EXECUTIVE SUMMARY

Performance Appraisal is a crucial activity for organizations that are looking for growth
and profit maximization in this ever-increasing competitive environment. This project report is a
review based on theory as well as research and experience. The research report starts with the
background and explains its importance in the performance management system and also its
changed scenario. The essential components of an effective performance appraisal system consist
of understanding its foundations and the essential steps that lay the foundation. It is also
necessary to recognize the objectives and benefits of this system. For benefit realization it is
necessary to identify key result areas (KRAs) i.e. goal setting and monitor resulting performance
so that a meaningful relationship between performance, reward and development of required
skill through counseling if required, can be established. Finally lot of brainstorming is required
to be done to device a sound appraisal system by evaluating available techniques and
implementation processes. One must remember that performance appraisal is an inexact, human
process and it is quite a challenge to actually implement it successfully.
Performance appraisal system has gone through a sea change over a period of time. In the
beginning the process was non transparent and the employee was kept in dark about his
performance. No systematic exercise was done and the entire process was arbitrary. The current
processes of performance appraisal involve self-appraisal by the employee too.
Thus the system has gone through the phase of non-transparency to transparency. In the
transparent system of appraisals appraise is taken into confidence and the whole process is
interactive. Review process with employees is designed in such a way that employees become
aware of what is expected from them, receive timely feedback and recognition for their
achievements. Some of these relatively transparent methods are appraisal discussion-dialogue
method of appraisal, competency based appraisal system, potential appraisal, performance and
development planning. While new frontiers to performance appraisal include management by
objectives, 360 feedback and balanced scorecard. In this technology driven era appraisals too can
be done electronically like E Appraisal.
Finally, the repot is rounded up by presenting a case study on one of the top Indian BPO
companies and concluded further.

OBJECTIVES OF STUDY
A) Primary Objectives
1) To study the performance appraisal system.
2) To study the transformation of performance appraisal from traditional
To modern.
3) To get an insight into the relative importance of performance appraisal
In an organization.
4)

To study the effectiveness of performance appraisal system and its

Benefit to an organization.

5)

To study the practical application of performance appraisal.

6)

To compare appraisal system of an organization and find out the most

Common parameters for appraisal.

7) To understand the problems associated with performance appraisal and

Suggest measures to be adopted to overcome these issues.
B)

Secondary Objectives.
1) To observe the work environment in organization.
2) To get experience and expertise in making projects.
3) To enhance my communication skills.
4) To increase my confidence.

SCOPE OF THE STUDY

This project covers the definition and meaning of performance appraisal. It elucidates the
benefits and drawbacks of the traditional methods as well as recent advances in the field of
performance appraisal. The project throws light on the concern areas for different people
involved in the appraisal process and attempts to find out ways to overcome those problems.
Appraisees and appraising managers have both been given guidelines in evaluation
process and subsequently the review meeting. It emphasizes how this approach will help the
appraisees by giving them an apportunity to assess and correct areas that their supervisors feel
may have overlooked. Such incidences do happen due to personal likes and dislikes of superiors.
The system can help management to take informed decisions on pay hikes and career
enhancement for their employees.

Thus, through this project report one can.

Have a reasonable understanding of the term performance appraisal ;

Understand what needs to be done for its effective implementation ;
Know the key areas of performance indicators ;
Understand the benefits of the system ;
Know how it helps in designing the performance rated pay system ;
Know how it helps in planning of career of employees ;
Know how it help in the future requirement of the organization as it grows.

LIMITATIONS OF STUDY
1) To get contacts of HR managers for interviews was difficult.
2) Getting the views and opinion of the interviewee (HR Manager) was difficult task.

RESEARCH METHODOLOGY

The study of the topic performance Appraisal has been done through various Sources.

The primary source includes the personal experience.

The secondary sources include;

Information gathered through surfing the internet ;

Information available on interact site on Knowledge Management ;

Different study materials ;

Private circulations from consultants ;

Deliberations with practicing consultants and experts in the field ;

Sample performance appraisal forms obtained from reliable resources.

INTRODUCTION

Todays working culture demands a great deal of commitment and effort from the
employees, who in turn naturally expect a great deal more from their employers. The
development of much more participative style of management in many organizations is a positive
step towards meeting such heightened expectations. This participative style can be expressed in a
variety of practical ways. For eg. Work teams, quality circles, and of course regular performance
appraisals.
Appraising the performance of individuals and groups and organizations has been a
common practice in all societies. While in some instances, these appraisal processes are
structured and formally sanctioned, in other instances they are informal and integral part of daily
activities. Performance appraisal is the method of evaluating the behaviour of an employee at the
work place, normally including both quantitative and qualitative aspects of job performance.
Performance here refers to the level of accomplishments. In the sense that there are expectations
from every person in organizations, a certain level of output or performance is expected from all.
How an employee actually performs in the light of the expectations determines whether his
performance is exceptional, good, average or below that. It is always measured in term of results.
This process has very a high implication on various other HR functions, like recruitment,
training, manpower planning etc.
It is important that the employees are aware of their goals, how to achieve them, how
they are matching up to them, what should be done if they are not. There is not one right way of
doing the performance appraisals. The most appropriate route to be taken will depend upon the
current style and status of the organization. People do have a negative attitude about the
performance appraisals. Many have the complaints such as, its just yearly rollicking , or It
is like school report time or nothing comes out of it anyway A significant consideration in
choosing how to go about introducing or revising a performance appraisal scheme will be an
understanding of how much attitudes have been perpetuated and how they might be overcome.
People carry bad experiences with them for a long time, in this case, perhaps from job to job.
Much has to be done at the time of introducing or revising a performance appraisal scheme to
reassure those who will be involved that the intensions behind conducting the performance
appraisal are sincere and positive.
Performance Appraisal must be seen as an intrinsic part of a managers responsibilities,
not an unwelcome an time consuming addition to them. It is about improving performance and
ultimately the effectiveness all a part of the managers remit.

DEFINITION AND MEANING :

In simple terms performance appraisal may be understood as the assessment of an

individuals performance in a systematic way, the performance being measured against
such factors as job knowledge, quality, quantity of output, initiative, leadership abilities,
supervision, dependability, co-operation, judhement, versatility, health, and the like.
Assessment should not be confined to past performance alone. Potentials of the
employees for future performance must also be assessed.

A formal definition of performance appraisal is :

It is the systematic evalution of the individual with respect to his or her
interest.
A more comprehensive performance on the job and his or her potential for
development definition is :
Performance appraisal is a formal structured system of measuring and
evaluating an employees job, related behaviour, and outcomes to discover how and
why the employee is presently performing on the job and how the employee can
perform more effectively in the future so that the employee, organization, and the
society all benefit.

MEANING :
Performance in a job is a matter, which needs to be considered both in terms of
results achieved and behaviour demonstrated. Results required in relation to quantity,
quality or timing can be established in most espects if a large number of jobs. Comparing
results reached to results required is essential in evaluating the performance. Reviewing
results in the context of actions and behaviour is nessessary to develop a full
understanding of individual performance. In determining what actions have lad to
success or the lack of it, this aspect of examining performance will represent a
significant element in forming plans for the future, so that strengths can be built upon and
weekness addressed. There are, of course, certain jobs or features of certain jobs, where it
is not always possible to state a required result or standard that clearly. In this instances
considering behaviour assumes a greater significance when appraising the performance.
The manager for the home for the elderly, for example would be able to show
ability in controlling budgets in a tangible manner by keeping within certain financial
guidelines. The most important part of such job however, whould concern the health and
well being of residents. Apart from being difficult to measure, these aspects could be
some what beyond the manager s control, and it would be unfair to make an assessment
on the amount of medicines used or the mortality rate. Therefore t follows that the
manager s actions in promoting the good health and wll being of the residents are the
most relevant factor in evaluating performance, rather than the results.

Concept Of Performance Appraisal :

The concept of performance appraisal can be explained with the analogy illustrated
below:

Head

Shaft

Ring

The head of the key represents the uniqueness of the employee. No two
Employees are alike.
The ring represents the managementn requirement the job content.
The shaft represents the communication between the employee and the
Company, the transmission of the task and the response from the performer.

PERFORMANCE APPRAISAL AS A NATURAL PROCESS

OF MANAGEMENT
Performance appraisal as a natural process of management for three reasons:
MEASURING PERFORMANCE:

Performance can be used as a means of measuring performance in accordance with the

adage: If you cannot measure it you cant manage it. But the purpose of measurement is to
indicate not only where things are not going according to the plan (i.e. there is a negative
variance from the anticipated variance) so that steps can be taken to build on success.
Performance appraisal is means for creating and maintaining a climate of success in the
organization. Have a success oriented strategy does not only mean expecting people to succeed
but also if they do not succeed, helping them to succeed.

IMPROVING PERFORMANCE:
Building a climate of success involves taking specific steps to improve the performance
of individuals or teams. Because managers depend on that performance, they have a major and
continuing responsibility to take whatever action is necessary to improve it. This is an entirely
natural process of management and whenever anyone complete a task or project good managers
will consciously or unconsciously consider the following points:
How well was that done?
Could it have been better?
Was the right person selected for the job?
In what ways, if any, does the person need to improve?
What guidance or help can be provided to this person to ensure that
Better results are achieved next time?
EXERCISING LEADERSHIP:
There are many ways of defining leadership. Basically, however it is about getting things
done through people. Leaders point out the way and ensure that everyone gets there. Leadership
is about encouraging and inspiring individuals and teams to give their best to achieve a desired
result. Managers as leaders have to achieve the task. That is why they and their teams exist. The
leaders role is to ensure that the teams purpose is fulfilled. If it is not, the result is frustration,
disharmony, criticisms and, eventually perhaps disintegration of the group.
OBJECTIVES OF PERFORMANCE APPRAISAL
Performance appraisal is potentially useful for managers in many ways. At base however
there are two fundamental reasons for developing such systems.

Assessing past, which outlines the evaluative aspect of performance appraisal.

Improving future performance, which highlights the development aspect of
performance appraisal.

OTHER OBJECTIVE ARE AS FOLLOWS:

a) Promotion, separation, and transfer decisions.
b) Feedback to the employee regarding how the organization viewed the employees
performance.
c) Evaluation of relative contribution made by individuals and entire departments in
achieving higher level organization goal.
d) Criteria for evaluating the effectiveness of selection and placement decisions, including
the relevance of the informations used in the decisions within the organization.
e) Reward decisions, including merit increases, promotions and other rewards.
f) Ascertaining and diagnosing training and development decisions.
g) Criteria for evaluating the success of training and development decisions.
h) Information upon which work scheduling plans, budgeting, and human resources
planning can be used.
i) Provided employees the opportunity to formally indicate the direction and level of the
employees ambition.
j) Show organizational interest in employee development, which was cited to help the
enterprise retain ambitious, capable employees instead of losing the employees to
competitors.
k) Provided a structure for communications between employees and management to help
clarify expectations of the employee by management and the employee.
l) Provide satisfaction and encouragement to the employee who has been trying to perform
well.

PERFORMANCE MANAGEMNET CYCLE

SKILLS REQUIRED TO CARRY OUT PERFORMANCE

APPRAISAL PROCESS

PERFORMANCE GUILDLINES FOR MANAGERS

A) Professional and technical knowledge :
Has expertise in the productive marketing of the business units Services.
Has expert knowledge of business units services and sufficient familiarity with other
business units services to enable customer needs to be meet.
Has expert knowledge of basic operations of the total business unit and the appropriate
management information.

B) Organizational and business knowledge :

Understands and applies organizational knowledge to the business Unit.
Knows whom to contact to gain additional knowledge.
Appropriately applies knowledge of the team to enhance the operations of the business
unit.

C) Interpersonal and communication:

Responds constructively when dealing with customer and Colleagues.
Can establish rapport easily with a range of different people.
Helps people in groups and teams to get on together.
Can say No when necessary and set standards/ limits for others.
Makes it easy for others to be open and honest.
Presents ideas and information clearly in speech and writing.

D) Influencing skill :
Maintains a good relation with customers even when their needs cant all be met.
Actively involves others in decision- making and wins co operation.
Uses contacts appropriately to obtain information and help.
It is assertive for self and/or on teams behalf without damaging relationships.

E) Critical thinking :
Readily spots trends and patterns in job-related quantitative and qualitative data.

 Tests the quality of available information and draws logical conclusions from it.
Can analyze varied major problems and at the same time identify
Appropriate actions.

F) Self managing and learning :

Is objective about own strengths and weaknesses.
Prepared to back own judgment publicly.
Concentrates and maintains focus, even when constantly interrupted.
Makes good use of opportunities to learn.
Recognizes and deals effectively with personal stress.

G) Achievement and Action :

Is clear about what success means for the business; successful in overcoming obstacles.
Makes decisions without passing the buck and sets personal performance standards, too.
Take early actions to deal with problems even if it is difficult or unpopular.
Makes best use of resources to achieve objectives.

H) Initiative and Innovation :

Identifies option for improvement and acts on them or motivates others to do so.
Challenges accepted ways of doing things when this means breaking with time honored
traditions.
Activity encourages the team to come up with new ideas and Approaches.
Experiments and learns from mistakes.

I) Strategic perspective :
Understands key organizational aims, values and strategies.
Anticipates how trends and events in different areas of the business and environment will
affect them.
Actively encourages and supports people when they offer different perspective and
opinions.

J) Capacity for change :

Gradually modifies approach or strategy as the situation changes.
Can accept and work with new approaches, even if not totally in agreement with them.
Keeps focused in the phase of uncertainty helps the team to accept and adjust to changed
approaches.

FUTURE ORIENTED APPRAISALS METHODS :

MANAGEMENT BY OBJECTIVE (MBO) :

USING PERFORMANCE APPRAISAL TO ADDRESS WORKFORCE

DEVELOPMENT CHALLENGES
A proper understanding of how to automate and improve the effectiveness of workforce
processes is significantly impeded by the lack of leadership and investment in global
organizations. Assessing the potential of workforce management practices to automate and
improve the processes and performance of employees is rapidly becoming a top issue for finance
and operations executives. Industry and corporate conversation in human capital management,
talent management, and pay-for-performance initiatives must be translated into processes and
systems for improving employee life-cycle management. Ventana Research recommends that you
assess your processes, re-evaluate your systems investments into ERP and human resource (HR)
operational systems, and accelerate the adoption of workforce performance management.
Recognise, reward and support effective performance:
Ventana Research sees the practice of managing the effectiveness and value of your
workforce as the performance management imperative of this decade. Leveraging employees
as human capital assets is essential for improving business and operational performance. The
challenge is that this imperative is not always a priority and is not given enough credence and
investment to ensure an optimal outcome.
The finance and operational management gap in this critical human capital investment is
beginning to change as a new optimism in the importance of workforce management has begun.
Business operations and finance have a direct responsibility to manage employee actions and
costs, but now must address performance and process improvement more seriously. The lack of
alignment between processes and systems in supporting employee-centric programs has kept
large global organizations from fully leveraging their human capital.
Organizations need to determine where to link their process and system investments for
optimal workforce management. ERP providers are trying to influence you to invest in their HR,
finance, and performance management systems, while best-of-breed workforce management
and pay-for-performance providers are focused on complementing your investments. Many

workforce management applications are available through a hosted application service that
reduces costs and resources required to deploy these applications.

To take a workforce management initiative seriously, you must fully assess the following
segments within your organization:

Recruit and Hire Management:

Ability to centrally manage and improve the process for a new or replacement employee
in an organization Compensation Management: Ability to centrally manage compensation and
analysis to optimize workforce and employee satisfaction incentive Management: Ability to
centrally define strategies for incentives and rewards and measurement of outcomes on expected
performance improvement goals Management: Ability to centrally manage objectives of
employees and compare performance to objectives in order to reach the desired outcomes on an
annual or initiative basis.
Learning Management:
Ability to centrally define, manage and track the impact of training and education
programs outcomes on employee performance competency Management: Ability to centrally
manage competencies in the organization and be able to leverage them across the organization
Performance Measurement: Ability to provide flexible reporting and analysis of employees
from a cost and performance perspective to determine their potential and value organizations
will need to determine how to bring these functional capabilities into a workforce process and
performance improvement environment. The imperative to assess your ERP transactioncentered systems and determine your workforce management direction will be a competitive
differentiation.
Assessment:
Ventana Research believes that using workforce performance management to automate
and improve business processes will increase the value employees bring to the organization. A
lack of clear understanding of how to address the workforce management imperative is
preventing organizations from achieving optimal results. Realizing the need to improve

employee effectiveness through more efficient systems has made this topic a part of the strategy
and planning conversations in executive and regular management meetings. Improving the
maturity and prioritization in your organization will be critical to advance the value and
potential of your workforce.

OVERCOMING THE PROBLEMS OF PERFORMANCE APPRAISAL

Overcoming 5 Common Performance Appraisal Biases

One

of

the most
difficult aspects in the performance

appraisal
process has to do with
biases. A bias is defined as a

prejudice

in favor of or against someone or

something. It should go without saying that employees expect their performance evaluations to
be fair and free of biases.

Many different kinds of bias can show up during the performance appraisal process.
Here are five common ones:

1. Contrast This occurs when the manager compares an employees performance to other
employees instead of the company standard. When employees are ranked in comparison,
someone must end up at the bottom, even if they are exceeding the company standard.
The problem isnt the employee its the goal or standard that has been set.
2. Halo An employee is rated highly in all areas because of one thing they do really well.
Ive seen this happen with sales people. She hits the numbers and senior leadership loves
it. But behind the scenes, she creates havoc and doesnt have the respect of her coworkers.
3. Horn On the flip side, an employee is rated as a poor performer because of one thing
they dont do well. For example, the administrative assistant who is great at everything
but filing. It piles up because he puts it off resulting in the company hiring a temp to
get the filing caught up. In all other areas, hes a rock star.
4. Leniency A manager gives everyone on their team a satisfactory rating. Unfortunately,
Ive seen this occur a lot when a manager has a large span of control coupled with a
common review date. The manager has dozens of reviews to work on and a heart full of
good intentions. But somewhere around review number 17, the manager gets burned out
and starts giving everyone a satisfactory response. Because it doesnt require any written
supporting statements.
5. Regency The employees most recent behavior becomes the primary focus of the
review. This can go both ways. A poor performer does something terrific and their past
performance is forgotten. Or an excellent performer makes a mistake and it weighs down
the rest of the review.

INDUSTRY PROFILE

The BPO Industry in India

of

In India, Business Process Outsourcing (BPO) is the fastest

growing segment of the ITES (Information Technology
Enabled Services) industry. Factors such as economy of scale,
business risk mitigation, cost advantage; utilization
improvement and superior competency have all lead to the growth
the Indian BPO industry. Business process outsourcing in India,
which started around the mid-90s, has now grown by leaps and

bounds.
India is

now the world's favored market for BPO companies, among other
competitors, such as, Australia, China, Philippines and Ireland. The BPO

boom in India is credited to cheap labor costs and India's huge talent pool of skilled,
English-speaking professionals. Research by the National Association of Software
Services and Companies (NASSCOM) has revealed that quality orientation among
leading BPO companies, 24/7 services, India's unique geographic location and the
investor friendly tax structure in India have all made the BPO industry in India very
popular.

What is business process outsourcing?

The term Business Process Outsourcing or BPO as it is popularly known, refers to
outsourcing in all fields. A BPO service provider usually administers and manages a particular
business process for another company. BPOs either use new technology or apply an existing
technology in a new way to improve a particular business process. India is currently the number
one destination for business process outsourcing, as most companies in the US and UK outsource
IT-related business processes to Indian service providers.

Services offered by Indian BPO companies

Indian BPO companies offer varied services, such as, customer support, technical
support, telemarketing, insurance processing, data processing, forms processing, bookkeeping
and internet / online / web research.
1.

Customer support services: 24/7 inbound / outbound calls center

services that address customer queries and concerns through phone, email and live chat.

2.

Technical support services: Installation, product support, running

support, troubleshooting, usage support and problem resolution for computer software,
hardware, peripherals and internet infrastructure.

3.

Telemarketing services: Interacting with potential customers and

creating interest for the customer's services/ products. Up-selling, promoting and cross
selling to existing customers and completing online sales processes.

4.

IT help desk services: Level 1 and 2 multi-channel support, system

problem resolutions, technical problem resolution, and office productivity tools support,
answering product usage queries and performing remote diagnostics.

5.

Insurance processing: New business acquisition and promotion,

claims processing, policy maintenance and policy management.

6.

Data entry and data processing: Data entry from paper, books,
images, e-books, yellow pages, web sites, business cards, printed documents, software
applications, receipts, bills, catalogs and mailing lists.

7.

Data conversion services: Data conversion for databases, word

processors, spreadsheets and software applications. Data conversion of raw data into PDF,
HTML, Word or Acrobat formats.

8.

Bookkeeping and accounting services: Maintenance of the

customer's general ledger, accounts receivables, accounts payables, financial statements,
bank reconciliations and assets / equipment ledgers.

9.

Form processing services: Online form processing,

payroll

processing, medical billing, insurance claim forms processing and medical forms
processing.
10. Online research: Internet search, product research, market research, surveys, analysis,
web research and mailing list research.

Interesting facts about the Indian BPO industry

The BPO sector in India is estimated to have reached a
54 per cent growth in revenue The demand for Indian BPO services has been growing at an
annual growth rate of 50% The BPO industry in India has provided jobs for over 74,400
Indians. This number is continuing to grow on a yearly basis. The Indian BPO sector is soon
to employ over 1.1 million Indians 70% of India's BPO industry's revenue is from contact
centers, 20% from data entry work and the remaining 10% from information technology
related work Indian BPOs handle 56% of the world's business process outsourcing.

The top fifteen BPO companies in India

NASSCOM recently conducted a survey and evaluated the leading BPO service
providers across India. The top fifteen business process outsourcing companies in India
are:

WNS Group

Wipro Spectramind

Daksh e-Services

Convergys

HCL Technologiess

Zenta

First Source

MphasiS

EXL

Tracmail

GTL Ltd

vCustomer

HTMT

24/7 Customer

Sutherland Technologies.

Outsource your BPO work to India :

Get ahead of your competitors, cut down on operational costs and get access to the
services of skilled professionals, all by outsourcing non-core BPO work to India. Make a
decision to outsource to India today and watch your business grow exponentially.

BPO IN INDIA
BPO benefits i.e. benefits accrued as a result of outsourcing are numerous.
BPO or outsourcing is advantageous as it links to shareholder value. Business Process
Outsourcing is about optimizing business performance to attain value creation. There
has been a tremendous upsurge in BPO and outsourcing industry in many developing
countries like India because of their(BPO)expertise in reducing, costs ,while
increasing,service,quality.
Another great BPO benefit is that it helps companies to focus on core areas.
Companies generally outsource processes to reallocate accountability and control
costs. Thus the management is in a better position to focus on core areas, and not
keep itself engrossed in other areas. Outsourcing also helps companies to avoid
capital expenditures, which is in particular important in non-core areas that may need
new systems and up gradation. By and large, companies only want to spend money on
core
Reduction in costs is another BPO benefit. BPO provides quantifiable benefits
through improved efficiencies, lower overhead, reduced payroll and benefit expenses,
and fewer capital investments. Other BPO benefits include assurance of best
practices, skills, and technology. It is important to note that BPO provides access to
proprietary workflow systems, process reengineering skills, and innovative staffing
and delivery models, coupled with world-class technology delivered by experts.

Productivity Improvements
Cost Savings
Improved HR
Focus on Core Competency
BPO Advantages- At a Glance

Increase in Capabilities

1) Productivity Improvements : An important facet of business process outsourcing is

its ability to free corporate executives from some of their day-to-day process
management responsibilities. Conventionally, executives spend 80 percent of their time
in management of details and only 20 percent on formulating strategies. But the
scenario is remarkably different when the business process is outsourced. Once a
process is successfully outsourced, the ratio can be easily reversed. In such situations,
executives get more time. This saved time helps them tremendously to explore new
revenue areas, accelerate other projects and focus on their customers. This, beyond
doubt, leads to productivity improvements. Companies that outsource their business
processes are often able to capture new efficiencies and in the process improve upon
their productivity. They are in a better position to reallocate their resources to other
important projects. This also helps their employees to increase their efficiency and
productivity. In most cases, high-caliber subject-matter experts are brought in to design
and manage these processes. They bring with them increased productivity and years of
experience that most companies don't have access to or can't afford on their own.
Availability of highly qualified skill pool and faster adoption of well-defined business
processes leads to productivity improvements without compromising on quality.
2) Cost Savings : One of the most important benefits and advantages of outsourcing the
business processes is in terms of cost savings. The companies that outsource their work
have the access to the best of talent and expertise in the BPO field and that too at very
low wages. Various studies have indicated that for every one dollar invested in BPOs
across India, the value derived by the US economy is between $12-14. This is what
makes the outsourcing to India an irreversible process. It is a reality that the companies
which have shifted their BPO work to India have garnered savings of around 40-50%
till now. American BFSI (Banking & Financial Services Industry) companies have
saved more than $6 billion in the last four years by outsourcing their business to India.
It is a simple fact that if a bank shifts work of 1000 people from US to India it can save
about $18 million a year due to lower costs in India. Similarly, in the field of pharma
research and development, firms can reduce the cost of developing a new drug,
currently estimated at between $600 million and $900 million by as much as $200
million if development work is outsourced to India. In the US/UK 67-72% of costs
incurred by call centers are directly linked to man power costs whereas call centers in
India spend only 33-40% of costs on man power. This includes spending on training,
benefits and other incentives for labor.
3) Cost Savings : One of the most important benefits and advantages of outsourcing the
business processes is in terms of cost savings. The companies that outsource their work
have the access to the best of talent and expertise in the BPO field and that too at very
low wages. Various studies have indicated that for every one dollar invested in BPOs
across India, the value derived by the US economy is between $12-14. This is what
makes the outsourcing to India an irreversible process. It is a reality that the companies
which have shifted their BPO work to India have garnered savings of around 40-50%
till now. American BFSI (Banking & Financial Services Industry) companies have
saved more than $6 billion in the last four years by outsourcing their business to India.
It is a simple fact that if a bank shifts work of 1000 people from US to India it can save
about $18 million a year due to lower costs in India. Similarly, in the field of pharma

research and development, firms can reduce the cost of developing a new drug,
currently estimated at between $600 million and $900 million by as much as $200
million if development work is outsourced to India. In the US/UK 67-72% of costs
incurred by call centers are directly linked to man power costs whereas call centers in
India spend only 33-40% of costs on man power. This includes spending on training,
benefits and other incentives for labor.
4) Focus on Core Competency : Business Process Outsourcing gives tremendous help to
the companies to concentrate more on the core areas of their business. The most
important factor behind the growth in the BPO market world wide today is an increase
in the number of enterprises that are reviewing their internal operations in an attempt to
fully understand their true core competencies. In the process they are able to focus more
on their core competencies. Business Process Outsourcing gives more freedom to the
management to focus more time, energy, and resources on building the company's core
businesses. It is because the BPOs assume full responsibility for managing the day-today back-office operations. Once outsourcing of certain processes take place it becomes
easier for the company to compare and evaluate the efficiency and effectiveness of
services that are being delivered from outside and inside. This decision-making process
often includes an evaluation of the cost of owning technology - with its associated
support costs, that are not core to the enterprise (HR is one such example). This trend is
leading to an increased keenness to outsource processes that are considered non-core,
yet critical activities. These critical activities include claims administration, HR
services and payment services.
5) BPO Advantages- At a Glance :
Cost reductions- Cost reduction is done through process improvements, reengineering
and use of technologies that reduce and bring administrative and other costs under
control.
Concentration on core business- With the day-to-day back office operations taken care
of, the management is free to concentrate more on the core business of the company.
Outside expertise- Company is saved from the hassles of recruiting and training
personnel. BPOs ensure that experts from another company provide the needed guidance
and
skills.
Cater to changing customer demands- It is another great advantage of out sourcing the
business processes. Many BPOs provide the management with flexible and scalable
services to meet the customers' changing requirements, and to support company
acquisitions,consolidations,andjointventures.
Revenue increase- As stated above, by outsourcing non-core processes, companies can
concentrate on increasing their sales and market share, develop new products; spread out
into new markets and increase customer service and satisfactions.

6) Increase in Capabilities : Apart from other advantages, business process outsourcing

has another big advantage which leads to increase in capabilities of the employees and
the company. With this know-how increased capabilities can be seen. In addition to
doing things more efficiently, employees can expand their ability to deliver new
products and services to their customers. Then there are the factors of scalability and
scope. Companies that want to grow internationally must continuously invest in
infrastructure and find talent around the world and this is possible only trough business
process outsourcing. Many outsourcing providers are already established globally and
help in increasing the capabilities of the companies that are outsourcing their work to
these BPOs.

Future of BPO Industry In India

The future of BPO industry in India looks bright considering that over the last few
years, the understanding of people has improved greatly about the BPO industry and it is
no more considered a dead-end and no-so-respectable career option. Here are a few
reasons why the future of BPO industry in India is bright.
From Business Process Outsourcing (BPO) to Business Process management (BPM) :
There has been a paradigm shift in this regard. The respect for the industry has
also grown. According to this TOI report, Nasscom, the IT industry body, has be working
actively to change the name Business Process Outsourcing to Business Process
Management to signify the change that has happened over the years in the BPO industry.
The BPO industry in India has moved away from the low end call center work it started
with during the initial days and is now involving a whole new range of business
processes. But it will still take come time for clients to accept BPM as the new name for
this industry.
IT/BPO the Second Biggest Job Creator in India :
BPO is now the 2nd largest industry in India for Employment. During the second
quarter of 2013-14 IT/BPO industry provided 61,000 new jobs, second only to textile
industry. BPO industry has given a platform and opportunities to the talented youngsters
an opportunity beyond Engineering, Medical, and CA. A major chunk of students from
the humanities background, and miscellaneous education streams, have got a bright
prospect. Starting with a job to sustain personal expenses, they can convert it into a
professional career. The industry observes the fastest growth path for the people with
multiple domain expertise.
Growth of BPO in Tier 2 and Tier 3 Cities :
Since the manpower costs in Metros is exceeding profits, BPO companies are
now shifting their attention to smaller towns and sub-urban areas to attract costeffective but quality talent to service global clients. Five Splash is a pioneering company
in this regard.We are focusing to capitalize and derive out the gains from the sub-urban
BPO model, with a perfect blend of associates, managers, and leaders. We look forward
to providing the right opportunities and right set of services to our customers.This growth

of BPO companies in sub-urban areas is not only providing employment opportunities to

millions of unemployed youth, but also giving companies a competitive advantage to fuel
the next level of growth.
India Dominates Global BPO Industry :
India is a leading player in the BPO industry with 6 of the top global BPO cities located
in India. Bangalore still ranks the number 1 BPO city in the world. Considering that
majority of the Indian population is still young, India will continue to dominate global
BPO industry in the coming decades. Considering the above factors and trends, one can
be sure that the future of BPO industry in India is anything but bright. This industry is
currently witnessing a major shift in the nature of work and will evolve further.

WIPRO BPO
Winning by Applying Thought

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AND SURVEY