Service Management and Employment Systems in U.S. and Indian Call Centers

The explosive growth of call centers in India has gained widespread attention because of its potential impact on employment in the United States and other advanced economies. Media accounts report that Indian operations are more likely to use college-educated workers while paying one-tenth of U.S. wages. Some argue that these advantages may allow Indian centers to outcompete U.S. centers on both cost and quality.¹ Nonetheless, complaints about poor quality and security, as well as consumer backlash, have led some firms to pull out of India, while leaders in the offshoring business such as General Electric have sold their Indian operations altogether. High turnover rates have become a particularly serious problem in recent years as an expanding number of employers compete for a small pool of educated employees, a trend that both increases costs and undermines service quality.

With heated debate more prevalent than systematic empirical investigation, our understanding of this emerging sector is based largely on anecdotal evidence. National figures on employment, industry trends, and the percentage of centers operated in-house (as opposed to outsourced or offshore) are unreliable.² Our own national survey of U.S. call centers suggests that after two decades of rapid growth, the outsourced sector represents less than 15 percent of the market; and Indian offshore centers cover a tiny fraction of the U.S. market.

In addition, there has been little or no research on management and employment practices in this sector, either in the United States or in India. In this paper, therefore, we consider two questions. First, how similar or different are call center management strategies and employment systems in each country? Here our goal is to map the management practices adopted by three types of operations: in-house centers in the United States, outsourced centers in the United States, and offshore centers that are owned and operated by subcontractors in India and serve the U.S. market. Are there systematic differences in these practices, or is there a call center "production model" that has diffused across very different institutional and organizational contexts? Second, what are the implications of different management practices for outcomes such as turnover? In other words, which practices explain the high levels of turnover in the industry?

To answer these questions, we draw on an original establishment-level survey of 330 call centers in the United States and India. We focus on customer contact rather than back-office operations such as check processing or online order fulfillment. For each center, the survey provides information on the customer base, market and ownership conditions, organizational characteristics, work functions, workforce skills and training, call center technology, work organization, compensation, and outcomes such as absenteeism and turnover. In the next section, we discuss prior research that informs our study. We then present the study methods and analytic strategy and our findings. Finally we outline the study's limitations and implications for policy.

Prior Research

The first question we address in this study concerns the extent to which call center management practices vary across markets and institutional settings. Call centers represent a new industrial model driven by advances in information technologies that are now ubiquitous. These technologies facilitate the automation of services through interactive voice recognition units, standardize customer transactions through skill-based routing systems, create machine-paced operations through automated call distribution systems, and routinize work through widespread use of scripting and electronic monitoring.

However, research shows that service management strategies and employment systems vary substantially across centers that serve different industry and customer segments, and that perform different work functions—from professional approaches to service to highly transactional or cost-driven ones.³ In this line of research, work and employment systems typically are defined to include three dimensions: (a) the level of education and training required...