Alternative

·         Employer Downsizing -SUMATI REDDY

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·         Causes and Effects of Employee Downsizing

·         The effect of gender and organizational level on how survivors appraise and cope with organizational downsizing.

·         Taking a positive approach to organizational downsizing.

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·         Dealing with Downsizing

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·         Survivor reactions to organizational downsizing: Does time ease the pain?By: Allen, Tammy D.; Freeman, Deena M.; Russell, Joyce E. A.; Reizenstein, Richard C.; Rentz, Joseph O.. Journal of Occupational & Organizational Psychology, Jun2001, Vol. 74 Issue 2, p145-164, 20p

·         THE IMPACT OF DOWNSIZING ON ORGANIZATIONAL CAREER DEVELOPMENT ACTIVITIES AND EMPLOYEE CAREER DEVELOPMENT OPPORTUNITIES. By: Feldman, Daniel C.. Human Resource Management Review, Fall95, Vol. 5 Issue 3, p189, 33p

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

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