Managing Risks: Staff Turnover

Find out what the turnover is in the particular area where your vendor is located. Also, ask vendors what their turnover has been in the last 12 months, and last 24 months (i.e., you want to know if their rate is going up). If a vendor’s numbers don’t jive with the reported turnover numbers for the area, then keep looking for another vendor.

By then way, these numbers may not be even throughout. For example, by all accounts turnover is very high in Shanghai and the developed coastal areas in China. However, in inland locations that are not yet as well developed, turnover is much lower.

You need to decide how much risk you want to take on, but a turnover rate close to or higher than 8-10%/year should raise red flags. That is because that number is an average, which means that half the population of vendors is doing much worse and are experiencing higher turnover.

For example, in India, the larger outsourcing firms are suffering the highest staff turnover rates. According to a report by Reuters, Wipro, one of top three outsourcing companies in India, had “turnover rates [of] 90 per cent” in 2004 (silicon.com).

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