Bernardo M. Villegas
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How to Reduce Attrition Rates

           In a recent trip I made to Shanghai, I learned first hand about the horrendous rates of attrition among workers in Chinese factories.  I already had an inkling of this threat to manufacturing enterprises in China from a friend of mine who is a CEO of a large factory manufacturing computer parts in Sta. Rosa, Laguna.  He told me more than a year ago that his firm, whose ownership was transferred from Japanese to US investors, decided to close down their operations in Shenzhen, China because they were suffering from 30 percent   attrition rate monthly in normal times and 50 percent during Chinese New Year.  This prompted them to move their factory to Sta. Rosa, Laguna, where attrition is only 5 percent.  This is one of the reasons why there is a noticeable increase in the number of Japanese firms relocating their operations from China to the Philippines.  In fact, Director General Lilia de Lima of the Philippine Economic Zone Authority (PEZA) is encouraging PEZA-registered industrial zones to significantly expand their capacity.  We will see a veritable renaissance of manufacturing in the Philippines in the coming years.

          When some expat managers in Shanghai told me about the high attrition rates, I decided to accept the invitation of a colleague of mine to travel to Suzhou, China known as the Venice of the Orient because of its very scenic canals.  There I was introduced to the manager of a social enterprise called MicroBenefits whose mission is to help factories to reduce the attrition rates by providing more humane and engaging working environments for the workers.   The social entrepreneur explained to us in greater detail the problem of attrition by citing the case of a certain factory producing electronic components for a U.S. multinational company.  The following explains the extreme situation faced by the factory manager whose name was Furong:  “Pressure was mounting on Furong because he had lost nearly 10% of his workforce over the past week and was averaging an employee churn rate of about 15% per month.  Each time he lost workers, the factory’s productivity dropped.  With so much turnover, he didn’t have time to think about productivity problems.  He barely even had time to focus on his output.  The bulk of his resources went into recruiting and training replacements for the workers who were constantly leaving.  There was a shortage of labor and Furong felt like the factory was at the mercy of the workers with little he could do to prevent turnover.  They even had trouble retaining workers during orientation; frequently workers would quit during the first few minutes on the job, while taking the factory tour.”  That sounds like the summit of attrition: leaving even before starting to work.  It must really be bad!

          Without being an alarmist, I thought of the BPO industry in the Philippines, especially the voice-oriented call centers, and resolved to communicate the work of MicroBenefits to the BPO employers in the Philippines who are already being challenged by the high rate of attrition that some of them are experiencing as competition for workers heats up.  I know of call center agents who would move from one employer to another for a difference of a few hundreds of pesos of monthly salary.  If we do not address the problem of job satisfaction and engagement in the industry, it won’t be long when the Philippine BPO industry will be suffering the same attrition rates of their counterparts in India where such rates can reach as high as 100 percent in a given year.  That is one reason why Indian companies are investing in the BPO industry of the Philippines.

          Very briefly, MicroBenefits is dedicated to improving the livelihood of frontline workers through an economically sustainable business model that creates value for customers.  Its value-driven product suite is designed to:  a) develop employees’ skill sets; b) improve employee reward; c) enhance employee satisfaction and loyalty; and d) boost company retention rates.  The company’s current product portfolio consists of five key offerings:  1) Welcome Kit; 2) Discount Card; 3) Company Link; 4. Company IQ; and 5) Reporting and Communication.       

          The Welcome Kit includes basic information about the company, information about benefits offered by the company in conjunction with MicroBenefits, and a postcard with a picture of the factory for employees to send home to their families. Discount cards are negotiated by MicroBenefits with stores in the area which provide workers with essentials such as clothing, groceries, haircuts, etc.  The participating stores display stickers on the front window to welcome employees of the local factory.    Company link facilitates connections among factory workers by creating a company network.  This facilitation happens through the “friend matcher” function pairing workers within their company based on proximity of hometown and mutual interests, allowing them to message each other and begin a connection.  Company IQ provides opportunities for continuing education through mobile learning opportunities offering more than 60 modules, including topics such as English training, financial literacy, feminine hygiene and computer skills.    Finally, there is a platform for reporting usage of the application and communicating company information to employees. 

          Although MicroBenefits has applied its business model to manufacturing operations within the Chinese culture, it will be relatively easy to adapt the same business model to service-oriented enterprises in the Philippine cultural and educational setting.  For example, the “friend matcher” function would be even more culturally attractive to Filipino workers.  Also, many of the less educated BPO workers would appreciate the mobile learning opportunities, especially through their ubiquitous smart phones. Those interested in more details about its work in China may log on to http://www.microbenefits.com.  They may also get in touch with Mr. Richard Roque at email address rsr@sa-capital.com.   For comments, my email address is bernardo.villegas@uap.asia