Managerial Organization - Project report: Progeon
Managerial Organization
PROJECT REPORT
PROGEON
Presented to
Asst. Prof. Sourav Mukherji
On
September 13th, 2004
By
Group No. 12
Peeyush Agarwal (Roll No. 0411112)
Abhinav Thakur (Roll No. 0411071)
Amit Gandhi (Roll No. 0411074)
Sunil Khaitan (Roll No. 0411126)
Sarguna Raja (Roll No. 0411119)
Mahesh S (Roll No. 0411106)
INDIAN INSTITUTE OF MANAGEMENT
BANGALORE
TABLE OF CONTENTS
INTRODUCTION 2
. SUPERORDINATE GOALS 2
2. STRATEGY 2
3. STRUCTURE 2
4. STAFF 2
5. SKILLS 2
6. STYLE 2
7. SYSTEMS 2
CONCLUSION 2
INTRODUCTION
Objective of the project
This project will consist of a thorough organizational study of Progeon, the BPO subsidiary of Infosys, on the lines of McKenzie's 7-S framework. The framework would be loosely adhered to and each of the S' will be analyzed along different dimensions.
Methodology adopted
Phase 1: The first phase of the project involved secondary research on the Indian BPO industry and Progeon in specific. It included information gathering on Progeon, its competitors, current market scenario and potential threats.
Phase 2: This phase involved a visit to Progeon to communicate first-hand with the various head of departments and the employees to get a "feel" of the organization and clarify doubts and issues that came up during phase 1. We also benefited from the structured tour of the facility and a one-hour presentation on Progeon, its goals, strategy and future prospects.
Business Process Outsourcing
Business process outsourcing is defined as the delegation of the ownership, administration and operation of a business process or processes to a third party or to an external service provider. A customer servicing BPO company is typically run with the help of many call centers.
Call center
It is a functional area within an organization or an outsourced, separate facility that exists solely to answer inbound or place outbound telephone calls. It usually refers to a sophisticated voice operations center that provides a full range of high-volume, inbound or outbound call-handling services, including customer support, operator services, directory assistance, multilingual customer support, credit services, card services, inbound and outbound telemarketing, interactive voice response and web-based services.
Types of BPO industry
The three options available to run a BPO centre are:
. Captive facilities
2. Third-party
3. Outsourcing joint ventures
The captive facility option provides the greatest savings and control. However, it is often the most difficult and takes the longest. In India, GE , Accenture and American Express have led in setting up captive facilities - in part because they already had significant presences in that country.
The third-party outsourcing option reduces the risk and time of setting up operations - but it also reduces cost savings. Daksh, Spectramind, Vcustomer, 24/7 Customer.com and Transworks are among the leading Indian call center outsourcers. Their global clients include Amazon, Yahoo, Dell, Avis, Ramada and several other players.
Joint venture is the third option. A recent innovative Joint Venture arrangement is Build, Operate and Transfer (BOT). Under this model, an Indian company helps set up the Indian operations that the Joint Venture partner has the option to eventually take over. This benefits both parties. It enables the foreign company to get its operations up and running quickly, while guaranteeing a takeover option. And it gives the Indian company the references and credibility to become an established player. BOT usage is expected to increase over time.
The right approach for a company depends on how quickly the offshore operation needs to be up and running, the degree of control required, the company's knowledge and experience in the offshore location, the financial implications and the availability of management resources.
Indian BPO Industry
The Indian BPO industry has evolved significantly over the past few years. For Instance the size of the Indian BPO industry has increased to Rs 71 billion (bn) in FY2002 from Rs 24 bn in FY2000. IN FY2003 the size of the Indian BPO industry has touched Rs 117 bn. The evolution growth of the BPO industry in India has been facilitated by the global economic meltdown. India is in the fourth phase of growth in the BPO sector.
First phase of Evolution:
In the first phase of evolution of the BPO industry in India lots of MNC's started their own captive units in the country. The primary functions that were carried out were customer support and transaction processing. Amex came to India in 1993, British Airways in 1996 and GE in 1998.
Second Phase of evolution:
In this phase, BPO units were set up in Indian by the MNC's, NRI's, Indian independents and Indian subsidiaries. Established software services have ventured into this business in 2002 by establishing subsidiaries.
Third Phase of Evolution:
The third phase was characterized by the increasing trends towards geographical dispersion of activities; M&As have also taken place within the industry in this phase.
Fourth Phase of Evolution:
N the current and the fourth phase there is an increasing trend towards Indian companies acquiring small to medium size businesses in overseas locations. These foreign acquisitions mark a contrast to the practice of foreign MNC's setting up BPO units in India to take advantage of the lower costs here. Also these acquisitions are probably in the nature of a market entry strategy.
Key Sub Segments of the Indian BPO industry
The main sub segments of the Indian BPO industry are:
. Customer care: This segment consists of mainly telephone based service centers or call centers performing specific customer centric activities like database marketing telemarketing, and web sales. According to industry estimates there were possibly over 300,000 call centers worldwide by the end of 2002. Employing around 18 million persons. In India there are around 250 call centers employing about 33800 people. The size of this segment in FY2003 was $700mn.
2. Finance: This segment covers all activities related to billing accounting transactions, tax consulting and compliance, risk management, financial reporting and financial analysis. In particular this service is utilized by industries like banking and airlines, which have to process voluminous data and draw conclusions from them. Typically service providers in this segment enter process and reconcile the data sent to them by the outsourcing firms. The size of this segment during FY2003 was $450 mn.
3. Human Resources: In this segment service provides undertake business process relating to administration, education and training , recruiting and staffing , payroll management , hiring and record management on behalf of their client firms. The size of this segment in India was $35 mn in FY2003.
4. Payment services: In this segment service provider undertake business functions including cheque and transaction processing besides offering services related to credit or debit cards. The size of the payment services segment in India was $ 190 mn in FY 2003.
5. Administration: This segment covers business functions like tax processing, claims processing, asset and document management, transcription and translation, in medical transcription for instance the service provider typically offers its services to hospitals, clinic, emergency departments and medical professionals. This segment was worth around $350 mn in FY 2003.
6. Content development: This segment covers services including engineering, design, animation, network consultancy and management and biotechnological research. For instance digital content developers manage website of firms, besides producing content for Internet-enabled television. Typically the functions of service providers in this segment include defining a set of rules and norms for collection of data, collating data from various sources sorting, indexing, shifting, and compiling data and finally converting data into the digital formal and disseminating the same to various users. The size of this segment was about $650 mn in FY 2003.
. SUPERORDINATE GOALS
Superordinate Goals are the long-term vision of the organization. These are the values, ethics and principles that shape the destiny of an organization. They are the broad notions of future direction that the top management team wants to infuse throughout the organization. The basic characteristics or shall we say attributes of Infosys are very clearly visible as far as the long-term vision of Progeon is concerned. Progeon has adopted the famous C Life principles that are the very core values upon which Infosys works.
The C Life model is presented as below:
HOW SUCCESSFUL HAS BEEN THE ORGANIZATION IN WALKING THE TALK?
Customer delight
Progeon has been working on the philosophy of customer being the first and foremost.
The kind of reviews that Progeon has been having clearly point to the fact that the organization commands immense respect in the eyes of the customer.
The integrated business model that Progeon has been following ensures that the customer does not have to get into a contract with a different organization even if the task is remotely connected to the task that has been assigned to Progeon.]
Leadership through example
It is important that the leader of a household, firm or an industry performs and leads from the front. Progeon as an organization has created a niche for itself by defining the rules of the game and creating a new sector for itself within the BPO industry called the BPM i.e. business process management.
Progeon has also been the first organization in the industry to reduce its voice-based services in its quest to move up the value chain. As an organization Progeon has been at the front of this movement to transform itself from an organization performing lower level back office jobs to one having considerable expertise in all levels of jobs at all the strata of an organization.
Integrity and Transparency
Accountability, transparency, integrity and fairness are not just about hollow rhetoric at Progeon. It is only because of the rigidly imposed code of conduct that Progeon today has competitors from the same industry outsourcing work to Progeon. This has only been made possible because of the ability of Progeon to convince its clients as to complete data secrecy and non-disclosure at all costs.
Progeon having two mortgage banks from the same country is the case in point. Two organizations, which are by nature of their work completely "manic" about the safety of their data, have assigned to Progeon projects of considerable size.
Fairness
The attrition rate in an industry like BPO is just phenomenal. According to the latest data released by NASSCOM it is around 60% of the total employees employed in the core functions. In such a scenario it becomes increasingly important that an organization has an employee retention policy. It is an achievement for the top brass of the organization that the attrition rate in the organization is as low as 35%.
The remuneration, perquisites and the complete ambience of the workplace has been made such that the employee develops an affinity towards the organization.
Pursuit of excellence.
At the end of the day the customer can only be satisfied by the quality of work that is performed by the organization. In this regard it must be mentioned that the quality of work provided by Progeon is second to none. It has also been awarded the CMM level 5 certification as a vindication of the company's superior performance.
One other philosophy that the basic business model of ...
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The remuneration, perquisites and the complete ambience of the workplace has been made such that the employee develops an affinity towards the organization.
Pursuit of excellence.
At the end of the day the customer can only be satisfied by the quality of work that is performed by the organization. In this regard it must be mentioned that the quality of work provided by Progeon is second to none. It has also been awarded the CMM level 5 certification as a vindication of the company's superior performance.
One other philosophy that the basic business model of Progeon adheres to is PSPD Model (predictability, sustainability, profitability and de-risking).
Note that the company does not believe in springing surprises i.e. not the unpleasant ones at least. They say that the most important thing in the business is predictability as this lets the management plan ahead. They want to convince the client that if some processes have been outsourced to Progeon the task would be completed without any unpleasant surprises.
As far as sustainability is concerned the business model that Progeon follows, has been built keeping sustainability in mind.
They say it upfront that the advantages that we as a country have are neither invincible nor inimitable and thus there is always a possibility that someone with an even lower cost structure and better quality can take our business away.
Therefore Progeon believes in going higher up the value chain and providing services that are not exactly back-end jobs that merely yield cost advantages. An important component of whatever Progeon does is Value Addition. However the bottom line remains Cost arbitrage, as this is the reason why the client outsource and Progeon believes in adding that extra bit to their client's bottom line.
The high standards that Infosys sets for itself are also pretty evident in the way Progeon works. Accountability, transparency and fairness are not just rhetoric but a way of life as far as Progeon is concerned.
It is important that superordinate goals are concise and succinct so that the management, employees and the stakeholders, readily understand them.
And in this respect Progeon performs a tremendous job as the superordinate goals are not abstract or on a different plane altogether. They are neither very esoteric to comprehend nor are they arcane to implement.
2. STRATEGY
Strategy means an integration of all those actions that a company plans in response to or in anticipation of changes in its external environment-its customers, stakeholders and competitors.
As the company's chosen route to competitive success, strategy is obviously a central concern in many business situations-especially in a highly competitive industry like business process outsourcing.
It has increasingly been recognized by the organizations that the competitive advantages that we as a country have today are not invincible or inimitable. The best way out for the organizations is to go up the value chain and in this regard it must be said that Progeon has been the pioneer because with a voice ratio of 20% (where the industry ratio is 63%) it is steadily moving up the value chain.
Also Progeon has been building up on the customer base that Infosys already has and as such a large part of the client base is common to both the parent and the progeny.
It leverages cost competitive development centers in different parts of the world to provide high quality business process related solutions on time and within budget.
The organization focuses on providing services tailor made to customer's needs.
Progeon works closely with clients to recognize the areas in where the scope for devolving the tasks into smaller components exists, and then builds upon its highly diversified services portfolio to undertake the performance of the smaller tasks recognized.
It must be mentioned herein that Progeon plays considerably on the resources of its parent Infosys and by resources we mean both intellectual and physical resources and thus it owes a great deal of its success to its parent. Some of the clear advantages offered by the organization to its clients include
* Reduced cycle time across processes leading to reduce time to market and faster issue resolution.
* Reduced operating costs leading to a growth in the bottom line of the client by as much as 30-35%.
* Development of a knowledge management for the outsourced activity
* Improved quality, reduced turnaround time and greater speed in processing operations.
Given below are some of the important methods followed by Progeon practically for mitigation of various risks that appear before an outsourcing company.
Risks
Mitigation Strategy
Disruption of product development plans
Move less critical processes offshore first- such as testing. Move more work offshore as the teams over time.
Costs of launching operation spiral out of control
Hire a trusted and competent person familiar with local issues and with a strong local network to manage the launch and operation of the offshore center.
Regulatory and legal issues of launching offshore operation
The licenses and red tape of launching an offshore development center are very standard. However, it is best to use experienced legal counsel.
Cultural clashes between US and offshore teams
There must be frequent communication between the two offices and a clear understanding of corporate agendas by both sides.
The strategy followed by Progeon is different from that of its competitors as a detailed value analysis goes into acceptance or a rejection of an offer. The management takes into account the validity, viability and the position of the task on the value chain before deciding on the future course of action.
CORPORATE STARTEGY AT PROGEON
The transition from Business Process Outsourcing to Business Process Management and from the back end jobs to front end jobs is a tough one but the reason for success of Progeon is that the organization was not conceptualized or designed for BPO and in the coming days we may expect greater things from this company.
3. STRUCTURE
The organizational chart reveals that the structure at Progeon is actually a mix of various structures and is predominantly a functional one at the top level where the organization is divided along lines of specialization and employees performing similar tasks such as Sales, Finance, HR and Product Development are assigned to separate departments. This structure fits the organization as the product delivered is largely a commodity currently. This structure enables Progeon to attain economies of scale within departments, promotes efficiency as employees are encouraged to develop specific skill set. However as Progeon grows, interdepartmental interaction might become cumbersome, develop bureaucratic features and resistant to changes. Many of these deficiencies might be overcome by having comprehensive information systems encompassing all facets of the working of Progeon, have temporary task forces and permanent teams which shall comprise members from various functional departments of Progeon.
On deeper analysis, the structure is found to have nested sub functional structures. These sub structures focus primarily on addressing the needs of various services and also to focus on various markets that Progeon participates in. For example, Product Management is divided into various product based divisions: Banking, F&A, Securities and Insurance. Similarly Operations is divided into Financial Services, Telecom, F&A, Insurance and Healthcare etc. It is interesting to note that Market based groupings are in place. For example, Operations consist of a Czech Center and Sales consists of US and Europe divisions. Similarly Transition has region wise divisions. These sub structures provides solid foundation to the functional structure at the top by achieving coordination between various departments for a particular product and while servicing various markets. This sub structure also enables decentralized decision making and coordination will be easy when Progeon grows in size and diversifies its product portfolio and attends to more markets. The inherent weakness of this type of structure is redundancy of functional departments and weak coordination between product groups which is taken care by the predominantly functional structure at the top. Middle Managers belonging to various sub divisions should be given exposure to the other areas within the same functional specialization or if possible within various departments to ensure common goals to be dominant over functional goals.
This structure lies in between Functional Structure and a Divisional Structure resembling more the former. As Progeon matures, it shall have a large number of products offering and a number of markets to cater to. With the rapidly changing environment in the BPO sector, there shall be a pressing need for innovation driven by in depth specialization calling for high degree of coordination and information pressing across various Progeon units. This reflects in Progeon's strategic intent that says "Our focus is on strategic segments and strategic customers." This shall demand more than the current dominating functional expertise and both shall be of paramount importance for further growth. Gradually the structure of Progeon should be to incorporate the desirable feature of both the structures should be implemented simultaneously where the Product Managers shall have an equal authority as the Functional Managers and the employees report to both of them. This shall bring into place a very strong form of integration mechanism within the company when it attains a large size. Also, integrating shall remove redundancies of workforce as well as infrastructure and enable Progeon to maintain price competitiveness that is one of the critical requirements of Business Process outsourcing Providers. Implementation is this structure shall work best if Progeon retains its informal work culture in order to enable dual reporting and informal problem resolving systems instead of decisions making powers being vested in hierarchical positions. Hence, Progeon should consider changing into a Matrix Structure when
. As Progeon grows in size and products, pressure begins to build to share scant resources of executives and managers across various products from the portfolio of Progeon keeping in mind that having separate people and resources performing similar work for each of the product will be cost intensive.
2. Progeon operates in a knowledge intensive environment. This in depth technical know-how needs to be incorporated into various products. When the imbalance of power skews towards the technical side, by extrapolating the current scenario, Progeon should change its structure so that to maintain a balance of power between the functional and the product management groups.
3. The environment surrounding Progeon is very complex where Progeon has to deal with a number of elements i.e. Customer Preferences, Locations, Technology which are rapidly changing. When this starts calling for frequent changes and high interdependence between departments requiring a large amount of information processing in both vertical and horizontal directions, a matrix structure would be suitable.
The impact of various Factors on Progeon's Structure
Various factors, outside and inside Progeon as an organization, affect it and we shall discuss the aspects of the same to which Progeon must respond to in order to meet its goals and obligations. We shall define Progeon's Organizational Environment (POE) as all the elements outside the boundary of Progeon that have the potential to affect all or some part of Progeon. Progeon plays in a Task Environment which comprises of elements which have a direct impact on the organization's ability to achieve its goals. This includes its parent company, Infosys, the BPO market, the other players in the BPO segment, the human resources market and technology. Progeon also has to deal with a General Environment which doesn't have an impact on its daily operations nevertheless has an indirect impact on it. This includes Government Policies, Labor Laws, Culture of the workforce, General Economics Conditions. Financial Resources and Technological Innovations. Since Progeon works in the International arena, the Policies of the Foreign Countries,, its culture, and trade policies also affect Progeon indirectly.
These facets of the environment bring in an inherent complexity in the structure of Progeon which shall be managed to be effective. There is an inherent difficulty in decision making due to lack of information about the lot many sectors affecting it and due to the rapidly changing nature of these forces.
We shall discuss some of these factors under various categories.
External Environment
. Complexity of the Environment: Progeon has a complex environment to deal with, as compared to simple environment faced by pure voice handling services. It has to incorporate a large number of technology to perform competitively and due to the large workforce, which is rapidly increasing, and its international operation, has to deal with many kind of cultures.
2. Stability of the Environment: Elements with which Progeon deal with are dynamic in nature that tend to shift abruptly. That is the case with most of the technology driven organizations, more accentuated for Progeon as it is a relatively new organization, the only cases of stable environment being Government Monopolies. The demand of the customers for Progeon is difficult to predict, the technology changes rapidly and there is the inherent instability associated with international operations. The cut throat competition in the BPO arena, esp. with the emergence of South East Asia and China as lucrative alternative destination. Progeon performs in a very dynamic arena.
These factors have a marked impact on the structure of Progeon. Progeon operates in a high uncertainty area. This calls for an Organic Structure that is loose, free flowing and adaptive to changes with less rules and regulations as compared to a Manufacturing firm which generally operates in a complex but stable domain. This uncertainty calls for teamwork and lesser hierarchy as compared to industry. Communication in Progeon should be horizontal and control of tasks should be spread across the organization to deal with rapid changes. The large number of external factors calls for many departments which in turn increases the complexity in Progeon. Also this calls for Progeon to have defined and effective boundary spanning roles wherein changes in the BPO industry is communicated to the decision makers and also to broadcast information about Progeon to the environment which portrays Progeon in favorable light to external agencies. In addition to these, Progeon has to make sure that it minimizes its resource dependence on the environment to the extent possible, esp. for the vital resources such as Technology and Human Resources. This shall enable Progeon to be an autonomous organization.
Interorganizational Relationship
Progeon is an entity that interacts with many organizations that include its parent company - Infosys, the society, the Government, Other BPO companies and so forth. Each of the organizations with which Progeon interacts with thrives on autonomy and competes for supremacy over each other. This situation can be compared with an Eco System with a large number of living organisms struggling for survival and largely dependant on each other for survival. This in turn causes resource dependence which shall be dealt with effectively in order to thrive. Progeon has to compete with a large number of companies in the BPO sector. These companies are involved in a similar set of activities as Progeon and Progeon should differentiate itself in order to attract the resources of the environment such as finances and human capital. Progeon, being a new company, shall bring in variation in the kind of work it does, its work culture and its strategy to differentiate itself from other players in the area. This shall make the society view Progeon favorably and hence it will keep on attracting best talent and financial resources. This shall help Progeon gain societal legitimacy, a critical ingredient for success and gradually Progeon shall become an integral part of the society and shall be an autonomous, self sustainable unit. However this shall cause certain changes in the structure of Progeon. It shall have to incorporate some of the societal rules and regulation and start appearing like other BPO outfits which it could not afford to do during the initial stages. One reason for this is that as Progeon grows, it shall incorporate new managers from various other BPO outfits that shall bring in their different cultures and the structure of Progeon shall tend to a common melting pot culture with ingredients from various professional organizations. This is a common phenomenon in all companies which grow large.
Effect of Technology on the Structure
The deliverable of Progeon is Service as contrasted with a tangible product, such as an automobile. This is abstract and often consists of the transfer of knowledge in performing the services as required by the client. The interaction with the customer is sustained and lasts through a period of time till Progeon has a contract with the Outsourcing firm. The quality of the services provided by Progeon is perceived by the customer and is difficult to measure in absolute terms, such as mileage for automobiles. This also calls for a rapid response to the needs of the customers. These factors effect the organizational structure of Progeon. The importance of an interface with the customer cannot be overstated. Progeon has well developed boundary roles to interact with the customer. This also calls for Progeon to be divided into small firms in abstraction handling different products and separate customer groups. For further analysis Progeon's departments have been aggregated into two categories, variety and analyzability. Variety refers to frequency of unexpected events occurring during day to day functioning of the particular department. Analyzability refers to the mechanical steps taken in order to perform a task. Refer Exhibit.
Analyzability
Low
Craft
Non Routine
Operations & Transition
Business Transformation
High
Routine
Engineering
Sales
HR
Finance
Product Management
Low
High
Variety
This chart can be used to design various parameters of various departments. Craft and Engineering fall in between routine and non routine specifications. Routine technological work is associated with a mechanistic structure having rigid rules and rigid management structure. On the other hand, due to its inherent deliverables and inputs, the Non Routine departments have an organic structure with free flowing structure and informal hierarchy with little rules and procedures. We shall deal with the impact of the above parameters in detail:
. Formalization: The departments in Progeon classified as routine should have standardization and division of work in a defined manner for efficiency. For non routine jobs, it should be less standardized and there should be a large scope for discretion.
2. Centralization: In routine departments, the decision making should be vested in the top hierarchy for efficiency. While in the non routine departments, since individual skills become the driving force for the department, decisions should be taken largely collectively and by consensus.
3. Span of Control: The current hierarchy rungs between the CEO and the associates for Progeon are six. Span refers to the number of employees at the bottom rung of the hierarchy that report to managers above them. The span should be large for routine tasks while should be less for departments such as Business Transformation.
4. Communication: In the routine departments, communication should be formal, vertical and written whereas in the non routine departments, there should be horizontal informal communication and meetings.
The structure of Progeon reveals pooled interdependence where the tasks does not flow between various departments but every department works towards the common good of the organization. For example, transition and sales are separate units, though both work towards the realization of the goals of Progeon. This is typical of most of the BPO organizations.
Effect of Size on Progeon's Structure
Progeon with strength of 2269 employees and revenue of $7162000 can be considered to be a mid sized organization by BPO standards. This segment has the potential of reaching very high in terms of number of employees. Progeon itself projects its employee count to touch 10000 by the year 2007. Progeon being a part of BPO industry and a subsidiary of Infosys that has 27000 employees has the pressures to grow rapidly as witnessed lately. This growth in size affects the structure to a significant degree. Progeon is currently in between Collectivity stage and Formalization stage. In the Collective stage there is strong leadership and clear goals and directions. This stage is exemplified with Progeon with a fixed set of products on offer and innovation and decision making concentrated largely in the upper rungs of hierarchy, the goal of this stage being growth which Progeon has demonstrated lately. In Formalization stage there is an installation of rules and control systems with a formal communication being setup. In this stage, strategy and incentive systems are given much attention to. The goals of this stage are market expansion and internal stability. Soon Progeon will enter the Formalization stage and increase its product offerings. During this transition, Progeon should pay attention to the fact that delegation is put properly in place and red tape is cut to a minimum. The next stage in the evolution of Progeon is when it enters the Elaboration stage wherein the requirement shall be of team based work, diversification of product portfolio and its goals shall be to become a reputed complete autonomous organization. However Progeon should take care to reduce bureaucracy to the extent possible.
4. STAFF
Progeon's staff characteristics are typical of the BPO industry, where employees are required to work in three shifts, with the shifts typically being rotated once every month or two.
The shift rotation raises two major issues:
? The stress resulting from shift in body clock cycle
? The lack of external socialization
The first issue is generally prevalent only for the first few days of the new shift - subsequently, the body adjusts itself to the new cycle. However, the long term effects of (relatively) frequent clock cycle shifts are not measurable.
The second issue is a more deep-seated one. The odd hours of work ensure that external socialization is almost absent. In addition, intangibles like working during evenings and late nights, when everyone else is taking time off add to the stress.
The incidences of short-term relationships, generally ending with shift changes, are on the rise. While this is indicative of Indian society as a whole, the confined environment and the absence of any external interaction on a sustained basis makes BPO industry the "pressure point" i.e., the place where these changes first show up and intensify, before spreading to the whole of the society.
This could be the primary reason for the high attrition rate in BPOs. The workforce changing career plans is a more prominent factor than poaching by competitors. The companies have now realized that their 24-years-and-less talent pool is changing careers due to lack of fair idea of the sector's potential. Consequently, BPOs are now ensuring that their employees can have proper career guidance. Measures like faster promotions and earn-and-learn schemes are being taken to ensure that the attrition rate is kept low. Progeon has recently created a career planning committee to guide young employees on future prospects.
However, poaching by competitors isn't an inconsequential problem. This is where the HR department's real test lies. A Draconian HR policy would lead to high attrition. A very loose policy would result in lower employee efficiency. It is a very fine balancing act. To counter attrition, Progeon offers relatively high remuneration. However, a lot of their prospective employees view the job as a temporary step to make some quick money and then move on to "better" jobs. This is especially true when one looks at the hiring rates and on-campus recruitments. The number of employees being hired is increasing very fast, but the quality of employees is not the best available. BPO is seen as a low-end job, and Progeon is engaged in a constant struggle against perceptions.
In spite of the varying quality of input, the output is maintained at a constant acceptable level through very robust systems of formal training and constant evaluation. Thus, the input quality is not a huge issue in Progeon. However, as it begins to ramp up its operations and pitch for high-end jobs, it might have to re-look its hiring policies.
An innovative recruitment program which Progeon initiated in June 2003 is to catch youth in an informal atmosphere and conduct interviews for interested candidates. Coasters with the slogan 'Interview over coffee' are distributed with beverages, asking customers if they are Progeon material. Those interested are invited to refer to the back page of Cafe Beat, the Coffee Day magazine, where a fun questionnaire awaits completion. Applicants must fill in the questionnaire and dispatch it along with their resume to be considered for an interview over coffee.
This strategy was followed to increase their visibility among the right segment of the population, because Progeon is a relatively young company. It seems to have paid off to some extent, with successful recruitments occurring from Coffee Day outlets.
5. SKILLS
Progeon calls its service business process management rather than outsourcing, because the differentiating factor is that it offers end-to-end process management, rather than just a call-centre base or a small element of a project. The company ensures that the client views the operations here as an extension of its own company, rather than the perception of outsourcing.
This has two implications:
* The type of client whom Progeon is looking for is one who is interested in a long-term relationship, generally involving knowledge-intensive work.
* There is very little commoditization i.e., the services are not standard commodities and thus, can't be "traded" in the marketplace. The asset specificity is much higher, leading to higher switching costs.
One prominent perception which dogs the Indian BPO industry is that the data and IP are not safe once transferred here. Understandably, clients are jittery about sending sensitive data like credit histories. Progeon has successfully negotiated this problem, as evidenced by the Green Point account that it obtained. Essentially, it established a separate facility for that account, with restricted access. The computer network used was not connected to the rest of Progeon and Infosys. Additionally, the employees were educated about IP, after signing NDAs and submitting to background checks. A strict shredding policy ensured no paper left the building.
Another factor by which Progeon gets a boost in brand value is the Infosys tag which is associated with it. Generally, companies looking for IT+BPO services find it convenient to adopt an integrated approach. The value of the Infosys tag lessens the amount of uncertainty clients have about outsourcing, particularly end-to-end.
Progeon is currently trying to climb the so-called value chain by offering services which require more domain knowledge. The kind of work is classified into three levels: rule-based work, judgment level work and research and analysis. The value, and thus the asset specificity, increases correspondingly.
6. STYLE
Style of any organization refers to the cultural style of the organization and how key managers behave in achieving the organization's goals.
A manager can affect the performance, satisfaction, and motivation of a group by offering rewards for achieving performance goals, taking clarifying paths towards these goals, removing obstacles to performance. However, whether leadership behavior can do so effectively also depends on situational factors.
Four different types of leadership styles depending on the situation can be identified.
Directive Leadership: The leader gives specific guidance of performance to subordinates.
Supportive Leadership: The leader is friendly and shows concern for the subordinates.
Participative Leadership: The leader consults with subordinates and considers their decisions.
Achievement-oriented Leadership: The leader sets high goals and expects subordinates to have high-level performance.
The Situational Factors identified are:
I) Subordinates' Personality:
A) Locus of Control (A participative leader is suitable for subordinates with internal locus of control; A directive leader is suitable for subordinates with external locus of control).
B) Self-perceived ability (Subordinates who perceive themselves as having high ability do not like directive leadership).
A manager should supervise his employees generally, not closely, has to specify objectives and communicate them but then allow subordinates considerable freedom in accomplishing the tasks.
(Autocratic to Democratic)
BOSS CENTERED LEADERSHIP
CONTINUUM
SUBORDINATE CENTERED LEADERSHIP
Use of authority by manager <----------------------> Freedom for subordinates
Manager makes decision and announces it
Manager "sells" decision
Manager presents ideas and invites questions
Manager presents tentative decision subject to change
Manager presents problem, get suggestions, makes decision
manager defines limits; asks group to make decision
Manager permits subordinate to function within limits defined by superior
TELL
SELL
CONSULT
SHARE
Progeon is all about partnership delivered through teamwork and passion. Progeon is proud of its heritage. Its parent company Infosys is globally recognized for its values and employee orientation. Progeon follows the Infosys C-LIFE principle.
Supportive or directive leadership does not fit into Progeon because
When working on a task that has a high structure, directive leadership is redundant and less effective.
When a highly formal authority system is in place, directive leadership can again reduce workers' satisfaction.
When subordinates are in a team environment that offers great social support, the supportive leadership style becomes less necessary.
So considering the above factors, Progeon could follow an achievement-oriented leadership where the manager sets high goals and expects subordinates to have high-level performance. This will lead do a democratic style of management as the manager has to delegate more authority to his subordinates.
Democratic style of management also ensures flexibility and dynamism in response to changing environmental needs.
7. SYSTEMS
Systems refer to the processes used to manage the organization. Being in the Information Technology Enabled Services (ITES) domain, internal and external systems are largely based on software. These systems provide a common network for information gathering and sharing across all parts of the organization, especially the operating core, technostructure and the support staff and a set of rules, procedures and processes that help in the regular functioning of the organization. These systems include the following:
. Performance Management and Remuneration System
2. Employee Feedback System
3. Financial System
4. Resource Allocation System / Capacity Management - write abt staff movement
5. Quality and Process Control System
6. Customer Satisfaction Monitoring System
7. Training System
8. Information Technology System
9. Knowledge Management System
0. Operations
1. Support System
. Performance Management and Remuneration System
For the voice operations, a feedback survey given to users in US ranks the people on their technical and people skills which have a bearing on their remuneration. The grade of the return is set with people's salaries having base component and an incentive scheme. Regular rewards, incentives and recognition depend on meeting the SLA and the internal efficiency metrics such as productivity. The employees are evaluated based on the following quality parameters
* Introduction
* Communication skills
* Problem Solving
* Resolution of the problem
* Closing of the call
* Customer satisfaction
Calls are audited in random fashion and the above-mentioned quality parameters are evaluated for each of the calls audited. Also the first call resolution (FCR) is an indicator of whether the same problem is solved within the first attempt and no recalls have to be made again on them in 72 hours.
In general, performance and potential of moving into a new role are the criteria for promotion with customer satisfaction being the mandatory parameter being evaluated in the performance management system.
2. Employee Feedback System
The employee feedback is taken formally through the Employee Satisfaction Survey process. The informal methods for suggesting changes/improvements include:
* Communiqué sessions with top management
* SKIP level meetings with one-level up manager(s)
* Dipstick surveys on internal customer satisfaction
* Dinner with the CEO
3. Financial System
Progeon has an online payroll system which has been integrated into the internal website. Employees can view and take copies of their salary slips after entering their employee identification numbers and the relevant month. Various other important documents like the income tax form, the income tax refund form, investment declaration form et al are also available on the intranet. The finance department deals with the short term as well as long term financial transactions of the organization.
4. Resource Allocation System / Capacity Management
Capacity managers are the schedulers who work with skill sets and available work hours of the employees as inventory and make schedules to maximize the capacity utilization for each skill level. They also allocate people to projects not only on basis of their timelines and skills but also recommendations of their superiors.
For the voice operations, service providers are given an estimate of the calls that would be routed to them on a periodic basis. The forecasting is done on a historic basis. The same situation is compared to the previous year's scenario. This information could be provided on a monthly or a on a quarterly or on a weekly or on a fortnightly basis. The service providers then staff their centers based on the demand forecasting. Usually they keep a safety stock of about 10 percent in order to catch up for spikes in the demand
and absenteeism.
To keep the attrition rate low, the following factors are taken care of:
* Hiring the right people (the "Progeon" way)
* Role clarity
* Career development initiatives
* Competitive compensation and benefits
* Value based practices
5. Quality and Process Control System (more details awaited)
Progeon has a several member strong quality department. It has been reiterated that Progeon considers "Quality" as a hygiene factor. Every process has processes to ensure this.
6. Customer Satisfaction Monitoring System (more details awaited)
Customer satisfaction is measured by each client account through the C-SAT survey. Dipstick surveys are also carried to gauge customer satisfaction for use in the performance management system.
7. Training System
The smooth functioning of the company is possible only through a comprehensive training and retraining system in place for new recruits and old employees. The measures of doing that range from training programs on induction , upgraded courses on a continual basis ,lunch-n-learn systems and click and learn systems through an elaborate IT system in place for the same. The training focuses on both hard and soft skills with the first year having 400-600hours of training. Progeon has training facilities in Bangalore to impart training about 220 personnel. It follows a "train the trainer" approach, where Progeon personnel would visit the client, understand the processes and then impart training to off-shore personnel. Domain experts are also involved to utilize their industry experience to add to the training process.
The training program has a strong orientation towards cultural training with special emphasis on addressing nuances of various geographical regions. The training provided is highly interactive (for example, the FTE's are imparted hands on training through live interactions with client representatives).
8. Information Technology System
Progeon boasts of an extensive information technology system, software as well as hardware, largely due to pre-existing systems in Infosys.
* Fully secured and networked capacity of 1,000 seats spread over 100,000 sq. ft.
* Independent bays for each client, with 24x7 security.
* 200% power back-up and redundant data and telecommunications links.
* Option to utilize Infosys' offices within Bangalore and facilities in seven other Indian cities, if required. All facilities are interconnected and can be used by Progeon as required.
* A dedicated Technology Infrastructure Group (TIG) manages the technology infrastructure requirements for Progeon and its clients. For complex requirements, a full-time resource is provided initially to ensure client satisfaction.
* The Technology and e-Solution Group (TeSG) is responsible for internal systems, engagement-specific application development, information security and knowledge management.
* Progeon is also in the process of establishing a center in Eastern Europe to provide clients with access to cost-effective talent pools in geographies that meet their requirements and risk preferences.
9. Knowledge Management System
Progeon's transition toolkit PROTON has a section dedicated to addressing all issues pertaining to knowledge transfer. It follows a structured approach, which ensures that knowledge is captured correctly to the last level of detail and in a manner suitable for effective dissemination. This is bolstered by their domain competency, attention to documentation and development of training content in collaboration with the client.
There is significant amount of interaction and knowledge sharing between teams. This is normally done by cross training process executives/ agents on multiple processes of the same client, and maintaining a knowledge management database to share best practices. Progeon also has Knowledge Management experts who use formal mechanisms to capture knowledge learnt by the team and are responsible for training as a function of knowledge dissemination.
0. Operations
Progeon follows a Global Delivery Mode, pioneered by Infosys. It leverages cost-competitive development centers in different parts of the world to provide business process related services on time economically. The model has the following stages: break an activity into logical tasks and determine the best location to execute them and convert clients' fixed costs to variable costs.
The trend has been that most companies have started with voice - and now are attempting to move into "transaction processing". With Progeon already doing the latter, it is moving towards Knowledge services. Progeon has decided to cap its voice based business to less than 30%. It currently remains at less than 20%.
Progeon believes that the customer thought process follows a certain sequence and hence, tries to manage the apprehensions and risks associated with Business Risk Management teams in various functional areas.
Progeon believes that clients are looking for value addition to the usual advantage of cost arbitrage. Thus, it provides skill and technology arbitrage as well. Progeon also vies to increase productivity continuously through process re-engineering (through domain expertise) and technology enhancement (through Infosys' strong skills). Progeon believes that by working on end-to-end processes, it will be able to come up with insights to the client's system and recommend alternatives or improvements. The Progeon value curve can be understood with the following diagram.
Progeon follows the following operational approach to outsourcing to assess, analyze and arrive at the optimal outsourcing solution.
In order to facilitate senior management commitment the following approach is adopted:
* Formally initiation of the Change Management Program with help from specialists (both within Infosys as well as employing and external agency) before moving processes offshore
* Establishment of a clear governance model around the outsourcing initiative
* Building credibility through developing an understanding of clients' businesses and then proposing a solution which addresses all key concerns
1. Support System
A department called Facilities and Administration looks after food, transport, work facilities (hygiene, environment etc), telephones, first aid, stationary etc. All activities that help support processes to ensure their people work in commendable conditions.
Leave management, attendance and appraisals are automated and are communicated and supported through campaigns, help desks and through direct touch of HR with business (business HR function caters directly to each business vertical/client account)
These systems have aided in the effective implementation of formal policies by cutting across functional domains and providing a common network. These have also resulted in increased centralization as monitoring is now facilitated by state of the art information systems. This will be extremely beneficial to Progeon when it decides to expand to the next level.
CONCLUSION
Right through the analysis, one aspect of Progeon which keeps reappearing is its dependence on Infosys - right from its policies and systems to its goals. This works both ways for Progeon. At present, it is a minnow compared to other BPO companies. However, with Infosys' contacts and support, it is experiencing tremendous amounts of growth.
In addition, its unique business model ensures that there is sufficient differentiation to counter any commoditization which might be present in the market. The organization has set the right goals for itself - it has skipped cost arbitrage and positioned itself in the less-commoditized technology and process management segment. The aim is to eventually graduate into an organization capable of technology and process development, a role which would include research and analysis. It is at this point that Progeon would consider itself truly differentiated.
However, this path has its associated set of challenges. Progeon, and the Indian BPO industry as a whole, is engaged in a constant fight against perceptions. If Progeon proposes to move up the value chain, it will have to improve the quality of its operating core input. However, the target segment views BPO only as a temporary step, not as a career. Also, it is perceived to be a "lower" job than, say, a software job. Consequently, there will have to be a change in pay structure, in addition to other measures taken.
The other, more deep-seated, challenge that Progeon faces is the perception of India as an "unsafe" destination. IP issues and the sensitivity of information transmitted make this a very important issue to address.
It is very difficult to change perceptions and biases. However, these will have to be overcome if Progeon plans to continue along its laid-out expansion path.
OBH104 - Project Report: PROGEON
Indian Institute of Management, Bangalore Page 2
