Adam Guzowski and Pomai Verzon

Impact Sourcing is Going Rural: Here’s what we learned from studying several BPO companies

Did you know rural villages could be helping your insurance company move into the 21st century? In this new, flatter world, insurance companies are shifting to digital records, but need some help making this transition. So when you fill out an insurance claim and mail it to your provider, the insurer finds a company they can outsource the process to – one that is willing to take the scanned claim, break it into pieces to protect your information, manually type the data, and return it back to them for a pittance of what it would cost their employees to do it. This is the Business Process Outsourcing (BPO) industry – and it is going rural.

An increasing number of BPO centers are being started in rural India to both take advantage of lower operating costs and bring economic opportunity, often with an aim of employing women and youth. Outsourcing tasks from urban to rural areas allows companies to save significantly on both salaries and overhead. Rural BPOs also have low attrition rates due to loyalty, community ties, and lack of other employment opportunities with good pay and work environments.

This article examines some of the lessons learned from small to medium BPOs (defined here as 250 employees or less) working in this new, socially responsible sector in India. Data for this project was gathered through interviews with five rural Indian BPOs: Head Held High, IndiVillage, JSoft Solutions, rProcess, and SAI SEVA.

Lessons Learned

  • “Infrastructure seems like an overblown issue”

The most obvious challenge for a rural BPO is infrastructure. Understandably, worries about consistent power supply and reliable Internet are at the forefront of potential customers’ and skeptics’ minds. However, this concern is largely overblown and diminishing as Internet providers continue to penetrate rural India. Facilities, energy, and connectivity are more complex when going rural, but it is an obstacle dealt with only once. Where some BPOs falter is choosing the wrong location, not for lack of infrastructure, but for lack of talent. One BPO realized that it needed to place facilities in areas with a population of 1 lakh (100,000) or more because there was not enough human capital available. Accessing a sufficient talent pool of potential employees is another factor to be considered when scouting for location.

  • “For them this might be their first job”

Rural employees typically require more training and a longer warm-up period on processes. Several BPOs have learned through trial and error that it is best to provide basic training in the beginning and then supplement it with more complex training as needed. One BPO found that it provided months of intensive training only to have many of the workers leave and bring their new skills to the city. It then started recruiting housewives, knowing they were tied to the community and shared the goal of doing social good. But without productivity benchmarks in place, the firm realized that some of the workers were being subsidized by the company instead of providing value. Most BPOs now follow a system of providing a stipend during training followed by a period of progressing job intensity and responsibility. While there is a steeper learning curve in rural BPOs, setting appropriate benchmarks can alert management to workers that are not a good fit.

BPOs must also be careful about hiring, as workflow can be inconsistent and companies cannot afford to keep employees on the bench waiting for new assignments. Recruitment should be client based. Employees should be hired and trained based on the requirements of customers once some work is secured. Otherwise BPOs may invest too heavily in a process that does not have enough customers. Again, this is a careful balance as, depending on available talent, the process can take four or more weeks.

  • “Low attrition rates can turn against you eventually”

Low attrition is one of the factors that help make BPOs successful and bring down costs. But it can also become a problem, especially as long service eventually meets pay and work ceilings. Employers find themselves unable to meet the rising expectations of workers. With gained experience, employees anticipate a salary increase, but this does not always translate to a rise in productivity. The other issue is that while an employee may be ready for more challenging work, it may not be available. This leaves the employee de-motivated and their career stagnant, as a promotion may not be an option. While some attrition is necessary, there are several actions managers can take to delay it, including diversifying the workload of employees, providing training on services the BPO plans to offer and, for those organizations with nothing left to teach, allowing and encouraging workers to pursue external learning through schedule flexibility and even providing education loans.

  • “There is only so much data entry work available”

The most common, if not the biggest, challenge that BPOs are facing is finding and maintaining the right work mix. A steady supply of simple, repetitive work for employees with basic computer and language skills is necessary. But to grow the business and keep the workforce motivated, securing more complex work is essential. A mix of low-skilled workers and graduates can increase the variety of work a BPO can handle by splitting processes and having higher skilled workers act as quality controllers or team leaders. However, BPOs must first attract the work and that is where many struggle. Small to medium BPOs have not found much success through cold calling and sales teams have not had great returns. Instead, BPOs have benefited the most from their existing network and word of mouth. In the rural context, BPO directors actually end up doing the bulk of business development leveraging their own connections and on their own dime.

  • “It’s easier to write a check and give money than work”

Despite a near exclusive social mission and passionate leaders at the helm, most BPOs have opted to make the business case rather than use the social impact approach as a selling point. They have discovered that the social pitch does not attract the attention of most potential customers who are more interested in reducing costs. While this holds true for most domestic customers in India, Western customers have shown more of an interest in the impact they are helping to make. Perhaps due to the limited interest of customers, few BPOs have devoted time and resources to measure their impact.

Both cost and socially focused customers remain concerned about the quality of the service delivered by employees from rural areas and their overall skills levels. One BPO that focuses on youth finds it is better to not mention the transformational journey their trainees complete. Customers tend to focus on the rural origins of the trainees and worry they will not have the capabilities to handle the work. It is important for BPOs to build their credibility and create the right expectations among their prospective customers. This has been done through taking on part of the work as a pilot project and building the process up or forging partnerships with larger, urban BPOs that subcontract processes that do not require high levels of skill or specialization.

  • “We are careful about bringing city culture into villages”

BPOs bring opportunity but they can also be viewed as a threat to village culture, ushering in change where tradition has ruled. Husbands and overzealous community members often object to women not only working outside the home, but alongside men. Employees balk at different castes mixing. These issues require a hands-on approach not just of managing internal affairs but family and community members. A BPO working in a new area may find it beneficial to partner with a trusted NGO or to reach out to religious and other leaders. Managers at one BPO explained that in the beginning the firm had to explain to families the benefits of their wives and daughters working at the BPO. Today, employment brings these women greater respect both within their homes and in the community.

For many employees the BPO will be their first experience in a professional environment. Managers have found the need to establish a work culture early on and include soft skills in training. A particularly challenging issue for one BPO is that employees tend to take long holidays for religious events and festivals that can last as long as two to three weeks. Many BPO centers struggle to replace employees as others need to be trained on the specific tasks, and recruiting replacements is not profitable for such a short time period. This concern intensifies around major festivals when numerous employees plan their holidays simultaneously. Strategies to overcome this have included an effort to hire employees of diverse religious backgrounds and making rules around vacation time to maintain operational capacity.

Adam Guzowski and Pomai Verzon are IDEX Fellows.