207287040 a-study-on-impact-of-ites-sectors-in-india

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KARNATAKA STATE OPEN UNIVERSITY
MANASA GANGOTHRI, MYSORE- 570006
A PROJECT REPORT
A Study on Impact of ITES Sectors in India
for
Executive MBA
Submitted by
Ravi Parappa Ratnakar

124211FEMBA019
In partial fulfillment of the requirement
For the award of the degree
Under the guidance of
Mr. Kannan
Sharada Vikas Trust
No.450/1/14, 2nd
floor. Lakshmi complex, 10th
main
27th
cross, 4th
block, Jayanagar, Bangalore-11
CERTIFICATE
This is to certify that this project entitled A Study on Impact of ITES
Sectors in India submitted by Ravi Parappa Ratnakar with roll no
124211FEMBA019 on July/2013 to the KARNATAKA STATE OPEN
UNIVERSITY, in partial fulfillment of the requirements for the award of
EXECUTIVE MBA, is a record of bonafied work undertaken by her/him.
(STUDENT) (GUIDE)
Signature : Signature :
Name : Ravi Ratnakar Name : Mr. Kannan

Date : 31 July 2013 Date :
Designation :
(STUDY CENTRE)
Signature :
Name :
Date :
Seal of Study Centre:
A Study on Impact of ITES Sectors in India
CONTENT
SL
NO
PARTICULARS PAGE NO
1. OVER VIEW OF BPO 1
2. BPO TERMINOLOGY 11
3. ORGANIZATION STRUCTURE OF BPO INDUSTRY 14
4. RATIO OF MANPOWER IN BPO INDUSTRIES 15
5. COMPETENCIES REQUIRED FOR DIFFERENT 24

DEPARTMENT
6. CAREER PLANNING / GROWTH OF BPO 25
7. PERFORMANCE MANAGEMENT SYSTEM OF BPO 34
8. SUCCESSION PLANNING OF BPO INDUSTRY 46
9. REWARDS AND RECOGNITION IN BPO INDUSTRY 50
10. CHALLENGES FOR HR IN BPO INDUSTRY 64
11. CONCLUSION 74

1. OVER VIEW OF BPO
The concept of outsourcing started with Ross Perot when he founded Electronic Data
Systems in 1962. EDS would tell a prospective client, "You are familiar with designing,
manufacturing and selling furniture, but we're familiar with managing information
technology. We can sell you the information technology you need, and you pay us
monthly for the service with a minimum commitment of two to ten years.
BPO is the act of transferring some of an organization's repeated non-core and core
business processes to an outside provider to achieve cost reductions while improving
service quality. Because the processes are repeated and a long-term contract is used,
outsourcing goes far beyond the use of consultants. If done well, BPO results in
increasing shareholder value. The main difference between BPO and more traditional IT
outsourcing is that BPO offers companies a way of achieving transformational outcomes
much more quickly. In a typical BPO contract, a service provider takes over a specific
corporate function. Effective BPO encompasses much more than just changing who is
responsible for performing the process. In BPO, the outside provider not only takes on
the responsibility to manage the function or business process, but also re-engineers the
way the process has been traditionally done.
The next generation of Business Process Outsourcing has emerged as a priority for
businesses looking to better options in managing their application portfolios. The first
wave offered low-cost, off-shore development labor, but today firms are demanding
new, less risky options for applications that are strategic, complex, or mission-critical,
while still taking cost into consideration. Outsourcing has moved from a niche
technology management tool to a mainstream strategic weapon. Business Process
Outsourcing leverages process driven efficiencies in terms of organizational excellence,
responsiveness & branding, financial efficiency and customer relationship. BPO is
emerging as a powerful and flexible approach that business leaders can use to achieve a
wide range of tactical and strategic aims. The most common business process that gets
outsourced is call centers. Call centers and Help Desks of many multi national and

fortune 500 companies are being outsourced to low waged, English speaking countries
such as Philippines and India. Countries like India with vast IT human resources are also
attracting outsourcing from American IT/Technology companies to outsource their IT
Help Desks. Many of these help desks are state of the art with latest Help Desk software
and help desk hardware with technical savvy IT graduates behind them answering your
questions.
It can be defined as the transfer of an organization's entire non-core but critical business
process/function to an external vendor who uses an IT-based service delivery. By doing
so, BPO helps an organization concentrate on its core competencies, improve efficiency,
reduce cost and improve shareholders' value. Though IT outsourcing has been happening
for so many years, an increased momentum has been witnessed since the late 1990s due
to the rise of Internet and Communication technologies. Several global giants from
various industries have begun to realize the importance of BPO and have started
outsourcing their non-core business functions. This has given rise to many specialized
BPO vendors across the globe, with India being a major hub owing to its large
computer-literate English-speaking population, low billing rates, strategically favorable
time zone and high quality. The BPO market in India is expected to grow exponentially
in the coming years.
Although the term "business process outsourcing" (BPO) has gained visibility in the IT
services industry only in the past four to five years, the service offering itself has existed
for decades. For example, several of the largest service providers have significant legacy
revenue streams that are derived from medical claims processing contracts. In many
instances, these contracts include the entire back-office function. The outsourcing of
payroll administration, an accepted practice for many years, is another illustration of the
true age of the BPO market.
This market is now experiencing noticeable momentum in terms of wider user
acceptance and the emergence of new service offering categories, as well as a
proliferation of providers from which to choose. Service providers offer BPO for

literally hundreds of business processes. Some of these service offerings are very stable;
some are just emerging and are, therefore, largely untested.
 Domestic Market Of BPO
 Business process outsourcing in India
The business process outsourcing industry in India has grown by leaps and bounds and
as its size increases so does its competitive advantage. Compared with 1996 when this
Industry had started inroads into the United States with Outbound Telemarketing
campaigns, today the vehicle for these calls-the internet has become cheaper and more
reliable for the average Indian business. The business has boomed to the extent that
many people are now running BPO’s out of their cyber cafes and houses in New Delhi.
The sector witnessed considerable activity during 2004-05, including a ramping up of
operations by major Indian and MNC players and stepped up hiring. The domestic BPO
market, catalyzed by demand from the telecommunications and BFSI segments, matched
the growth of BPO exports. The market experienced maturity and consolidation, a result
of numerous mergers and acquisitions taking place within the sector. There were over
400 companies operating within the Indian BPO space, including captive units (of both
MNCs and Indian companies) and third-party services providers. The Indian BPO
industry remains on a growth path, emerging as one of the key investment markets in the
country. Growth in this sector will get a further impetus as Indian BPO companies have
robust security practices and emphasis is laid in developing trust with clients on this
score. While earlier there were varying quality standards on this aspect, today there is
focus on standardization of security, such as data and IP security.
 Major BPO locations in India

Cities that are leading BPO-ITeS hubs in India today:
• Bangalore
• Chennai
• Hyderabad
• Mumbai
• NCR (Gurgaon, Noida, Faridabad, Greater Noida)
• New Delhi
• Pune
These are Tier I cities that are leading IT cities in India.
With rising infrastructure costs in these cities, many BPO's are shifting operations to
Tier II cities like:-Ahmedabad, Amritsar, Bhubaneswar, Chandigarh, Guwahati, Indore,
Jaipur, Kanpur, Kochi, Kolkata, Mangalore, Mohali, Mysore, Nagpur and Srinagar.
Tier II cities offer lower business process overhead is compared to Tier I cities, but may
have a less reliable infrastructure system which may hamper dedicated operations. The
Government of India in partnership with private infrastructure giants is committed to
bringing all around development and providing robust infrastructure all over the nation.
 Business Process Outsourcing (BPO) - Advantage India
The abundant skilled manpower has made India a target destination for multinationals to
back end their operations in India. India ranks high in areas such as qualifications,
capabilities, quality of work, linguistic capabilities and work ethics, and thus is ahead of
competitors such as China, Philippines, Ireland, Australia, Canada etc. Indian companies
have unique capabilities and systems to set, measure and monitor quality targets.
In specific BPO categories, Indian centers have achieved higher productivity levels-for
example, the number of transactions per hour for back office processing, than their
Western counterparts. Also, India is able to offer a 24x7 services and reduction in
turnaround times by leveraging time zone differences. India's unique geographic

Positioning makes this possible. Many state governments in India are offering incentives
and infrastructure to set up IT enabled services.
About 100,000 engineers graduate from India every year. Many of these engineers are
employed with call centers for troubleshooting and providing technical support at
salaries that are dramatically lower compared to the pay scales in the US. The average
monthly salary in India is $400-700 compared to $2,700-2,800 in the US.
Size and Growth of BPO in India
Year Size (US$ Bn) Growth Rate
2003 2.8 59%
2004 3.9 45.3%
2005 5.7 44.4%
Strengths Weaknesses
• Solid history in software
development.
• English proficiency
• Government Support
• Cost advantage
• Strong tertiary education
• Process quality focus
• Skilled workforce
• Expertise in new technologies
• Entrepreneurship
• Reasonable technical innovations
• Reverse brain drain
• Existing long term relationships
Opportunities
• Positioning & Brand management
• Infrastructure
• Cultural differences
• Sales & marketing
• Leverage expertise for higher-value
education
• Business process experience
• Distance from US
• Fear/Uncertainty from Pakistan
• Legal system
• Poor globalization skills
Threats

• Creation of global brands
• BPO & Call center offerings
• Expansion of existing relationships
• Chinese domestic & export market
• Leverage relationships in West to
access APAC/Middle East markets
• Indian domestic-market growth
• Internal competition for resources
• Over-promise / Under-deliver
• Regional geopolitical uncertainty
• Rising labor costs
• Competition from other countries
• Sometime blinding nationalism
• Government blocking reform/deals
• Corruption/piracy/trust
• Political & religious instability -war
 Global Market of BPO
Global BPO Market by Industry
Information Technology 43%
Financial Services 17%
Communication (Telecom) 16%
Consumer Goods/ Services 15%
Manufacturing 9%
Global BPO Market by Geography
United States 59%
Europe 27%
Asia-Pacific (incl. Japan) 9%
Rest of the World 5%
Size of Global Outsourcing Market
2000 USD$ 119 Billion
2005 USD$ 234 Billion

2008 (est.) USD$ 310 Billion
Call Center Employee cost
USA US$ 19,000 annually
Australia US$ 17,000 annually
Philippines US$ 9,050 annually
India US$ 7,500 annually
Nearly 75% of US and European multinational companies now use outsourcing or
shared services to support their financial functions. 72% of European multinational
companies have outsourced financial functions over the past two years.
Additionally, 71% of European companies and 78% US companies plan to use these
services in the next 12-24 months. Overall, 29% of US and European companies expect
to increase their use of outsourcing of financial functions, with spending expected to be
nearly 16% higher than current levels.
North America is expected to represent 57 percent of the total BPO market in 2003 - to
$69 billion - with growth in other regions eventually outpacing North America. Gartner
analysts say that after several years of double-digit growth, delays in contract signings
and lower negotiated rates for large BPO deals have led to moderate growth in 2002 and
2003.
The Western European BPO market is forecast to grow 10.9 percent in 2003, to $27
billion, according to Gartner. In Europe, outsourcing of financial services processes are
widely used, however, other industries are growing in respect for different types of BPO.
Customer interaction for demand-management BPO is proving popular in the utilities
and telecommunications sectors. Supply-management BPO is gaining popularity in local
governments, and enterprise services are growing in telecommunications for human
resources, finance and accounting
Starting off slowly, the Asia Pacific BPO market is expected to grow 7.8 percent in
2003, to $8.7 billion, but it is then forecast to have double-digit growth during the next
few years. META Group, Inc. found that nearly all Asia Pacific IT organizations will
outsource at least one mission-critical technology operation by 2005.

McKinsey's research found that Australia and New Zealand are the most mature
economies in terms of acceptance of BPO services, followed by Singapore. In most other
countries there is almost no history of outsourcing other than product support.
CHINA
In the outsourcing field, China is the biggest challenge in the future and the largest threat
to India. With the largest population and fastest economic growth, China has at least two
strengths in the global outsourcing market: manufacturing and IT.
The main advantages of China are as follows:
• Lower Manpower costs: The Chinese workers cost about 15 percent less than
equally qualified Indians.
• Japan Advantage: China is likely to grow through the Japanese outsourcing
route. The advantages that China has are Japan's proximity to China, similarity of
the languages. India currently offers almost no BPO services in Japan.
• Extremely low cost real estate and power: These costs are lower than in India.
This can be a very attractive to the US companies, which are looking for cost
cutting due to the downturn.
• Proactive Govt.: The govt. is very friendly to this sector and has taken the
following steps.
1. English teaching and other skill sets: Over $5.4 billion was invested in
nine universities in China to promote English language and other skill
sets.
2. Increasing telecom density and PC penetration: China scores over India in
these aspects and intends to further increase the gap.
• Leveraging on the manufacturing image: Western manufacturing companies have
found that outsourcing their manufacturing function to China for their companies'
global operation can be profitable and also of good quality.
The main disadvantages of China are as follows:

• Lack of a good Quality record in Software: India has a better image as a quality
supplier mostly due to its track record of better quality software than China.
• Low English speaking population: This is the biggest drawback of China. It has a
very small proportion of the population speaking fluent English.
• Less mature: The Indian business processes are much more mature. China has
only recently entered into BPO. As such, despite lower billing rates, total project
costs in China would turn out be higher because of the higher overheads
incurred.
PHILIPPINES
In the Philippines the manpower costs are 60 to 80 percent lower as compared to UK and
US. The average salary cost is around $700-800 per month in the BPO sector. The
country has a shortage of manpower mainly due to the small population as compared to
India. The manpower base for BPO is only 300,000. Right now the country is getting
business from nearly 70 companies employing more than 12,000 people with revenues
of US$ 250 million.
The main advantages of Philippines are as follows:
• Large scale technical training program: The govt. has initiated a no. of policies
by which the skills can be provided to a larger population.
• Improved telecom and office infrastructure: Philippines scores over India in this
respect.
• 3rd largest English-speaking nation in the world: This is a very important
advantage.
• Well developed IT skill set: It is considered 2nd only to India due to performance
in software.
• Costs of technology workers: This is(which represents the biggest recurring costs
for, say, a B2B site) is only around 16% to 25% in the Philippines to that of
comparable workers from the United States.

• Former American colony: As a former American colony, American culture and
language is widely emulated here. These cultural and communications skills
could prove to be so appealing to American firms that they would outweigh
slightly higher labor costs in the Philippines.
The main disadvantages of Philippines are as follows:
• Low graduate turnout: Philippines has a low graduate turnout (only 400,000 per
annum). This compares very unfavorably with India.
• Not having a record of high quality: India has consistently delivered very high
quality in Software and has built a very high reputation in it.
• Political instability: The country has frequent elections which makes it difficult
for companies to outsource as there is lack of uniformity of policies with changes
in the Govt.
• No disaster recovery facilities or multi-location facilities: After the WTC
bombing terrorism has become a very important issue for the US companies in
particular and they want that the BPO providers should have multi location
facilities which can be used in case of any terrorist attack.
• Issue of scaling up: Philippines face the important issues of scaling up. Issues
like scaling up have stunted the growth of BPO activities being outsourced to
Philippines. The largest call Centre in Philippines of AOL has only 800 people.
The size of the Philippines BPO industry is only $100 million, whereas India's BPO
industry is presently at $1.5 billion (2001-02).
IRELAND
It was one of the front runners in the BPO and started much earlier than India. Thus it
has built good brand equity in US. It has a very conducive regulatory framework and is
known for excellent quality standards. The country that has strategically pursued
developing outsourcing services market and is planning to invest heavily in telecom
infrastructure ($ 5 billion over 10 years).But it suffers from a very big disadvantage of a

lack of a large human resource pool. It has nearly 500 companies employing more than
40,000 people. Also it compares very poorly with India and China in terms of Manpower
costs. Ireland is actually the biggest exporter of software services in the world today. But
there is currently a shortage of programmers in Ireland and companies are forced to
outsource work to India. The other countries, which have a share in the BPO sector, are
given below. These countries are not serious competitors to India mostly due to the small
population base.
AUSTRALIA
It has a mature BPO industry with 4000 call centers employing 225,000 people with US$
5.7 billion revenue. It has the advantage of large English speaking population with a
favorable time zone.
2. BPO TERMINOLOGY
Business Process Outsourcing
Business process outsourcing means examining the processes that compose the business
and its functional units, and then working with focused service providers to both re-
engineer and outsource these at the same time. BPO involves the full transfer of
responsibility for functions such as transaction processing, policy servicing, claims
management, HR, finance, and compliance to the outsourcing company. The outsourcing
provider then administers these functions on their own systems to agreed service
standards and at a guaranteed cost. Some of the BPO contracts call for performance-
based payouts, tying vendor payments to business performance or overall cost savings.
Business Application Outsourcing
Company A (vendor) rents applications to Company B (user). Increasingly corporations
are renting applications like enterprise resource planning, customer relationship
management, messaging and collaboration, and e-business. The outsourcer provides the
mission-critical enterprise application hosting and management. The goal is to relieve
the corporation from day-to-day management and lower the total cost of ownership
(TCO). The outsourcer hosts the software solution ensuring a preset level of

performance and reliability. This is also termed application service provider (ASP)
service.
Business Process Off shoring
Business process off shoring is the transfer of business tasks (medical transcription) or
business processes (call centers) to a low-cost country like India or the Philippines. The
interaction is conducted over telecom networks and the Internet. Off shoring typically
include tasks like transaction or accounts processing, credit card processing, call centers,
translation, and transcription. Most of this work can be sent without the need for in-
person interaction. The off shoring of support functions is still relatively new. The off
shoring wave began with IT/software services in the 1980s and accelerated in the 1990s
with the Y2K hysteria. With the global economic slowdown, off shoring has vaulted to
the forefront as an effective cost-cutting technique that takes advantage of labor price
differentials and favorable skill/performance ratios.
Business Transformation Outsourcing
Business transformation outsourcing (BTO) is a natural extension of the more tactical
BPO model and involves the transfer of responsibility for all back-office functions, as
well as a comprehensive business change management process to an external vendor.
The objective is to maximize the long-term benefits of the BPO operations, resulting in a
comprehensive business transformation (or overhaul). Transformation outsourcing is not
a tactical issue but a forward-looking strategic tool for change. The logic: big gains in
performance only come about through business transformation.
Outsourcing
Multi sourcing is the management and distribution of different business processes among
multiple BPO vendors. For instance, HR processes are outsourced to one best-of-breed
vendor. Logistics are outsourced to another. IT development and maintenance to another
vendor. Risk mitigation is a primary driver behind multi sourcing. One aspect of
multisourcing is to use multiple suppliers to eliminate lock-in and achieve so-called best-
of-breed advantages. This is especially true for U.S. and European firms, which often

like to spread offshore development to a variety of vendors and locations. Multisourcing
also covers the different delivery models. These include:
• On shoring - outsourcing to another company within the United States
• Near shoring - outsourcing to Mexico or Canada
• Off shoring - outsourcing to another country such as Ireland or India
The figure below captures the differences.

Shared Services (or in sourcing)
Shared services, a form of "internal outsourcing," enables corporations to achieve
economies of scale by creating a separate internal entity within the company to perform
specific services, such as payroll, accounts payable, travel and expense processing. A
typical shared services initiative takes advantage of enterprise applications and other
technological developments, enabling the company to achieve further improvements to
quality in processes, such as finance, accounting, procurement, IT, and human resources.
At the core of shared services is the idea that new technologies offer businesses the
opportunity to 1) make better use of scarce skills, 2) provide information and services
more efficiently, and 3) reduce the cost of administration.
The bottom line: The modern firm sits at the centre of a network of suppliers. Gone are
the big in-house departments and in their place are complex chains of external partners
that are meant to deliver better services for less cost. All these signify a greater reliance
on partners for non-core activities and resources. The advent of the Internet and the
increasing sophistication of enterprise applications open up new opportunities for
companies to share a wider range of services across a greater number of business units,
departments, or vendors.
3. ORGANIZATION STRUCTURE OF BPO INDUSTRY
The typical organization structure of a BPO service provider is a pyramidal one. The
figure below depicts a simplified organization hierarchy, the roles and responsibilities at
each level and the competencies required at each level.
Top
Management

Manager
Team Leader / Quality Analysts
Agents
4. RATIO OF MANPOWER RATIO IN BPO SECTOR
FOR EXAMPLE HCL TECHNOLOGY
• HCL Technologies Ltd expects the BPO and IT infrastructure management
services to be the major growth driver, in line with the IT outsourcing industry
trend. BPO space is still in an investment period. In the core product engineering
area, the company expects buying interest to rebound in near future. `We have
strong presence in BPO and IT infrastructure management services and lead in
both the spaces, but due to the sensitivity of our clients we have kept its

successes in these areas a low-key affair,` said Shiv Nadar, chairman and CEO,
HCL Technologies Ltd, at the conference call.
BPO
• BPO business recorded a four per cent sequential growth in June 2003 quarter
with organic revenues registering a significant 46 per cent growth, while
contribution to overall revenues stands at 8.6 per cent. Manpower in the segment
increased by 635 to 1,466 permanent employees on the company’s rolls and
added seven clients during the June 2003 quarter.
Infrastructure
• Infrastructure services business managed by HCL Comment has started yielding
results from global markets, registering a two per cent sequential growth in
revenues and contribution to overall revenues stands at 9.4 per cent. A total of 84
new employees were added during the June 2003 quarter, taking total headcount
to 614.
HCL Technology (HCL Tech) has earned a net income of $ 52 million during 1999-
2000 which is an increase of 136 per cent.
3087 software engineers were added last year which meant a growth of 51 per cent.
Customer size increased to 269.
They have offices in 15 countries worldwide.
Their customers include NTT Data, VDO, Toshiba and Intelsat.
THE KEY OPERATING STRATEGIES OF HCL TECHNOLOGIES ARE AS
FOLLOWS:
• Emphasis on a strong management team :
1. The creation of a global advisory board and technology advisory board
should help in improving their geographical and technological strategy;
this would help them in the acquisition of emerging technologies.

2. The organizational structure fosters an entrepreneurial spirit.
3. Independent Audit, Compensation and Related Party Committees have
been formed. Audit Committee, headed by ambassador, Richard Burt, has
formulated guidelines for insider trading and best practices.
Compensation committee, headed by Robin Abrams, has approved of an
Employee Stock Option plan to cover 91 per cent of the employees.
4. They have a distinguished International Board of Directors. This
international experience should be useful while making acquisitions.
• Emphasis on front run emerging technologies :
1. The investment in Research and development (R & D) should provide
accelerated growth.
2. 9 per cent of their offshore manpower is dedicated to R & D.
3. The company intends to add value to the customer's business rather than
just maintain systems. Thus there is greater potential for value based
pricing.
4. Their technology services continue to move up the value-chain.
5. The company has placed an emphasis on Internet technologies
development with minimum exposure to dot coms.
• Non-linear growth model :
1. This implies that the company seeks to push revenue/income further than
the hours put in and supplement its organic growth through diverse
avenues.
2. Joint ventures and strategic partnerships: The company's partnership with
Perot Systems (50:50) has been a highly successful one. HCL Perot has a
man power of 1373 employees and has emerged as a leading outsourcing
and systems integration company, with strengths in banking, energy,
healthcare, insurance, manufacturing and telecommunications. HCL Perot
added $ 4.1 million to the company's net profit during Q1 of FY2001. The
company has also completed the acquisition and integration of Intelicent
Inc. successfully.

3. Equity investments for value acquisition: HCL Tech is involved in
developing cutting edge technologies along with some smaller
companies, and may go in for a value acquisition to enhance shareholder
value soon.
4. Mergers and acquisitions: Though the company has been actively
evaluating M&A opportunities in the US and Europe, yet it has not
finalized a deal as yet. They intend to acquire companies with strong
technology, network services orientation and a quality client base. Mr.
Shiv Nadar stated that the companies that they had targeted were going
through a low phase, due to which their valuations were not correct. So
the company could not go forward with their acquisition plans.
5. The company has invested $13 million in technology funds and other
related areas.
6. The non-linear model can lead to better scalability through the creation of
"soft cores" such as the Bluetooth soft core, Modem software, 12C
Software and Bluetooth Stack.
• Emphasis on quality revenue mix through the following :
1. Increased contribution from high value and high margin services-
however it must be noted here that revenue growth this time is lower than
the last time.
2. 72 per cent of the company's revenue's come from technology
development services, software product engineering and networking
services.
3. The company has a de-risked business model.
4. The top 5, top 10, top 15 customers contribute 23 per cent, 35 per cent
and 46 per cent of revenues respectively.
5. The repeat business of the company from existing clients is of the order
of 69 per cent.
6. The total client base is of the order of 286 as of September 30, 2000.

7. The company's offshore revenues are growing at a CAGR of 71 per cent
for 1999-00.
• Emphasis on earnings led growth :
1. The company has been focusing on moving up the value chain, due to
which the bill rate has increased both for offshore centric (11.4 per cent)
and onsite services (10.9 per cent) over Q1 last year.
2. Average revenue per employee during Q1 2001 has also increased to Rs.
3.2 million per annum and gross profit per employee has also gone up to
Rs. 1.5 million.
3. Margins of the company have also improved.
• Employee Development and Contribution :
1. Human resources are the backbone of any information technology
company and the long-term success of HCL Tech also depends crucially
on their human resources.
2. Their total manpower stands at 4195 (inclusive of 494 people taken in
during the quarter).
3. 83% of their total manpower is established in India.
4. The company's attrition rate is 11.6 per cent while the average training
duration per employee stood at 13 days annualized for Q1 2001.
IT-Enabled Services (ITES) or BPO (Business Process Outsourcing) as it is better
known holds tremendous potential for India. Though ITES in India has become almost
synonymous with call centers in public perception, it encompasses much more. The term
ITES can be defined as outsourcing of such processes that can be enabled with
information technology and covers areas as diverse as finance, HR (human resource),
administration, healthcare, telecommunication, manufacturing etc. These services are
usually delivered to remote areas through the telecom and Internet medium and imply
transfer of ownership and management of the process from the customer to the service
provider.

The concept of ITES started with the drive of the global companies to become cost
efficient. In an attempt to stay competitive, corporate restructured their business in such
a way that they could concentrate on their competencies and outsource the processes that
were non-core to their business. India with its large English speaking graduate workforce
and low wage levels emerged as an attractive destination for ITES (Exhibit I).
Exhibit I
Comparison of Operating
Costs
US India (US $ cost per full time
employee)
India as % of US costs
Personnel 42927 6179 14.4
General & Administrative
Expense
8571 1000 11.7
Telecom 1500 2328 155.2
Property Rentals 2600 847 32.6
Depreciation 3000 1500 50.0
Total Expenses 58598 11854 20.2
Every year, India produces 2.1 mn graduates and 0.3mn post-graduates (including non-
engineering colleges). As these graduates do not have enough job options available, a large
pool of graduate workforce becomes available to the ITES industry. There is not only
abundant workforce in India, they are also available at very cheap rates. The difference in
wages between the US or UK and India is more than 70-80% for off shorable processes. Even
after taking into account the interaction cost of 10-20% because of locational differences, the
customers can still have net savings of 50-60% by outsourcing to India.
Impressive growth Potential
The ITES industry, which contributes 25% to the total IT Software and Service exports from
India, witnessed a growth of 53.3% to reach US$ 2.3 bn in FY03. According to Nasscom, the
industry is expected to grow by around 57% to touch US$ 3.6 bn. in the current fiscal. Going
by the long-term projection of Nasscom, the industry is estimated to touch a size of US$ 21-
24 bn by 2008. This would imply an estimated compound annual growth rate of 58%, making
it one of the fastest growing sectors in India (Exhibit 2).

Exhibit 2
Growth of ITES Industry
US$ mn
2000 565
2001 930
2002 1,495
2003 2,300
2004 5,200
Third-party service providers gaining prominence
One of the main proponents of outsourcing is General Electric (GE), which started
operations in India in 1997, has the largest ITES operation in India with more than
12,000 employees. The ITES story started in India with the captive centers of MNCs like
GE, HSBC, American Express, Dell Computers etc setting up base here. This was
followed by the emergence of venture funded third-party Indian ITES firms in
descending order of revenues (based on FY03 revenues reported in accordance with US
Generally Accepted Accounting Principles) which are Wipro Spectra mind, WNS
Group, Daksh services, Ex-Service and HCL Technologies. The industry also has the
presence of global BPO players like Converges, ES, Computer Sciences Corporation
(CSC), Accenture and Exult Inc. Established software services companies like Infosys,
Wipro, Patni, Satyam, HCL, Cognizant and Syntel have also started venturing into the
ITES arena. These companies enjoy a number of synergies between their ITES
operations and IT service offerings. They are able to leverage their existing customer
relationships to get contracts and are also in a position to target a larger share of the
customer's wallet by cross-selling different services. The customers also prefer vendors
who can provide end-to-end services. Moreover, the cash-rich balance sheets of these
companies are a big advantage as ITES is a capital-intensive industry.
Customer care: Fastest growing segment

Customer care also known as call center includes database marketing, customer analytics,
telesales/telemarketing, inbound call center, web sales and marketing, sales and marketing,
sales and marketing administration. The hype surrounding the industry can be explained by
the fact that this segment is not only the largest revenue earner (US$ 810 mn in FY03). But
is also the fastest growing segment (103% in FY03) in the industry (Exhibit 3). It also has to
its credit the status of being one of the largest employment generators. The segment
employed 65000 people in FY03 a stupendous growth of 117% compared to the previous
year.
Exhibit 3
ITES: Market Segmentation
Revenue (US$ mn) Employment
FY03 Growth* (%) FY03 Growth* (%)
Customer Care 810 102.5 65,000 116.7
Finance 510 70.0 24,000 60.0
HR 45 50.0 2,100 40.0
Payment Services 210 90.9 11,000 57.1
Administration 310 67.6 25,000 78.6
Content development 465 3.3 44,000 12.8
* Growth over FY02 Source: Nasscom
Financial service is the second highest revenue earner for the industry. The segment includes
billing compliance, risk management, financial reporting and financial analysis. This segment
earned revenue of US$ 510 mn in FY03 (70% y-o-y increase) and it employed 24000 people
in FY03. Some of the BPO players active in the banking, financial services and insurance
(BFSI) are ICICI One source, Ex Service and Wipro Spectra mind.
Content development, which includes areas like engineering, design animation, network
consultancy and management, biotech research, is another high revenue earner in the ITES
industry. The revenue of this segment in FY03 was US$ 465 mn. However,with 44,000
employees, this segment is the second largest employment generator in the industry. Some
of the other emerging segments in the ITES industry are HR, payment services,
administration, healthcare, retail, telecom and hospitality.
Challenges facing the industry

Mushrooming of small players
Attractive growth rate of the BPO industry has resulted in many reckless start-ups.
Several companies from unrelated sectors without the required expertise entered the
industry lured by the healthy potential of the industry. These small companies are now
finding it difficult to survive in this capital-intensive industry. In a dire strait, some of
the players are taking huge cuts in their billing rates, which in turn threaten to de-
stabilise the entire industry by reducing margins to unsustainable levels. They also
portray a negative picture of the industry as a whole because of their inability to deliver
on time.
Margins under pressure
With increasing competition and subsequent price dips, the margins of ITES companies
have come under tremendous pressure. Moreover, most of the players in the industry are
working in low margin areas. More than 60% of the BPO business coming to India is
voice related. Barring transcription, voice has the lowest margins among BPO business.
With the BPO business increasingly getting commoditised, moving up the value chain is
a sensible option before the industry. Vendors can move up the value chain vertically.
For example, for a credit card customer, the low end processes would include services
such as data entry and processing of applications, but the higher value jobs would
include processes such as credit evaluation and fraud detection. Vendors can also move
horizontally, that is expand services portfolio by moving into sophisticated areas such as
US GAAP accounting, certain engineering services, consulting etc.
HR Issues
The ITES industry currently employs more than 171,000 professionals compared to a
25,000 in 1999. However, India is running out of the supply of good quality managerial
talent. There have been recent cases of mid-sized companies losing BPO orders for not
being able to demonstrate a competent team that can manage a large workforce. High

level of attrition further complicates the problem. At least 60,000 of the 171,000
workforce change jobs every year. The supply of skilled manpower to the industry needs
to expand at a fast rate to keep pace with the rapid growth of the industry. In order to
create a big pool of qualified personnel, there is a need to encourage private institutions
to provide training to people interested in joining this industry.
Infrastructure Bottleneck
The state of India's Infrastructure is also a cause of concern for the ITES Industry. The
industry is suffering from long lead-time in commissioning of telecom services and power
supply problems. The country also needs to improve its roads and airports to facilitate
marketing of India as an ITES destination.
In the last couple of years, the Infrastructure condition in the country has shown
improvement. Deregulation of the telecom sector has resulted in the addition of significant
bandwidth as well as a decline in telecom costs. Several high-quality technology parks such
as Hitec city, Hyderabad Tata-Singapore Consortium, Bangalore and Tidel Park. Chennai have
also been established in the Industry.
Apart from the challenges discussed above, if the unemployment rate in the US/ other
customer countries soars further, it could lead to increased opposition to outsourcing. This
could become a threat for the Indian BPO Industry.
5. COMPETENCIES REQUIRED FOR DIFFERENT
DEPARTMENT
• Strategic Planning
• HR management
• Key Account Management
• Financial Management
• Business Development
• Account Handling
• Process Migration
• Team management
• Mentoring and coaching
• Process Improvement
• Quality Assurance
• Reporting
• Rostering and scheduling
• Supporting agents as the SME
• Processing Transactions
• End Customer Interaction
• Business strategy
• HR Planning
• Financial Management skills
• Leadership and Motivation
• Project Management
• Metrics and Quality management
• Process improvement tools
• Technology Management
• Operations Management
• Forecasting, Staffing and
Scheduling
• Mentoring and Coaching skills
• People Management skills
• MIS and reporting tools
• Industry knowledge
• Product Knowledge
• Process Knowledge
CompetenciesResponsibilities

6. CAREER PLANNING / GROWTH OF BPO
BPO is becoming part of the new model for managing international growth. The benefits
of this model are clear: Management can focus more time and attention on building core
business, without the distraction of back-office operations and administrative issues.
Also, management can avoid having to invest in office facilities and computer systems,
thereby freeing up investment capital that can be used to better advantage elsewhere.

Another benefit is that local outsourcing firms can provide valuable in-country
experience and really help new entrants get things done more efficiently.
Business process outsourcing (BPO) is a broad term referring to outsourcing in all fields.
A BPO differentiates itself by either putting in new technology or applying existing
technology in a new way to improve a process.
Business Process Outsourcing (BPO) is the delegation of one or more IT-intensive
business processes to an external provider that in turn owns administers and manages the
selected process based on defined and measurable performance criteria. Business
Process Outsourcing (BPO) is one of the fastest growing segments of the Information
Technology Enabled Services (ITES) industry.
Few of the motivation factors as to why BPO is gaining ground are:
- Factor Cost Advantage
- Economy of Scale
- Business Risk Mitigation
- Superior Competency
- Utilization Improvement
Generally outsourcing can be defined as - An organization entering into a contract with
another organization to operate and manage one or more of its business processes.
Different Types of Services Being Offered By BPO's
• Customer Support Services
Customer service offerings create a virtual customer service center to manage customer
concerns and queries through multiple channels including voice, e-mail and chat on a
24/7 and 365 days basis.

Service Example: Customers calling to check on their order status, customers calling to
check for information on products and services, customers calling to verify their account
status, customers calling to check their reservation status etc.
• Technical Support Services
Technical support offerings include round-the-clock technical support and problem
resolution for OEM customers and computer hardware, software, peripherals and
Internet infrastructure manufacturing companies. These include installation and product
support, up & running support, troubleshooting and Usage support.
Service Example: Customers calling to resolve a problem with their home PC, customers
calling to understand how to dial up to their ISP, customers calling with a problem with
their software or hardware.
• Telemarketing Services
Telesales and telemarketing outsourcing services target interaction with potential
customers for 'prospecting' like either for generating interest in products and services, or
to up-sell / promote and cross sell to an existing customer base or to complete the sales
process online.
Service Example: Outbound calling to sell wireless services for a telecom provider,
outbound calling to retail households to sell leisure holidays, outbound calling to
existing customers to sell a new rate card for a mobile service provider or outbound
calling to sell credit or debit cards etc.
• Employee IT Help-desk Services
Employee IT help-desk services provide technical problem resolution and support for
corporate employees.

Service Example: of this service include level 1 and 2 multi-channel support across a
wide range of shrink wrapped and LOB applications, system problem resolutions related
to desktop, notebooks, OS, connectivity etc., office productivity tools support including
browsers and mail, new service requests, IT operational issues, product usage queries,
routing specific requests to designated contacts and remote diagnostics etc.
• Insurance Processing
Insurance processing services provide specialized solutions to the insurance sector and
support critical business processes applicable to the industry right from new business
acquisition to policy maintenance to claims processing.
• New Business / Promotion:
Inbound / outbound sales, Initial Setup, Case Management, Underwriting, Risk
assessment, Policy issuance etc.
• Policy Maintenance / Management:
Record Changes like Name, Beneficiary, Nominee, Address; Collateral verification,
Surrender Audits Accounts Receivable, Accounting, Claim Overpayment, Customer care
service via voice/email etc.
• Data Entry Services / Data Processing Services Service Example:
Data entry from Paper/Books with highest accuracy and fast turn around time (TAT)
Data entry from Image files in any format
Business Transaction Data entry like sales / purchase / payroll.
Data entry of E-Books / Electronic Books
Data Entry: Yellow Pages / White Pages Keying
Data Entry and compilation from Web site
Data Capture / Collection

Business Card Data Entry into any Format
Data Entry from hardcopy/Printed Material into text or required format
Data Entry into Software Program and application
Receipt and Bill Data Entry
Catalog Data Entry.
Data Entry for Mailing List/Mailing Label.
Manu scripting typing in to word
Taped Transcription in to word.
Copy, Paste, Editing, Sorting, Indexing Data into required format etc.
Data Conversion Services Service Example:
Conversion of data across various databases on different platforms
Data Conversion via Input / Output for various media.
Data Conversion for databases, word processors, spreadsheets, and many other standard
and custom-made software packages as per requirement.
Conversion from Page maker to PDF format.
Conversion from Ms-Word to HTML format
Conversion from Text to Word Perfect.
Conversion from Text to Word to HTML and Acrobat
Convert Raw Data into required MS Office formats.
Text to PDF and PDF to Word / Text / Doc
Data Compilation in PDF from Several Sources.
E-Book Conversion etc.
• Scanning, OCR with Editing & Indexing:
High speed Image-Scanning and Data capture services

High speed large volume scanning
OCR Data From Scanned page / image
Scan & OCR paper Book in to CD.
ADOBE PDF Conversion Services.
Conversion from paper or e-file to various formats
• Book Keeping and Accounting:
General Ledger
Accounts Receivables and Accounts Payable
Financial Statements
Bank Reconciliation
Assets / Equipment Ledgers etc.
• Form Processing Services:
Insurance claim form
Medical Form / Medical billing
Online Form Processing
Payroll Processing etc.
• Internet / Online / Web Research
Internet Search, Product Research, Market Research, Survey, Analysis. Web and
Mailing list research etc.
Key To success

The key to success in ramping up talent in a BPO environment is a rapid training
module. The training component has to be seen as an important sub-process, requiring
constant re-engineering. Business Process Outsourcing: The Top Rankers WNS has
emerged as the top BPO in India, pushing Wipro Spectra mind to the second position,
according to a survey done by NASSCOM. The basis of ranking is the revenues
generated by the BPO companies in 2003-04, as per US GAAP. A list of top fifteen BPO
companies in India is given below.
WNS Group
Wipro Spectra mind
Daksh e-Services
Converges
HCL Technologies
Zenta
ICICI One source
MphasiS
EXL
Tracmail
GTL Ltd.
vCustomer
HTMT
24/7 Customer
Sutherland Technologies
The parameters for the survey was: Employee Size (Operation level executives),
Percentage of last salary hike, Cost to company, Overall Satisfaction Score, Composite
Satisfaction, Company Culture, Job Content / Growth, Training, Salary and
Compensation, Appraisal System, People, Preferred Company: (Percentage of
respondents of a company who named their own company as the preferred one), Dream
Company: (Percentage of respondents in the total sample who preferred a particular
company).
Employee Benefits Provided By Majority Of the BPO Companies Provident Fund: As
per the statutory guidelines, the employee is required to contribute a percentage of his
basic salary and DA to a common fund. The employer for this fund contributes as well.
The employee can use the amount deposited in this fund for various personal purposes
such as purchase of a new house, marriage etc.

Gratuity: Gratuity is one of the retrial benefits given to the employee in which the
employer every year contributes a particular amount. The fund created can be used by
the employee for the purpose of long-term investment in various things such as a house
etc.
Group Medical claim Insurance Scheme: This insurance scheme is to provide
adequate insurance coverage of employees for expenses related to hospitalization due to
illness, disease or injury or pregnancy in case of female employees or spouse of male
employees. All employees and their dependent family members are eligible. Dependent
family members include spouse, non-earning parents and children above three months
Personal Accident Insurance Scheme: This scheme is to provide adequate insurance
coverage for Hospitalization expenses arising out of injuries sustained in an accident.
Subsidized Food and Transportation: The organizations provide transportation facility
to all the employees from home till office at subsidized rates. The lunch provided is also
subsidized.
Company Leased Accommodation: Some of the companies provides shared
accommodation for all the out station employees, in fact some of the BPO companies
also undertakes to pay electricity/water bills as well as the Society charges for the shared
accommodation. The purpose is to provide to the employees to lead a more comfortable
work life balance.
Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities include
pool tables, chess tables and coffee bars. Companies also have well equipped gyms,
personal trainers and showers at facilities.
Corporate Credit Card: The main purpose of the corporate credit card is enable the
timely and efficient payment of official expenses which the employees undertake for
purposes such as travel related expenses like Hotel bills, Air tickets etc

Cellular Phone / Laptop: Cellular phone and / or Laptop is provided to the employees
on the basis of business need. The employee is responsible for the maintenance and
safeguarding of the asset.
Personal Health Care (Regular medical check-ups): Some of the BPO'S provides the
facility for extensive health check-up. For employees with above 40 years of age, the
medical check-up can be done once a year.
Loans: Many BPO companies provide loan facility on three different occasions:
Employees are provided with financial assistance in case of a medical emergency.
Employees are also provided with financial assistance at the time of their wedding. And,
The new recruits are provided with interest free loans to assist them in their initial
settlement at the work location.
Educational Benefits: Many BPO companies have this policy to develop the personality
and knowledge level of their employees and hence reimburses the expenses incurred
towards tuition fees, examination fees, and purchase of books subject, for pursuing
MBA, and/or other management qualification at India's top most Business Schools.
Performance based incentives: In many BPO companies they have plans for ,
performance based incentive scheme. The parameters for calculation are process
performance i.e. speed, accuracy and productivity of each process. The Pay for
Performance can be as much as 22% of the salary.
Flexi-time: The main objective of the flextime policy is to provide opportunity to
employees to work with flexible work schedules and set out conditions for availing this
provision. Flexible work schedules are initiated by employees and approved by
management to meet business commitments while supporting employee personal life
needs .The factors on which Flexi time is allowed to an employee include: Child or
Parent care, Health situation, Maternity, Formal education program
Flexible Salary Benefits: Its main objective is to provide flexibility to the employees to
plan a tax-effective compensation structure by balancing the monthly net income, yearly

benefits and income tax payable. It is applicable of all the employees of the organization.
The Salary consists of Basic, DA and Conveyance Allowance. The Flexible Benefit Plan
consists of: House Rent Allowance, Leave Travel Assistance, Medical Reimbursement,
Special Allowance
Regular Get together and other cultural programs: The companies organizes cultural
program as and when possible but most of the times, once in a quarter, in which all the
employees are given an opportunity to display their talents in dramatics, singing, acting,
dancing etc. Apart from that the organizations also conduct various sports programs such
as Cricket, football, etc and regularly play matches with the teams of other organizations
and colleges.
Wedding Day Gift: Employee is given a gift voucher of Rs. 2000/- to Rs. 7000/- based
on their level in the organization.
Employee Referral Scheme: In several companies employee referral scheme is
implemented to encourage employees to refer friends and relatives for employment in
the organization.

7. PERFORMANCE MANAGEMENT SYSTEM OF BPO
INTRODUCTION
The history of management in India can be traced to the English East India Company,
(1600–1874) chartered by Queen Elizabeth I for trade with Asia. After independence in
1947, India subscribed to a model which placed a strong emphasis on central planning
and a big role for government owned Public Sector Enterprises (PSEs) who were
established to control the "commanding heights" of the economy. After the economic
reforms of 1991 the country's economy became much more integrated to the world
economy, which was the effect of liberalization in our country and globalization
worldwide. The concept of human resources has undergone drastic changes as far as the
Indian Industry is concerned. The age-old concept of Human Resource Management has
changed to Human Resource Development. This change has come as a result of the
change in industry from manufacturing in the public sector to information technology in
the private sector.
PERFORMANCE MANAGEMENT IN HUMAN RESOURCES:
The evolution of the concept of performance management as a new Human Resource
Management model reflects a change of emphasis in organizations away from
command-and-control toward a facilitation model of leadership. This change has been
accompanied by recognition of the importance to the employee and the institution of
relating work performance to the strategic or long-term and overarching mission of the
organization as a whole. The performance management process provides an opportunity
for the employee and performance manager to discuss development goals and jointly
create a plan for achieving those goals. Development plans should contribute to

organizational goals and the professional growth of the employee. Critical to the success
of this new model, a flexible attitude in the face of constant change is most essential. For
performance managers, this changing environment offers many new challenges and
opportunities. Performance managers and their employees are increasingly being asked
to become generalists who step outside of traditional narrowly-defined job descriptions
in support of team objectives and goals. These changes are resulting in the development
of new approaches to human resource management.
BPO INDUSTRY AND PERFORANCE MANAGEMENT:
The BPO industry with its major thrust on knowledge workers offers a challenge to the
Human Resource manager. The major challenges are:
• Brand equity: People still consider BPO to be "low brow", thus making it
difficult to attract the best talent.
• 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.
• Benchmarks: There are hardly any benchmarks for compensation and
benefits, performance or HR policies. Everyone is charting his or her own
course.
Standards of performance
Job description & essential functions
Strategic plan & Annual goals
Observation & Feedback
Performance Appraisal
Performance Development

In both the pre-job training as well as in benchmarks, the role performance management
plays is not too small. Performance appraisals whether they be pre/post training, offers
the company a quick glance through the effectiveness and the worthiness of a person in
the organization and also helps in effective placements.
PERFORMANCE MANAGEMENT IN BPO INDUSTRY:
Business process outsourcing (BPO) satisfaction levels are on the up – but while more
organizations are now confident when negotiating outsourcing contracts.
Most struggle with ongoing management and making the deal deliver ongoing value,
argues Simon Lindley, Principal Consultant at Orbys Consulting.
Over the last couple of years, the outsourcing market has turned a corner and the
widespread perception of failure has been replaced by a growing acceptance that BPO
can really deliver on its potential benefits – from reduced cost to supporting business
growth through effective access to key skills. Organizations now have a level of
confidence in negotiating outsourcing contracts that is enabling far more to achieve
strategic objectives via a BPO arrangement.
Indeed, in a recent independent study undertaken by Benchmark Research on behalf of
Orbys Consulting, 29 percent stated the contract exceeded expectations, 61 percent
believed it was in line with expectations and only nine percent felt that it fell below
expectations.
However, it is also apparent that organizations increasingly recognize that getting to
contract is just the beginning of a complex, evolving relationship with the outsource
service provider. Ensuring the contract retains its successful perception throughout the
business over the long term requires a proactive approach to managing the relationship
between the business and BPO service provider.
For example, post contract performance management should not just be about tracking
service level agreement (SLA) metrics. If organizations are to maximize their
relationship with a BPO service provider and achieve long-term strategic benefits – or

even just make sure they stay on track – then other key factors need to be identified,
monitored and actively managed against. Some will be ongoing regular measures; others
should be modified over time to reflect changing business priorities, and current business
strategy and initiatives.
This wider ‘balanced scorecard’ approach to performance management is not only of
value to the business in driving continuous improvement and business focus, it also
helps the BPO service provider in terms of providing greater clarity of customer
perceptions and satisfaction, and clearer specification of business priorities and how the
service provider can help them be delivered.
Although initially some service providers may be wary of the additional effort and
investment required, the wiser ones will realize the potential for providing wider service
and project support. Effective ongoing management can also greatly reduce the risk of
client dissatisfaction and therefore ultimately help avoid subsequent re-tendering of the
contract or services being taken back in-house.
PROCESSES OF PERFORMANCE MANAGEENT IN BPO INDUSTRIES:
Business process outsourcing (BPO) has become an essential trend in the current
digitalization and globalization environment which influences the strategy of enterprise
greatly. In this paper, current research and results are discussed as well as their
deficiencies. Then based on business process performance measurement, the total life
cycle management framework of BPO is brought forward to solve challenges identified
through these deficiencies. At last business process performance and management
system and relevant concrete methods such as business process based risk analysis,
hierarchical fuzzy cognitive map to simulate the cause-effect logical relationships among
performance indicators are presented as well to support the analysis and decision in the
total life cycle management.
Companies of today and tomorrow are confronted with intense global competition,
demanding customers with rapidly changing desires, shrinking response times and
shortened product life cycle.

However, globalization also gives companies an opportunity to take a fresh look at their
competitive strategy and exploit outside resources even in remote regions. Thus
outsourcing has become the most popular strategy in business for several decades.
According to the definition in [1], outsourcing is the operation of shifting a transaction
previously governed internally to an external supplier through a long-term contract, and
involving the transfer of staff to the vendor for the firm. Obviously, outsourcing implies
transferring a significant amount of management control to the supplier. Although
outsourcing IT and other specific services has taken place for about 50 years,
outsourcing entire functions which is called business process outsourcing (BPO) started
in the late 1980s and early 1990s [5].
There are several principal reasons for company to outsource business process. The first
is apparently cost saving and to focus on core capabilities; the second is to improve or
reengineer the outsourced business process; and the third is that a business requires
immediate access to specialist skills. In the beginning, companies outsource their non-
core activities to countries where labor and other expenses are low. But today there is
more to BPO than just cutting down costs. BPO tends to focus more on the overall
creation of value such as efficiency, high quality and customer satisfaction.
What are the major challenges of BPO confronted by service provider (or called third
party providers) and outsourcing company at present? From the point view of service
provider, there exists contradiction between large scale and customization.
Due to the complex nature of business processes and activities, service providers have to
cater for the special requirements of a company. Nevertheless to meet the demand for
flexible but multi-clients outsourcing arrangements, it is promising that the advent of
standards-based architectures, such as Web Services which provide a standardized IT
environment will achieve the seamless integration between service provider and
outsourcing company.

While from the point view of outsourcing company and combined with many failure
cases, the principal challenge and obstacle stems from loss of control on outsourced
activities which always leads to the huge risk and high failure rate. So the key to success
in all BPO segments, regardless of process or industry, is the ability to measure process
performance before a process is outsourced and during the life cycle of the engagement.
Although BPO is a growing trend and has finally moved from concept to reality, the
existing huge risk and lack of support approaches and technologies still lead to high ratio
of unsuccessful cases. With the efforts of many researchers research work on this field is
significantly developed but still has not fully stepped up to meet the actual requirements
of potential world market. Furthermore these deficiencies in research findings mainly
focus on managing approaches, not technical support. However with the rapid IT
application development in BPO and dramatic improvement of business process
management, the procurement of process data turns to easier and business process-based
BPO management with technical support is getting possible.
TOTAL LIFE CYCLE MANAGEMENT OF BPO BASED ON PROCESS
PERFORMANCE ANALYSIS
Through the above literature review and to meet the challenge above mentioned, it is
innovative and feasible to propose technical support to BPO grounding on business
process analysis and put forward total life cycle management framework of BPO based
on business process performance analysis.

Total Life Cycle Management of BPO-Framework
The total life cycle framework is proposed in attempt to shed light on the relationship
between BPO and business process performance the total life cycle management
framework is proposed here. And in the view of constructing BPO, its total life cycle is
composed of seven phases which are illustrated in Fig.1. Each phase will be elaborated
in the following section.
(1) Analyzing and planning outsourcing
It is obvious that BPO will bring opportunities accompanied with risks to an outsourcing
company. So before the “make or buy” decision, it is very critical to take an all-sided
analysis. In this stage, the analysis, which is normally based both on performance and
risk factors, firstly focuses on current business process if available. Thus a comparison
can be made between the pre-outsourced and outsourced process.
(2) Selecting service providers

In this stage a set of evaluation criteria must be defined to select prospective BPO
service provider. These criteria typically include cost, quality, IT capability and financial
stability. After listing the evaluation criteria in a hierarchical way, decision method like
AHP or expert system can be adopted to evaluate potential providers. Then a formal
request for proposal (RFP) which take the above evaluation criteria listing as a part
initiates the process.
Thus the client and the prospective service providers enter into interviews, not only
regarding price, but also skill, culture and commitment matching. Finally a service
provider can be selected according to the evaluation criteria based on comparison, RFP
responses and interviews.
(3) Contracting and negotiating
In this stage, the strategy and major solutions of BPO are settled; problem resolution
procedures are established; to assure continued process improvement incentives as well
as punishments even rules for termination of contract before its legally specified end are
defined. What’s more, service level agreement (SLA) has been widely used as a
reference for performance measurement.
(4) Transferring activity
The details related to transferring business activities like timetable for transfer, human
resources handling are mostly described in the outsourcing contracts. Since the control
of business process is now reassigned to service provider, how to properly integrate the
outsourced processes into the outsourcing company and define their interfaces should be
paid great attention to.
(5) Managing ongoing supplier

After the adaptation period, outsourcing company now changes its role from operational
management into a more strategic one (monitoring the BPO activities and performance)
and forms a management team in charge of coordination. Generally, because the
methods used by the management team to supervise BPO activities are scheduled by the
contracts (such as regular reports delivered by service providers, periodical meeting) and
lack of effective technical support and analysis methodology, this phase is always
confronted with many problems.
(6) Ending Contract
At the end of an outsourcing contract the outsourcing company has three options: to
renegotiate the contract with the same supplier, to change supplier or to in-source the
activity again. The two first options highlight the cyclical nature of BPO while the last
one corresponds to its termination.
(7) Constructing business process performance and management system
In the above framework shown in Fig. 1, this phase locating in the centre is put forward
to provide effective support for the most crucial three phases in the life cycle: analyzing
and planning outsourcing, contracting and negotiating, managing ongoing supplier. The
importance of this phase is usually neglected or underestimated by stakeholders of
outsourcing activities which may cause many serious problems during the execution of
outsourcing contracts.
To apply and support the total life cycle management framework, it is necessary to offer
relevant approaches and methods.
Accordingly business process performance and management system and some concrete
performance measurement methods are proposed as follows.
In terms of business process, as shown in Fig. 2, business process performance and
management system is composed of five modules---business process modeling, process

performance measurement system, process monitoring, and process diagnosis and
process improvement. Firstly after determining business process logic and collecting
related process parameters, business process models are built by exploiting suitable
process modeling methods such as IDEF3, EPC and so on. Because there are two kinds
of hypotheses: one is non IT-enabled business process while the other is IT-enabled, the
analysis thoughts are split in two parts.
The first part is to directly apply some diagnosis and analysis methods like business
process based risk analysis and find out the unreasonable structure or parameter setting
which need improvement. The second part is based on performance measurement system
which is constructed normally in a hierarchical way according to BPO strategy,
stakeholders’ interests and business process objectives etc. The measurement system
based on business process is supposed to be created to determine the performance of
BPO. Such a system should be designed to measure how well the outsourcing strategy
and objectives are being accomplished. The system must be in place before the
outsourcing starts so that a comparison can be made.
Then through the running IT system, data related to the indicators monitored can be
extracted to assist business process diagnosis. The monitored indicators should include
measures broader than the traditional operational and financial ones; for example,
including indicators to evaluate the behavior of the supplier towards the relationship and
the improvements that the supplier brought to the activity. Methods such as extended
fuzzy cognitive map combined with process data mining can be introduced to diagnose
the running relevant business process. And the following section is about to briefly
introduce some sorts of concrete methods in business process performance and
management system to support the application of total life cycle management framework
of BPO.

Figure 2: Business process performance and management system
(1) Business process performance system construction
Performance measurement of BPO is a constant challenge. All too often managers give
up trying to create integrated performance measurement systems (PMS) because of the
difficulties in managing inter-organization transactions. But unless this problem is
addressed it is difficult to see how BPO can be realistically developed in the future. And
it is suggested that a switch from transaction based PMS to process based PMS [3] is
more likely to achieve a robust and focused PMS leading to better and more consistent
customer service levels. Process performance normally measured from the following
aspects: service cost, time, service quality, service differentiation and so on. And from
the view of stakeholders is also another way to construct process based PMS.
(2) Risk analysis--- from business process model to fault tree

The risk related to a concerned process model which is associated with the cost of failure
process as well as system unavailability is an important topic in the research of business
process performance. The requirement to improve the process is also an attractive issue.
To meet these challenges, it is necessary to evaluate the risk of new process models. So
it is very important that reliability analysis and risk assessment from several aspects of
process modeling, such as process structure and process functions. To realize relevant
risk analysis and assessment, the fault tree analysis technique is presented. This kind of
technique was developed by H. A. Watson of the Bell Telephone Laboratories in 1961-
1962 in an air force contract and it is also effective for qualitative and quantitative
measurement. With reference to significant research and results of [4], at first, the
process models are depicted by relevant process modeling tools issued by our research
team and then these process models will be mapped to related fault tree structures.
Afterwards through the minimal cut and path sets of fault tree technique, a methodology
for identifying critical activities in process models as well as in fault tree from reliability
and structural point view are put forward. And this sort of technique can also be applied
in other aspects to evaluate process models.
(3) Extended fuzzy cognitive maps
Since fuzzy cognitive maps (FCMs) [6] are a very intuitional and powerful tool for
simulation and analysis of dynamic systems, they are introduced to model the cause-
effect logic relationship between process performance indicators and support reasoning
of anticipated business process performance. FCMs were originally developed in 1980
by Kosko, and since then successfully applied to numerous domains, such as
engineering, medicine, control, and political affairs. FCM is a modeling methodology for
complex decision systems, which originated from the combination of fuzzy logic and
neural networks. An FCM [2] describes the behavior of a system in terms of concepts
and each concept represents an entity, a state, a variable, or a characteristic of the
system. The proposed mechanism utilizes the fuzzy causal characteristics of FCMs as a
new modeling technique to generate a hierarchical network of interconnected
performance indicators. The weight which indicates the fuzzy cause-effect influences

from one indicator to another comes from expert knowledge or analysis results based on
process data mining. And the proposed method aims at simulating the operational
efficiency of complex hierarchical process models with imprecise relationships, while
quantifying the impact of the improved process on the overall outsourcing strategy.
Performance appraisals have become a tool of much importance in today's management
scenario. This could be used best only with the help of objective and fair HR practices.
The outputs of which could be used for Organization development rather than for mere
employee efficiency improvement. Casual and subjective appraisals will not be able to
stand the test of fairness and legality if challenged. Firms are thus being forced to
emphasize a participative but joint management by objectives followed by a
participative, joint-periodic appraisal, to bring more clarity into the system.
Because companies involved in BPO are confronted with many challenges especially
like the lack of performance measurement and management throughout the lifecycle, this
paper proposes a total life cycle management framework of BPO based on business
process performance. Also concrete methods such as business process based risk
analysis, hierarchical fuzzy cognitive maps to simulate the cause-effect logical
relationships among performance indicators are presented as well to support the analysis
and decision of the most important three stages in the BPO life cycle.
It is suggested that a careful consideration of this framework and the use of related
supporting technical methods can provide insights for BPO service providers,
outsourcing company, IT managers and academicians.

8. SUCCESSION PLANNING OF BPO INDUSTRY
Succession planning is an essential part of corporate strategy in most IT organizations.
While the design of the succession chart looks good on paper, it has often been found
that the planning process fails to meet requirements at the time of filling a key position
that has just been vacated. It is not an easy task dealing with the ever-changing equations
of the leadership pipeline. According to a report by US-based business research firm
Cutting Edge, while many companies have succession plans, very few follow through
with the rigorous implementation required. In fact, 70 percent of succession plans fail
due to bad execution.
Succession planning has to ensure that the right people with the right skills are in the
right place at the right time. It can be done in three ways: role-based, individual-based
and team-based. The first is about identifying key positions, the second focuses upon key
people, and the last involves replacing a section of people or resources.
Reviewing talent
One of the challenges in all organizations is planning for HR needs. It is essential to
adopt a disciplined approach to match HR resources with the anticipated needs of an
organization. This includes aligning the succession planning process with business
strategy.
“The purpose of the talent review is to figure out the talent required to implement the
business strategy and constantly strengthen the talent pool. The talent review and
planning process helps us identify talent for emerging roles in the organization, says
Bijay Sahoo, vice-president (talent engagement and development) and head of HR,
Wipro Technologies. Commitment from the top management is another key factor for

ensuring the success of succession planning. Sahoo reveals that in Wipro, the chairman
(Azim Premji) and vice-chairman and CEO (Vivek Paul) give enormous importance and
their personal time for talent review and planning, and personally supervise the
development and implementation of the talent plan for key roles.
According to Sahoo, the other essential factors are: (a) accountability, as the succession
planning programme requires ownership at all levels in the organization. Each manager
should be responsible for assessing and developing the talent in his or her team. (b)
Constant attention, as it can be tempting to overlook the need for succession planning in
the face of more immediate needs.
Planning the process
The bench strength of current and future leaders gives a competitive edge to every
organization. At Wipro, the succession planning programme is called Talent Review and
Planning (TRP), and it is the most critical part of the organizations leadership building
and talent management process. “Once our business strategy for the year is finalized, we
identify the critical roles to execute it. We review the talent available for those roles
internally as well as externally. We plan for the succession of existing critical roles,
including that of the CEO, and identify employees who are ready to take over the roles
immediately and over the next 1-2 or 2-3 years, informs Sahoo. He adds that the
company does developmental planning for each identified internal candidate in terms of
job rotation, training, coaching and performance counseling. They also keep track of
potential external candidates, and establish touch points for attracting them at the
appropriate time.
The respective SBU heads and the SBU HR heads do the TRP for the top three levels of
their business. This contributes to the TRP at the Wipro Technologies level, where the
chairman and vice-chairman, along with the HR head, get involved in talent planning for
the top three levels. Next is the implementation of the talent strategies by developing and
reviewing the action plan.

At Infinite Computer Solutions (ICS), which has a global headcount of 1,800, employees
have also taken up higher roles without a change in designation, with support from
functional heads and senior management teams? A skill-gap analysis is done of the
candidates, and requisite training provided to make them able successors.
Clear focus
It is a known fact that while most management is interested in developing a pool of
successors for key positions, they find it a difficult task to ensure the success of their
efforts. Succession planning can get very complicated. Organizations must therefore
have a clear focus.
Wipro has quarterly talent engagement and development (TED) reviews, and action
points of each SBU and vertical are tracked. “We also track the number of senior
positions that are filled internally, which gives an indication of the success of the
programme. At the macro level, the retention figure also reflects the effectiveness of the
succession planning programme, since one of the objectives of the programme is to help
employees realize their career aspirations and thus retain them in the organization.
Systematic succession planning does generate leadership talent, and an organization can
measure its effectiveness by looking at the leadership talent it has created and provided
to the industry. Wipro is one of the top companies when it comes to creating top-class
leaders in the IT industry. “Many of our ex-employees are heading successful IT
companies,” says Sahoo with apparent pride.
The training difference
Organizations are less vulnerable to leadership crises when there’s a shadow group of
successors who are able and available to step into their shoes. Training plays a key role
in succession planning. It is imperative to strategies, design and implements programmes
to train future leaders.
Wipro has its lifecycle leadership development programmes, which are synchronized
with the roles employees play at different stages of their corporate life. These include the

New Leaders Programme, Wipro Leaders Programme, Business Leaders Programme and
Strategic Leaders Programme for different leadership positions that an employee will
assume in the organization.
Most organizations do skill-gap analysis of the selected candidates. A schedule is drawn
for the prospective individual to acquire the knowledge, skills and competencies within a
time-frame, says Sunder Rajan, general manager, HR & administration, ICS. He adds
that the training could be through internal programmes or on-the-job (local as well as
global) to gain cross-functional or cross-geographical exposure for better maturity of the
expertise that would enhance the confidence level of the person.
Just-in-time succession
Then there just-in-time succession, which maps existing competencies of the staff to fill
an important position. Succession planning software uses competency analysis which
lets companies understand the demand side of the equation with what their staff has to
offer. Succession planning is not an issue of a position; you can plan for two or three
years, but by that time the to-be-successor may have already left the organization;
consequently it is not relevant. Instead of looking at a job to fill, organizations should
profile it in terms of competencies, go to the data bank, and find whose competency
profile matches the job, advises Stephen Martin, president of ITAP Europe. The key to
this is competency development across the organization; ITAP has done succession
planning for many global organizations through competency development.
Whatever be the methodology, measuring the effectiveness of a succession planning
programme is critical to every organization, irrespective of its size. After all, it is more
than just the passing of power and responsibility it is about survival and continuity.

9. REWARDS AND RECOGNITION IN BPO INDUSTRY
HR professionals all over the world, working is Call-Center or Contact Center or BPO
industries are breaking their heads to formulate Retention Strategies but nothing is
working in their favor. The average attrition rate in this sector is still 35-40%. No perks,
no rewards…just nothing is working.
Before proceeding further, let’s see why people are leaving? Why there is high attrition
rate.
Why people are moving?
When there are so many benefits associated with BPO industry…. when there are so
many privileges for the BPO employees than what makes them to change the
company/industry?? Is it only MONEY that matters or anything else as well?? After
taking exit-interviews and analyzing the trend I am able to list out following reasons for
a BPO professional to change his/her job.
• No growth opportunity/lack of promotion

• For higher Salary
• For Higher education
• Misguidance by the company
• Policies and procedures are not conducive
• No personal life
• Physical strains
• Uneasy relationship with peers or managers
Let’s also see as what are the various benefits…that have been extended to people
working in this sector.
Employee Benefits Provided By Majority of the BPO Companies
A part from the legal and mandatory benefits such as provident-fund and gratuity, below
is a list of other benefits…BPO professionals are entitled to the following:
1. Group Medical-claim Insurance Scheme: This insurance scheme is to provide
adequate insurance coverage of employees for expenses related to hospitalization
due to illness, disease or injury or pregnancy in case of female employees or
spouse of male employees. All employees and their dependent family members
are eligible. Dependent family members include spouse, non-earning parents and
children above three months
2. Personal Accident Insurance Scheme: This scheme is to provide adequate
insurance coverage for Hospitalization expenses arising out of injuries sustained
in an accident. This covers total / partial disablement / death due to accident and
due to accidents.
3. Subsidized Food and Transportation: The organizations provide transportation
facility to all the employees from home till office at subsidized rates. The lunch
provided is also subsidized.
4. Company Leased Accommodation: Some of the companies provides shared
accommodation for all the out station employees, in fact some of the BPO
companies also undertakes to pay electricity/water bills as well as the Society

charges for the shared accommodation. The purpose is to provide to the
employees to lead a more comfortable work life balance.
5. Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities
include pool tables, chess tables and coffee bars. Companies also have well
equipped gyms, personal trainers and showers at facilities.
6. Corporate Credit Card: The main purpose of the corporate credit card is enable
the timely and efficient payment of official expenses which the employees
undertake for purposes such as travel related expenses like Hotel bills, Air tickets
etc
7. Cellular Phone / Laptop: Cellular phone and / or Laptop are provided to the
employees on the basis of business need. The employee is responsible for the
maintenance and safeguarding of the asset.
8. Personal Health Care (Regular medical check-ups): Some of the BPO'S
provides the facility for extensive health check-up. For employees with above 40
years of age, the medical check-up can be done once a year.
9. Loans: Many BPO companies provide loan facility on three different occasions:
Employees are provided with financial assistance in case of a medical
emergency. Employees are also provided with financial assistance at the time of
their wedding. And, The new recruits are provided with interest free loans to
assist them in their initial settlement at the work location.
10. Educational Benefits: Many BPO companies have this policy to develop the
personality and knowledge level of their employees and hence reimburse the
expenses incurred towards tuition fees, examination fees, and purchase of books
subject, for pursuing MBA, and/or other management qualification at India's top
most Business Schools.
11. Performance based incentives: In many BPO companies they have plans for,
performance based incentive scheme. The parameters for calculation are process
performance i.e. speed, accuracy and productivity of each process. The Pay for
Performance can be as much as 22% of the salary.
12. Flexi-time: The main objective of the flextime policy is to provide opportunity
to employees to work with flexible work schedules and set out conditions for

availing this provision. Flexible work schedules are initiated by employees and
approved by management to meet business commitments while supporting
employee personal life needs .The factors on which Flexi time is allowed to an
employee include: Child or Parent care, Health situation, Maternity, Formal
education program
13. Flexible Salary Benefits: Its main objective is to provide flexibility to the
employees to plan a tax-effective compensation structure by balancing the
monthly net income, yearly benefits and income tax payable. It is applicable of
all the employees of the organization. The Salary consists of Basic, DA and
Conveyance Allowance. The Flexible Benefit Plan consists of: House Rent
Allowance, Leave Travel Assistance, Medical Reimbursement, Special
Allowance
14. Regular Get together and other cultural programs: The companies organizes
cultural program as and when possible but most of the times, once in a quarter, in
which all the employees are given an opportunity to display their talents in
dramatics, singing, acting, dancing etc. Apart from that the organizations also
conduct various sports programs such as Cricket, football, etc and regularly play
matches with the teams of other organizations and colleges.
15. Wedding Day Gift: Employee is given a gift voucher of Rs. 2000/- to Rs. 7000/-
based on their level in the organization.
16. Employee Referral Scheme: In several companies employee referral scheme is
implemented to encourage employees to refer friends and relatives for
employment in the organization.
17. Employee Stock Option Plan: Now, the actual question, why people are
leaving? What types of retention strategies are required? What is expected from
HR Professional and how they can address this issue?
Retention - A Big Challenge
Fundamental changes are taking place in the work force and the workplace that promise
to radically alter the way companies relate to their employees. Hiring and retaining good
employees have become the chief concerns of nearly every company in every industry.

Companies that understand what their employees want and need in the workplace and
make a strategic decision to proactively fulfill those needs will become the dominant
players in their respective markets.
The fierce competition for qualified workers results from a number of workplace trends,
including:
• A robust economy
• Shift in how people view their careers
• Changes in the unspoken "contract" between employer and employee
• Corporate cocooning
• A new generation of workers
• Changes in social mores
• Life balance
Concurrent with these trends, the emerging work force is developing very different
attitudes about their role the workplace. Today's employees place a high priority on the
following:
• Family orientation
• Quality of life issues
• Autonomy
To hold onto your people, you have to work counter to prevailing trends causing the job
churning. Smart employers make it a strategic initiative to understand what their people
want and need -- then give it to them.
Retention Strategies
This is not an exhaustive list, one can add or delete any of the below mentioned
strategies. Secondly, the need of the hour is to have "right basics". Every individual is
different, his needs are different, and his emotions, his problems are different. So, dear
HR-Professionals…sit down and concentrate on your basics. I have classified retention
strategies into two parts: Main and Ancillary.
Main retention strategies

This is not an exhaustive list, one can add or delete any of the below mentioned
strategies. Secondly, the need of the hour is to have "right basics". Every individual is
different, his needs are different, and his emotions, his problems are different. So, dear
HR-Professionals…sit down and concentrate on your basics.
1. Communications - Getting Your People to Care
Communication is the first step toward creating the kind of environment that people
care about, and if they care, they just may stay. I'm not talking about a lot of New
Age stroking designed to bring out the inner person or false praise that creates a
misplaced sense of security. Instead, keep your people in the loop about what's
happening with the company. At any time, all of your employees should have a
pretty good idea of how business has been, and they should be aware of what issues
the company is attempting to address.
That means that you regularly keep your people up to date with important events
affecting the company. If November was good, let them know, and while you're at it,
tell them what you expect to happen in December. Share good news, as well as
points of concern. If you've got "issues," talk about them before they start making
you crazy. And if they don't get resolved, figure out whether the problem stems from
a couple of individuals or from your system.
The point here is that you want to treat these people as your partners, which they are.
They may not have to worry about covering the payroll this week, but they do have
worries of their own. Treat them with at least as much respect as they give you. As
the store's owner or manager, you set the tone for the entire organization. If your
salespeople, for instance, enjoy their encounters with you, they are much more likely
to greet customers with a positive attitude. They are also much more likely to enjoy
their work when they don't have a fire-breathing dragon looking to singe their butts.
Listen to your employees when they have ideas for improvement. Again, the benefits
extend beyond just making people feel appreciated for their contributions. These are,

after all, the people who do the work every day. They may have some ideas to
improve productivity, and when they do come up with one, let everybody know
where it came from. Post a "brag board" in your break room, or circulate an internal
newsletter that touts these contributions. The pay-off is a contagious feeling of pride
and, perhaps, some new efficiency that saves the company money.
2. Set Clear Expectations
o How often do you appraise your employees/team-members?
o What are your expectations from your employees/team-members? What
are the parameters to measure their performance? Have you
communicated to them?
o What will be the consequences, if they fail?
o What will be the rewards, if they exceed the expected level?
If you are not having any expectations, how you are going to appraise, your employees?
Yes, you are going to be biased, because you don't have set standards.
The role of a CEO, HR Manager is like a director of a movie; choreographer of a stage
show, where there is a defined role for each character, each participant.
Setting expectations initiates the process. Managers need to sit down with each
employee and clearly define what's expected of them. Management consultant, Kenneth
Philips, states that when expectations are not clear, employees may not be in sync with
their job's current demands and priorities. Setting expectations is not a once and done
activity. Jobs change. Priorities change. Resources change. Managers need to revise and
set new expectations throughout the year. Setting expectations revolves around the
following three areas:
o Key job responsibilities
o Performance factors and standards
o Goals

Why is a setting expectation important? Quite simply, this process can be the
cornerstone of improving the motivational climate within your sphere of responsibility.
If your employees know what is expected of them, it allows them to focus on results and
to monitor themselves against the set standards. Environments in which expectations are
not clear, or change from week to week, seldom create high-performing work groups.
The three principles that should drive expectations are clarity, relevance, and simplicity.
Clarity. Expectations should focus on outcomes, not activities. In other words, you
achieve clarity when you identify the expected results rather than the method for
achieving them. Managers often make the mistake of attempting to direct the process
that an employee will use rather than being clear about results. The advantage of
identifying the outcome is that you, the manager, focus only on the goal; after all, the
employee will develop the method for achieving the desired results.
Defining the objective often requires some thought on the part of the manager because it
is easy to fall into the "activities trap." While developing a strategic plan for a
department or division is a worthy activity, it does not represent an outcome. In the
activities trap, developing a plan is the goal, rather than increasing your market share.
Relevance. The principle of relevance helps define the "why" of the assignment. If your
employees have a full understanding of the project's importance, they can make
adjustments as unanticipated factors crop up within the process. They probably also will
be more committed to the result because they can see more easily how it fits into the big
picture and how their efforts impact the company.
This understanding typically is accomplished through dialogue between the manager and
subordinate, which allows for a more thorough review of the situation and for feedback
and discussion. This process builds good will with the employee and sets the stage for
additional responsibilities.
Simplicity creates a sense of grounding for employees as they endeavor to carry out
assignments. If managers identify the work in simple, straightforward terms, employees
will find it much easier to follow through on managers' wishes. To accomplish this, a
manager must identify the key message in a fashion that the employee can embrace.

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