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Training in
Extending the “size matters” BPO SMEs
debate in India
Drivers of training in three business process
outsourcing SMEs in India 111
Ashish Malik
School of Business, University of Newcastle,
Central Coast Campus, Australia, and
Venkataraman Nilakant
Department of Management, University of Canterbury,
Christchurch, New Zealand

Abstract
Purpose – The purpose of this paper is to examine the factors that influence training decision
making in small and medium enterprises (SMEs) in India’s IT-enabled business process outsourcing
industry.
Design/methodology/approach – The research strategy employed is a case study. Data from
semi-structured interviews, organizational documents, and non-participant observation are analysed.
Findings – The inclusive theoretical approach uncovers novel explanations through the complex
interaction that occurs between various internal and external factors that shape the nature and extent of
training provision in SMEs in the context of a developing country. In SMEs, enterprise training can take
a variety of forms – formal, informal, and incidental. The final training provision is shaped by high
employee turnover, the complexity of the process, client specifications, and the presence of certain
organizational capabilities.
Research limitations/implications – Although a multi-case embedded design was followed, the
results and findings cannot be generalized to a wider population. Findings are generalized to the
literature on the drivers of training.
Practical implications – The paper’s findings allow practitioners to utilize scarce resources
effectively, particularly for where SMEs are operating in a dynamic outsourcing environment.
Originality/value – This paper extends the current academic and policy discourses on formal and
informal training in SMEs by reporting findings from a new context – India’s dynamic outsourcing
environment. Novel explanations are offered of how SMEs that outsource business process offshore
meet their skill development needs.
Keywords India, Small to medium-sized enterprises, Process management, Outsourcing, Training,
Human resource strategies
Paper type Research paper

Introduction
Small to medium-sized enterprises (SMEs) contribute significantly to a nation’s gross
domestic product (Hallberg, 2000). The high degree of proliferation of SMEs in both
developed and developing countries has attracted policy and academic interest focusing Management Research Review
Vol. 34 No. 1, 2011
on their development of human capital and skills (Ashton et al., 2005; Freeland, 2000; pp. 111-132
Kitchin and Blackburn, 2002; Matlay, 1997; Vaughan, 2002). Skills development and q Emerald Group Publishing Limited
2040-8269
employer-funded training have long been linked to improving firm’s competitiveness DOI 10.1108/01409171111096504
MRR and reducing the risk of unemployment (Bishop, 1991; International Labour
34,1 Organization (ILO), 2001; Felstead and Green, 1994). Further, as improvements at a
national level can occur in the context of improving human capital and skills at an
organizational level (Cappelli, 1995; Porter et al., 2004), understanding the processes of
skill formation in SMEs is critical.
Extant research on training in SMEs often criticises the lack of formal training
112 provision as a reason for their low productivity and competitiveness (Matlay, 2004).
Overall, the extant literature identifies four problems faced by research into SMEs’
investment in training. The first two problems relate to defining workplace training and
SME size. For example, tacit learning, which cannot be formally codified and measured,
is often not included in the traditional definitions of “training”. Consequently, firms
engaging in such learning are often labelled as not investing enough in training
(Ashton et al., 2005). SMEs rely a lot on informal and incidental learning approaches
(Kitchin and Blackburn, 2002; Ridoutt et al., 2002; Smith et al., 2004; Sung et al., 2000;
Tillaart et al., 1998). This view does not imply that only SMEs use informal and
incidental forms of learning; on the contrary, such learning approaches are prevalent in
large enterprises in both developed and developing countries (Fuller et al., 2003; Malik
and Nilakant, 2008).
Definitions of SME size vary from one country to another. Consensus is neither
possible nor practicable, as SMEs operate and cater to a nation’s diverse socio-economic
and market needs (Hallberg, 2000; Upadhyay, 2007). In India, for example, different
economic groups, trade bodies, banks, and employer organizations have adopted
definitions to suit their needs (Upadhyay, 2007). Most definitions of SME size are based
on the value of SME’s assets and revenues, their employee numbers, or a combination of
both. Definitions based on asset valuations are problematic, especially when historical
asset values are used. Defining enterprise size on the basis of revenues is equally
problematic for enterprises that export services of high value, as in most cases the firms
do not fit with the lower revenue threshold suited for domestic SMEs. Other researchers
view SMEs as merely smaller versions of larger enterprises and consider that the nature
and extent of training in SMEs is simply a matter of scale (Hill and Stewart, 2000;
Westhead and Storey, 1997). This paper concurs with the view that SMEs are different
from larger organizations and that their opportunities to engage in learning and
development are different (Doyle and Hughes, 2004).
The third, related and often ignored problem is that of the relevance of formal
qualifications, training, and informal learning for SMEs. With the exception of certain
legislative requirements (for example, for a workplace to be certified in accordance with
health and safety legislation or external industry standards), SMEs do not see much value
in supporting learning towards a qualification. There is thus a need to consider enterprise
training from a relevance perspective, especially for SMEs, whose resources are limited.
The fourth problem relates to explaining the differences in training provision
between SMEs that operate in the same industry sector. Why do some SMEs in the
same industry sector have varying levels of training investment, even after allowance
has been made for enterprise size? This paper takes the stand that SMEs operate and
compete in different strategic segments, even when they belong to a similar industry
grouping. It is likely that the level of training provision will be different in different
strategic segments. To this end, this paper analyses the internal and external factors
that shape the decision making about training in these firms.
 In the light of the gaps identified above, this paper attempts to extend the current Training in
debates on conceptualising training decisions in SMEs beyond just enterprise size. BPO SMEs
This study also advances our understanding of how and why SMEs in India’s business
process outsourcing (BPO) industry, which are operating in dynamic and high-growth in India
environments, invest in training. We present a classification of SME size based on
views of experts from India’s BPO sector.
The rest of the paper is organized in five sections. First, it gives a brief overview of the 113
research setting – India’s BPO sector. Second, it reviews the theoretical perspectives
that explain why firms invest in training. This forms the basis of the study’s research
questions. Third, the paper explains the methodology employed and its rationale.
Fourth, it presents and analyses the findings. Finally, it concludes with some
implications for practice and future research.

India’s BPO industry

India’s BPO sector is a part of its information technology (IT) industry and comprises
three key sub-sectors: IT hardware manufacturing; IT software services and product
development; and IT-enabled BPO services (hereafter referred to as BPO sector). The
focus of this paper is on the BPO sector. The BPO sector typifies a dynamic, high-growth
business environment with revenues of about US$15 billion (NASSCOM, 2007).
High-growth rates and a diverse portfolio of services (at least in an Indian context) create
an ongoing need for skilled employees. The BPO sector has two main service divisions:
voice (customer care call centres – inbound and outbound) and non-voice services
(for example, back-office business and knowledge process outsourcing (KPO)). The BPO
sector’s services span a continuum from simple to complex and cater to a range of
industry sectors. A few examples are: mass- and high-value service inbound and
outbound call centres; medical and legal transcription services; market analytics
modelling; and preparing sustainability ratings for global firms, for use by investment
fund managers. Such service diversity presents training challenges for the sector. The
sector has diverse ownership structures, from domestic firms to multinational
corporations (MNCs), or some form of joint venture between the two. The business
models include third-party service providers (mostly large domestic outsourcing firms),
offshore process centres (wholly owned offshore subsidiaries of MNCs), or some form of
joint venture in which a third-party service provider sets up a shop for MNCs on the basis
of build, operate, and transfer; or a build, operate, lease, and transfer.

Literature review
This section begins by providing an inclusive definition of enterprise training and the
nature and extent of training as considered in this study. Next, it provides short reviews
of research on human resource development (HRD) in India and research on training
and people management issues in India’s IT and BPO sectors. Finally, adopting an
inclusive theoretical approach, it presents the theoretical framework developed for
this study.

Definitions
Building on the definition of enterprise training provided by Hayton et al. (1996), this
paper redefines enterprise training, in the context of organizations operating for profit, as
all learning activities that are relevant to the operation of an enterprise. Learning activities
MRR includes formal and informal training, development, and education, provided internally
34,1 and/or externally. Such an approach makes it possible to capture the wider gamut of
learning that occurs at workplaces and allows a better understanding of decision making
in terms of training. Extending the debate from the mere formalisation of training
activities, this study considers both the nature and the extent of training. The nature of
training includes the formalisation of training practices, reliance on internal or external
114 providers, and the provision of generic and transferable or technical and firm-specific
training. The extent of training refers to the volume of training (the proxy used in this
research is the number of days/weeks per annum). This description of training is in line
with current models of training demand from developed countries (Dostie and
Montmarquette, 2007; Hayton et al., 1996; Ridoutt et al., 2002; Smith et al., 2004).

Training and development research in India

Recent HRD research in India has focused mostly on national HRD trends and the impact
of India’s liberalisation policies on firms’ training and development infrastructures (Rao,
2004; Rao and Varghese, 2009). An exception is Yadapadithaya’s (2001) work, which
evaluates the corporate training and development practices of public, private, and
multinational organizations in India. Yadapadithaya (2001) found training provision to
be driven by numerous factors. The key factors were competition (domestic and global),
changes to an organization’s culture and business strategies in response to competitive
forces, and the increasing need for enhancing the productivity, quality, and innovation
of a firm’s products or services. As in most service and manufacturing sectors, there is no
legal requirement for firms, including BPO firms to invest in the training of their
employees or, if they do so, to report the extent to which they invest. Thus, training
investment is voluntary and varies from industry to industry.

BPO and call centre research

HRD research in the services sector, particularly in the high-technology sectors such as
IT, has so far been limited. Further, recent studies on India’s IT sector have
concentrated only on the low added-value segment in new forms of knowledge work
(Ritzer, 2004) and customer service call centres (Noronha and D’Cruz, 2006; Taylor and
Bain, 2004). The research that has been conducted on call centres focuses on three main
strands of the literature. The first strand comprises the organization of work within a
Taylorist paradigm and looks at issues related to monotonous work and excessive
monitoring and control (Burgess and Connell, 2004; Taylor and Bain, 1999). The second
strand includes employee voice, resistance, and other coping mechanisms (van den
Broek, 2002). The third strand uses a unitary approach in dealing with labour turnover,
employee commitment, service quality, training staff, strategic human resource
management (HRM) and business models, and managing stress (Batt and Moynihan,
2002; Carton et al., 2004; Fernie and Metcalf, 1998; Hutchinson et al., 2001).
Although most of the above research has examined the issues of increasing
productivity, flexibility, and excessive monitoring and control of employee’s workflow,
recent research on call centres in India has examined the critical issue of “professional”
identity of call centre workers, which is brought into play to secure employee commitment
(Noronha and D’Cruz, 2007, 2009). Noronha and D’Cruz (2009) found four themes
that inculcate the notion of professional identity among call centre workers: justifying
organizational requirements, absorbing work-related stress, primacy of the customer,
and the privileges of professionalism. Embodied in these themes are the service provider’s Training in
adoption of strong managerial approaches to people management and skills development BPO SMEs
for achieving high levels of customer and client orientation. The virtual non-existence
of unions in the call centre industry has also helped in the development of such HRM in India
approaches. Critical to the development of this “professional” identity are HRM practices
such as higher than average market pay, a modern work environment, professional
development and training (for example, client-focused and accent neutralisation training), 115
client-focused performance management, and weaving in elements of fun in the work
design. A key element in the development of this “professional” identity is demonstrating
high levels of customer or client orientation. The authors believe that training is a key
vehicle for developing a client focus and improving overall service delivery. Thus,
this study seeks to build on the sparse research on training drivers in India’s BPO
services sector.

Theoretical background
This overview begins by reviewing various countries’ current models of training
demand in order to understand the influence of certain factors on the decision to invest in
training. Next, employing Swanson’s (2007) framework, we consider multiple theoretical
orientations evident in the existing training demand models to develop a framework of
contributing, useful, and novel theories in order to further our understanding of the
factors that shape training provision in firms.

Training demand models

Researchers from Australia (Hayton et al., 1996; Ridoutt et al., 2002) build on the previous
work undertaken by University of Warwick scholars in the UK (Pettigrew et al., 1988).
Pettigrew et al. identified factors that variously drive and stabilise training. They
highlighted the importance of having a distinction between driving and stabilising
factors. They found training to be triggered by either technical or product market
changes, both of which create a gap in skill requirements. Training drivers are more
closely linked to an organization’s strategy, whereas factors that stabilise provision of
training may be either internal or external to the firm. Hayton et al. (1996) and Ridoutt et al.
(2002) found that the introduction of new products or process technologies, quality
management systems, and technological innovation, respectively, were significant
drivers of training in Australian firms.
In the UK, the following factors were found to influence training: high levels of
computerisation, technical change, and introduction of new products or services
(Green et al., 2003; Kitchin and Blackburn, 2002; Mason, 2005). In Canada, among other
studies, Betcherman et al. (1997) and Dostie and Montmarquette (2007) found support for
a positive association between organizational change, strategy, and the role of
high-performance work practices on the incidence of training. Other studies have
attempted to explain the variation in training demands by considering the nature of a
firm’s competitive strategy (Boxall, 2003; Lloyd, 2005), its product/service specification
(Green et al., 2003), and the nature of its work organization (Ashton and Sung, 2006;
Smith and Dowling, 2001). The different theoretical orientations of these models require
a brief explanation of their main assumptions. The following section discusses the key
tenets of the contributing, useful, core, and novel theories used for developing a
theoretical framework for this study.
MRR Developing a theoretical framework
34,1 The need for a preliminary or guiding theoretical framework is highlighted by case study
research theorists (Eisenhardt, 1989; Yin, 2003). This study follows Swanson’s (2001)
conceptualisation of the core theories of HRD, and considers theories from the disciplines
of economics, systems, psychology, management, and marketing as contributing theories
in explicating the reasons for firm’s investment in training. The human capital theory
116 (HCT) (Becker, 1964), neo-HCTs (Acemoglu and Pischke, 1998a, b; Bartel and Lichtenberg,
1987; Wozniak, 1984), studies of strategic HRM and best-practice, high-performance work
practices, and best-fit HRM (Applebaum and Batt, 1994; Boxall, 2003) are considered as
useful theories here. HCTs and neo-HCT emphasise the link between training, the
introduction of new technology and improved organizational productivity. HCT posits
that investment in skills will improve productivity, which is also reflected in increased
wages. Proponents of the neo-HCT argue that highly trained and highly educated
employees are more likely to adopt technological change than less educated and less
skilled employees (Wozniak, 1984; Bartel and Lichtenberg, 1987). Consequently, the
adoption of new technology requires additional investment in training and results in
improved productivity. Further, neo-HCT argues that the comparative advantage of
highly skilled and highly educated workers declines with their experience on with a
particular technology (Bartel and Lichtenberg, 1987). The second stream of neo-HCT
challenges the orthodox HCT view that firms will spend more on technical training than
training in general skills. Acemoglu and Pischke (1998a, b) argue that many firms are
willing to bear the cost of general training as a way of dealing with the information
asymmetries created by their lack of knowledge of the true abilities of workers.
Studies of strategic HRM are considered useful in this theorisation because provision of
training is seen as a test for an organization’s strategic approach to HRM. Some strategic
HRM theorists (Ashton and Sung, 2002; Smith et al., 2004) have advocated best practice or
high-performance work practices for improving organizational performance, through
increased investments in training and by implementing a bundle of HR and management
practices. Other studies of strategic HRM have tended to focus on the fit between
competitive market dynamics and the application of Porter’s generic strategies in
determining the opportunities for investment in training (Ashton and Sung, 2006; Boxall,
2003; Lloyd, 2005). The key argument here is that there are opportunities for sustained
investment in training for firms operating in high-end and highly differentiated markets
than for those operating in mass-production or mass-service markets.
Given the impact of quality management philosophy (Prajogo and McDermott,
2006; Reed et al., 2000) on training (Ridoutt et al., 2002; Smith et al., 2004), the high level
of adoption of quality management systems in India’s IT industry (Arora and Asundi,
2000) and a generally high incidence of quality management systems in the bundle of
high-performance work practices (Ashton and Sung, 2002; Smith et al., 2004), quality
management philosophy’s role is considered for any novel explanations of decision
making about training.
Finally, Short (2006), reviewing ten years of HRD scholarship and research, found
(among other gaps) a much-neglected and often-cited need to consider the needs of an
organization’s customers/clients in a firm’s decision to train (Bing et al., 2003; Leimbach
and Baldwin, 1997). External factors such as client’s needs are important given the high
levels of interdependence and dynamic coordination that exist between service providers
and client firms in India’s IT industry (Banerjee, 2004). By employing a market-based
organizational learning framework (Sinkula et al., 1997), novel explanations can be Training in
sought. On the assumption that values drive behaviour, Sinkula et al. (1997) tested the BPO SMEs
interrelationships between an organization’s learning orientation (LO) – a
knowledge-questioning value (Argyris and Schon, 1978) – and its market information in India
processing behaviours or its market orientation (MO) – a knowledge-producing
behaviour (Kohli et al., 1993; Sinkula et al., 1997). LO has been defined in different
contexts but, in general, it is an organization’s tendency to learn by demonstrating a 117
commitment to learning and open-mindedness, requiring the development of a shared
vision (Argyris and Schon, 1978; Sinkula et al., 1997). Similarly, while MO has been
variously defined, Sinkula et al. follow Kohli et al.’s (1993) conceptualisation, in which
MO is defined as an organization’s ability to generate or sense market intelligence
pertaining to current and future needs of customers, disseminate the information
horizontally and vertically across the organization, and frame appropriate
organization-wide actions to respond to such market information.
Using the above review and framework as a basis, the purpose of this paper is to:
.
analyse the main factors that influence a firm’s decision to invest in training, in
the context of India’s BPO sector;
.
investigate and analyse whether an organization’s clients/customers have an
impact on investment in training – and if so, why and how;
.
examine how various factors, both internal and external to the firm, interact with
one another in the provision of training; and
.
ascertain why some firms invest more than others in the same industry sector.

Research methodology
Although the above models offer an understanding of the relationships between various
factors, a different understanding is needed in a new cultural context. An evolving state
of theory about high-level organizational complexity in decision making for training
(Smith, 2000) requires a textured and context-specific understanding. Thus, this study
employs a qualitative case study research design (Eisenhardt, 1989; Yin, 2003). Further,
the nature of the research questions and the use of new and unfamiliar terminology
meant that the phenomenon needed to be studied in its real-life context (Eisenhardt,
1989; Yin, 2003). To this end, the study collected data through semi-structured
interviews, organizational documents, web sites, policy documents, and reports.
Moreover, as the nature of the data sought made collection from a single informant
impossible, multiple informants were interviewed. The study follows a multi-case
embedded design, employing a maximum variation purposive sampling approach and
using the theoretical criteria outlined in Table I.
Because of the problems noted earlier in defining SME size, we interviewed experts
from the BPO sector to define and classify SMEs. On the basis of our interviews we
noted that BPOs are highly labour-intensive operations. The following classification
was developed:
.
small enterprises are those employing (150 employees; and
. medium enterprises are those employing (150 and (1,000 employees.

To ensure confidentiality, the case study organizations are referred in this paper as
MIDCOM, SMALLCOM, and MICROCOM.

Table I.
an overview
Case-study organizations:
Theoretical criteria
Enterprise size
Location visited
Ownership
Industry sectors served
Business model and
service lines
Competitive strategy
Enterprise age
Work organization
MIDCOM
Case analysis focuses on the BPO
division (employing about 900
employees) of this diversified firm
(employing a total of 1500 employees).
All business lines are based in one
location
Mumbai
Indian
Telecom, IT, insurance and financial
services for clients based in the USA
Third-party service provider.
Contact centre and knowledge process
outsourcing (KPO) services
Slightly differentiated
Established in 2000
Taylorist and differentiated work
organization in voice and KPO,
respectively. More than 90% full-time
permanent employees
34,1
118
MRR
SMALLCOM MICROCOM
250 employees. All business lines based 50 core employees in India. Head office
in one location in New Delhi and multiple vendor
locations in spread across 12 cities in
India
Gurgaon New Delhi
UK joint-venture partnership Indian
Telecommunication and real estate for Hospitals, tyre franchisees, and
UK firms accounting firms in the USA
Dual business model: third-party and a A third-party provider with business
wholly-owned service provider for a fronts in the US. Medical Transcription
large UK-owned real estate firm. and F&A back office services
Finance and accounts (F&A) and contact
centre services
Slightly differentiated Mix of mass-production and slightly
differentiated services
Established in 2004 as third party Established in 2000. F&A business line
added in 2002-2003
Taylorist work organization. 100% full- Taylorist work organization.
time permanent. 98% in operations; rest Core employees are full-time permanent.
in management and enabling functions Vendor network is outsourced
Data collection and case descriptions Training in
Following Yin (2003), a detailed case study protocol was developed containing a list of BPO SMEs
questions used as a prompt to explore key factors influencing decision making for
training. This approach was in no way limiting, as interviewees were asked further in India
questions as new factors emerged in the process of data collection. To gain a detailed
understanding of the phenomenon being studied, a total of 31 interviews were conducted
during the 2005-2006 period with a diverse group of internal stakeholders. Table II 119
provides details of interviewees. The interviews were 60-120 minutes in length and were
transcribed verbatim. In addition to semi-structured interviews, preliminary
information was also collected through organizational web sites even before the data
collection started.
Most of the descriptive details about the case study organizations have been obtained
from various organizational documents and non-participant observation noted above.
These are presented in Table I. Organizational documents relating to training, HRM
practices and quality management systems were also analysed. Non-participant
observation of daily work routines was undertaken to get a “feel for what’s happening”
in the case organizations. Analysis was undertaken at two levels: within- and cross-case,
using pattern-matching and explanation-building analytic strategies (Miles and
Huberman, 1994; Yin, 2003). At a within-case level, explanatory maps and matrices were
developed (Miles and Huberman, 1994) and sent to participating case organizations for
validity and feedback. Following literal and theoretical replication logic (Yin, 2003), the
analysis considered themes found across the case organizations. Given the multi-case
embedded design, a total of six business lines (two business units from each case
organization) were studied (see Table I for details). For each factor analysed, literal
replication from at least two or more informants was considered before the factor was
included in the final case report.

Nature and extent of training provision

Table III provides a brief summary of the nature and extent of training provided by the
three case organizations. MIDCOM reported medium to high training volume and
formalisation for its voice business. Learning was relatively low and informal in nature
for its KPO line (Watkins and Marsick, 1992). Learning needs were met by recruiting
skilled and experienced people in the finance domain who had knowledge of
contemporary corporate sustainability issues. MIDCOM invested significantly in quality
management resources and provided different types of quality management training to
its process leaders and employees. Like MIDCOM, SMALLCOM’s emphasis is on
building process- and domain-specific knowledge and offering ongoing refresher

CEO/ HR T&D Process Leader/ Quality Process

Organization COO Manager Manager Manager Manager employees BDMa Total

MIDCOM – 1 1 3 1 2 – 8
SMALLCOM 1 1 1 2 1 6 1 13
MICROCOM 1 – – 2 1 6 – 10
Total 2 2 2 7 3 14 1 31
Table II.
Notes: aBDM, business development manager; in the case of MICROCOM, the COO was also the BDM Details of interviewees
MRR training to accommodate changes in client’s process specifications. Investment in generic
skills for career development at SMALLCOM was limited due to the small size of the firm,
34,1 the age of the enterprise, and limited growth opportunities. MICROCOM invested in
Six Sigma (SS) quality management training and process-specific training for its medical
transcription team. Client-specific, process, and accounting software training was
offered for its F&A processes. In contrast to Yadapadithaya’s (2001) findings, our data
120 set suggests that in India private firms in the BPO industry invest at least two to three
times more than those in the manufacturing and service sectors. In addition, the training
volume reported in this study compares well with call centres in Europe (Garavan et al.,
2008), thus suggesting some industry level similarities in the industry globally.

Findings and analysis

From detailed within- and cross-case analyses the study found that training decisions
were influenced by a complex interaction between an organization’s internal and
external factors. All three firms had undergone major changes to their business models.
The impact of such change was pervasive enough to affect other factors and the
development of certain organizational capabilities. While this is highlighted as a key
factor, the paper also presents a textured analysis of how various factors shaped the final
training provision.
The findings indicate that in stable business and manufacturing environments
enterprise size may vary to a great extent explain investment in training volume (Bartel
and Lichtenberg, 1987), but not in dynamic and high-growth outsourcing environments.
In the latter context, the nature and extent of training is shaped by changing business
and process complexity, client’s unique service requirements, and the organization’s
evolving service capabilities. External labour market dynamics and the nature of work
organization have an impact on employee turnover rates. Consequently, organizations
need to invest in training. The first three research questions are answered by analysing
how various, factors internal as well as external to the firm, influence decision making
for training, both individually and by interacting with each other. For descriptive
and contextual details of case organizations, please refer to Table I.

Enterprise size and complexity

Extant literature suggests that enterprise size, expressed in the number of employees, is
an important factor in influencing the nature and extent of training provision. Although
small enterprises have been noted for low formalisation and diversity of training, the
present analysis suggests that it is the nature and extent of business and process
complexity that has a strong impact on training provision. Bartel and Lichtenberg’s
(1987) neo-human capital assumptions and the findings from the UK (Green et al., 2003;

Reliance Reliance Technical

Training volume/ on internal on external Formalisation training Behavioural
Organization employee/annum training training of training (%) training (%)

MIDCOM 3-12 weeks Medium to Low Medium to high 80 20

Table III. high
Nature and extent of SMALLCOM 2-3 weeks Medium Nil Medium to low 90 10
training MICROCOM 2 weeks Medium Very low Medium to low 95 5
Mason, 2005) regarding the impact of low and high value-added services on training Training in
offer partial explanations for firms that operate in a dynamic outsourcing environment. BPO SMEs
For example, MIDCOM’s Process Manager noted:
in India
Process training time depends on the campaign [process] they are going into. It may vary
from 7-20 days. If a person goes to a US campaign where we have [a] blended environment,
so you may handle [both] one in-bound call and one outbound call [. . .]. If you are in a
membership campaign where you are selling a product or upgrading a product to an existing 121
client base – 7 days max! For a UK process it may take from 15-20 days. If it is a telecom
process, you need to know a lot of basics about telecom [. . .] depends on the programme.
Similarly, SMALLCOM’s HR Manager and Quality Manager confirmed the impact of
changing business and process complexity on training:
Depending on the product and the process complexity and the sort of skills that we have,
the training times would vary (HR Manager).
If the complexity of the process is high, then you have to focus more on technical- and
domain-specific training [. . .]. Yes, to a certain extent you have to focus on voice and accent
and generic training for processes, but the amount and the degree changes with the kind of
complexity of the processes or project you are involved with (Quality Manager).
A relatively simple level of process complexity at MICROCOM had a limited impact on
training. A Senior Programme Manager added:
They [medical transcription employees] do not need to communicate with the client. They
only need to type the transcript. But we [process leaders] have to communicate to the client.
So, we need to go for a like communication skills programme [...] they have to just listen to
what the doctors are dictating, then write it down, and [. . .] upload the data back to the client
[. . .] but in F&A, yes, we are talking to the client, on various other issues.

Temporal dimension of processes

The main tenets of neo-HCT (Bartel and Lichtenberg, 1987; Wozniak, 1984) are not fully
supported in the case findings. The nature and extent of training investment varied
according to the organization’s process maturity. Although training demands stabilise
over time with experience in a given process (Bartel and Lichtenberg, 1987; Wozniak,
1984), the process changes constantly requested by clients and ongoing high employee
turnover rates necessitate sustained training provision. SMALLCOM’s Quality Manager
noted:
The only thing that changes with the process being mature is the quantity of the training
reduces. If it is a one-month-old project, then probably you would need to provide training for
about 80% of the people involved. But when the project is mature, it may be [that] around
10% or at the maximum about 25-30% of the people [need] to be engaged in training.
Process maturity and changes in client specifications were also noted by MIDCOM’s
Process Manager (voice):
For the US processes, our clients have given us the target for certification. But for UK
processes, we have kept 85% [...]. For example, if I get a similar campaign for a US process for
which we already have [expertise], it will take less time [. . .]. But, if suddenly [we] get some
other process where we do not have the expertise, we may require a lot of feedback from the
client, [a] lot of interface from the client.
MRR However, MICROCOM’s relatively simple process portfolio and the fact that it had
34,1 previously undergone a business model change limited the impact on training.
MICRCOM’s Chief Operations Officer (COO) noted:
Our process are in a stable and mature stage now. Earlier, when we were changing our
business model and starting, we invested heavily in training.

122 Given the dynamic nature of the services offered and the changing service delivery
metrics, the nature and extent of training varied with the size and scope of changes in
client’s service level agreements.

Workplace change
At the time of the study all three case organizations were undergoing significant
changes to their business models and service lines. For example, MIDCOM changed its
business model from a sales-based commission call centre to a services organization
selling telecom and financial services products. This change was brought about by
gradual investment in building its capabilities in client and people management.
Consequently, these changes resulted in medium to high levels of investment in
various training activities. The Vice-President HR commented: “It’s like changing the
mindset as well as learning the new process”. SMALLCOM, on the other hand, moved
its business model from a third-party service provider to a dual (third-party and a
wholly owned subsidiary) business model. As part of this change, SMALLCOM’s F&A
service line was acquired by a large real estate firm in the UK. As a result,
SMALLCOM had to reinvent its business processes to accommodate a dual business
model. This change had a significant impact on training. SMALLCOM’s HR Manager
noted:
See, earlier we started off in-voice operations, so we had multiple voice businesses. Then a
conscious decision was taken to move into back-office, so we reorganised and the entire
management focus shifted to work in back-office, though it would now be more of a
balance between back-office and voice processes. We are now concentrating on the kind of
voice processes that we get. This decision had a lot of impact on the kinds of skill sets the
organization needed [. . .] a lot of training eventually happened, once we moved into
back-office operations.
MICROCOM has a unique organizational structure. A few years ago the firm changed
its business model from a wholly owned 750-seat medical transcription centre to a core
team of about 50 employees in India. Its strategy was to outsource its medical
transcription work from the US clients to a network of vendors in India. The core team
of 50 employees focused on two areas: managing the quality of medical transcription
work received from its outsourced network of vendors; and running a small finance
and account BPO centre for tyre and retail sector SMEs in the USA. For better client
relationship management, MICROCOM employed 30 staffs in the USA. These
employees were the first point of contact for its clients and were also tasked with
business development. Workplace change did not have any significant impact on
training at MICROCOM, as the firm had already undergone structural change.
Overall, it was the change in the business model rather than an introduction of new
technologies (Wozniak, 1984) or other forms of organizational and technical change
(Ridoutt et al., 2002; Smith et al., 2004) that had a profound impact on the provision of
training.
Quality management systems Training in
Creating an awareness of the critical to quality service delivery metrics meant that BPO SMEs
employees in all three organizations needed to learn what was important and why. The
findings of this study confirm that the presence of well-developed quality management in India
systems has a positive impact on the nature and extent of training provision (Ridoutt et al.,
2002; Smith et al., 2004). MIDCOM’s quality management systems are fairly well
developed. Each of MIDCOM’s call centre and KPO business lines has dedicated quality 123
management resources for implementing standards from numerous quality management
accreditations for its service delivery. For example, MIDCOM’s KPO division develops
sustainability ratings for investment firms by using its client’s proprietary systems for
assessing individual performance and providing sustainability ratings of global firms in
four industry sectors: energy, utility, health, and technology. Overall, the nature of
learning utilized was a mix of formal (for contact centre) and informal (for KPO)
techniques. The quality management systems are well developed for MIDCOM’s contact
centre service line, but the standards of performance (both internal and external) for its
KPO business line are still evolving. MIDCOM’s Process Manager (voice) commented:
That’s on an individual level and as well as at a transaction monitoring [level]. For quality, we do
get a defects report and it can be generated anytime. It gives us all the parameters for defects. So,
if it’s on the floor level, we can have quick refresher training. For example, if the communication
scores are going down, the defects are high. Then you can go for a quick refresher [course].
SMALLCOM has a Customer Performance Operations Centre certification and
employees trained (but not formally certified) in SS. SS methodologies were rigorously
applied to SMALLCOM’s outbound contact centre. Implementation of SS
methodologies resulted in weekly identification of employee’s training needs and
ongoing interaction with clients to improve and/or review the existing service delivery
standards. The changes were then communicated back to the teams and any necessary
training was provided. SMALLCOM’s Manager (voice process) commented:
We follow a Six Sigma methodology. We would have people trained in SS who would then
define the quality methods. The people we have hired externally or developed internally as
quality analysts would not only look at compliance issues but they would also look at the
analysis of these reports and the performance of various measures [. . .]. Refresher training
also happens on account of continuous improvement efforts, not because [of] how things are
now but how we can improve upon them.
MICROCOM’s medical transcription centre relied on formal training for its quality
assurance people and developed service performance metrics (internal for process
efficiency and external for meeting the requirements of client, legislation, and the US
medical transcription industry’s standards) to monitor workflow from different
vendors. The COO noted:
We employ a three-tier QA process that enables us to meet or exceed our clients’ expectations.
Ongoing/periodic training programs and workshops keep the team abreast of the
developments in this so very dynamic healthcare industry.
MICROCOM’s F&A team, a small group of nine employees, relied on an informal learning
approach. Moreover, as the nature of their clients (mainly SMEs – tyre franchisees and
accounting firms in the USA), the client metrics for service delivery were not as demanding
as those for its medical transcription clients (medium- to large-sized hospitals in the USA).
MRR MO and client specifications
34,1 The influence of client specifications has a pervasive impact on the nature and extent of
training provision. A high level of customer orientation and the need to be able to deliver
services in a professional manner (Noronha and D’Cruz, 2009) required training to be
organized around client’s key deliverables, as per their service level agreements. This
was observable at the case study organizations visited. Thus, the roles of information
124 sensing and disseminating are critical in identifying training needs for the delivery
teams (Sinkula et al., 1997). To this end, the role of MO is critical in the identification of
training needs. However, beyond the identification of needs, training implementation
and delivery relies on interaction between other organizational capabilities such as
quality management systems and LO. This interaction will be examined further in the
discussion section.
MIDCOM’s move from a product to a service mindset required accurate sensing and
dissemination of process information received from its clients by the delivery teams.
The impact of client specifications is noted by MIDCOM’s Process Manager (voice) and
VP-HR, respectively:
The client drives it [training], which is Okayed by our internal market people [. . .]. Then the
operations [team] share it with the training and recruitment team [. . .] once they are recruited
we churn the raw materials into the polished product.
[. . .] [clients are] the guys who understand [their] product better than anyone else in the
facility here. So we ask [the client’s] trainer to fly down here to train our guys.
SMALLCOM had a dedicated business development team in India and in the UK for
sensing and disseminating client and competitor information. The Business Development
Manager noted:
Going from the proposal stage [. . .] we have our team of consultants here. Back-office consultants
who usually go over to the client’s facility, spend time there, learn about the company and
understand all about the processes [. . .]. A report is submitted to the client and then a more
detailed analysis is done once the client has decided, and contractual negotiations are carried out.
MICROCOM’s US business front-line personnel were primarily responsible for
negotiating client specifications and disseminating them to the operations team in India.
The Process Manager F&A noted:
There is the BD [business development] team who works with the client location in the
US [. . .] who actually goes to the client and [. . .] brings the process [. . .] depending upon what
[the] process is, we go for a [. . .] test run [. . .] then, the pilot run will go, and then we go for full
production. So, there is a BD team that is involved right from brining the client to the testing
of the data.
The medical transcription line relies on the strength of its quality assurance staff to
deliver performance that conforms to clients’ service level agreements.

Learning orientation
The LO (Sinkula et al., 1997) of all three firms was not fully developed. This is
explained by the limitations on resources and the nature of work received. Process
improvement of clients’ processes was evident in MIDCOM’s KPO line, but only to a
limited extent in its contact centre. The Vice-President (Human Resources) noted how
MIDCOM developed a shared vision:
 Yes, we have something called an open house every month. Each programme has an open Training in
house where we have a very formal discussion. Then, we have something called the CFTs
(cross functional teams), floor forums, and CEO/COO forums – held once in a year. BPO SMEs
SMALLCOM demonstrated limited evidence of open-mindedness but, being a small
in India
organization, its evolving quality management systems and an open work culture
strengthened its ability to develop a shared vision. This affected the extent to which
any proactive learning occurred. A Process Manager commented: 125
It’s like nothing is being hidden from anybody. It’s a transparent organization [. . .]. The
exchange of ideas is much more easier, practical, and efficient in a lean organization than in a
large organization. The idea can come from anyone in the organization, right from the team
member level to anyone from the top.
MICROCOM had an extremely low LO, as it had moved to an outsourced vendor
model. This move transferred the training costs to the vendors. Further, the low-end
transaction processing nature of work does not present any opportunities to engage in
open-mindedness or to develop a shared vision, both of which are essential for a strong
LO. However, some opportunities for open-mindedness were noted by its Process
Manager F&A:
Earlier, what we were doing is we were punching the data in the system. But one of the team
members from this team [. . .] designed a macro in Excel, in which [. . .] you ask when the data
has been received from a client in Excel format [. . .]. So, earlier it was a 6-hour job, but now it
is a 6-minute job.

Employee turnover
High-employee turnover emerged as a significant driver for the nature and extent of
training provision. High employee turnover (especially in contact centres) at MIDCOM
and SMALLCOM had an ongoing impact on training volumes. Medium- to low-employee
turnover was noted in SMALLCOM’s F&A back office and MIDCOM’s KPO business
lines. MICROCOM’s outsourced vendor model and its extremely small F&A group with
low-employee turnover resulted in minimal training provision. The focus of training is on
developing client- and process-specific knowledge, voice and accent neutralisation,
customer service skills, and quality management skills. The study found that, although
this training and strong managerial orientation and employee control helped in
developing a sense of professional identity in employees (Noronha and D’Cruz, 2009), its
effectiveness in terms of employee retention is questionable. Further, the high attrition
rate has had a dampening effect on the trainers’ and managers’ morale. A trainer at
MIDCOM noted: “[. . .] personally, as a trainer that really kills us [. . .] at the same time we
have a lot of work to do”. Similar frustration was noted by SMALLCOM’s Team Leader
voice:
[. . .] there is a constant need for providing training to new hires. So, every few weeks we have
some people here, so we have to train them. It’s a bit different in back-office [. . .] you train
them, they will stay for a reasonable period of time and only few will leave.
Training appears to have a minimal role in containing employee turnover, especially
when there are other critical factors operating in an employee’s decision to quit. These
include: external labour market dynamics, high industry growth rates, the routine and
mundane nature of the job, absence of a direct link between skills development and pay,
MRR and a work environment in which there is excessive monitoring and control. To some
34,1 extent the rapid growth of the industry mitigates the impact of excessive monitoring and
control of employees in “dead-end jobs” by presenting them with the opportunity to
move to other organizations in search of “fun” and/or a perceived “better work crowd”.
As one call centre agent noted:
What drives a voice employee is not the same as what drives a back-office employee [. . .]
126 voice agents are here to have a bit of fun. Whereas, back-office people more conventional [. . .]
real jobs and see [their jobs] as a career. Another reason is that there is a very competitive
market outside and there are loads of call centres in place [. . .] pay is a factor. There are also
various internal factors like the environment is not good or the crowd here is not nice, and so
on. Too much of control, unreasonable targets could be other reasons.
Additional excerpts from employee’s perspective include:
[. . .] right now most of them [firms] are just setting up their centres, so they want to hire
experienced people. This is bound to happen as they want to start off, their wage is going to
be slightly higher with the skeletal staff and they are ready to pay quite high because this
[experienced staff] [. . .] is what is going to drive their future operations (KPO employee,
MIDCOM).
Typically, what is happening [today] in the KPO industry is what happened in the voice
sector before. People just make you sit across the table and probably offer you probably
two-and-a-half or three times of what you are getting, along with the brand name that you are
with the biggest financial services companies in the world (KPO employee, MIDCOM).
Finally, the training choices that can be exercised in SMEs are rather limited. The
training philosophy in these firms leans more towards a “buy” decision than a “make”
decision to invest in training, although in most cases the uniqueness and diversity of
clients means that there will always be a need to invest in client- and enterprise-specific
training. Irrespective of the employee turnover rates, SMEs will need to invest in
training to ensure continuity of workflow and focus on training that is essential and
relevant to their client’s service delivery needs.

Strategic HRM approach and training

Although a firm may initially decide to offer its services in a mass service or differentiated
market (Boxall, 2003), the findings suggest that there is no simple relationship between an
organization’s product-market strategy (Boxall, 2003) and training provision. Training is
shaped through the dynamic coordination and negotiation that exists between the service
provider and the client (Banerjee, 2004) and their evolving state of organizational
capability. Thus, there was strong evidence of “make” and “buy” approaches to training
and the presence of both formal and informal approaches to learning.
MIDCOM’s HRM infrastructure relied on a combination of “make” and “buy” training
approaches to managing its skill development needs. In MIDCOM, training was closely
intertwined with its operations management infrastructure instead of its HRM function.
SMALLCOM had a single HR for both its business lines, with some support from external
recruitment agencies. SMALLCOM’s HR infrastructure focused on administrative
activities more than a strategic business partner. In terms of infrastructure, SMALLCOM’s
training was an integral part of its operations team. SMALLCOM also relied on a
combination of “make” and “buy” approaches to skill development. MICROCOM’s
HRM function was fully outsourced, with responsibility for training resting with its
operations team. MICROCOM relied more on a “buy” approach to skill development, Training in
reflecting its relatively lower commitment towards learning and development overall. BPO SMEs
in India
Discussion
The findings indicate that SMEs operate in heterogeneous strategic milieus. Investment
in training is shaped by an interaction between the complexity of the business, the
complexity of its processes, client specifications, and the strength of the organization’s 127
capabilities, rather than merely its size. However, the extent to which an organization
can sense and disseminate the key information from its clients depends on the process
complexity and the strength of its market-based organizational learning (Sinkula et al.,
1997) and quality management capabilities (Prajogo and McDermott, 2006; Reed et al.,
2000), and how these capabilities interact to produce varying levels of training and
operational responses. Depending on the strength of these capabilities, firms will engage
in either adaptive or transformational/generative learning (Argyris and Schon, 1978;
Senge, 1990). For example, if firms’ quality management systems are not well developed,
then their ability to develop strong learning and MOs will be affected, because quality
management capabilities can demonstrate what information is critical to quality, what is
do-able, and where process improvements are practicable. If, through its experience with
a given process, an organization knows information that is critical to service delivery,
the quality of information it will sense, disseminate and respond to will be much focused.
Similarly, the ability to challenge client’s assumptions or develop a shared vision
requires prior knowledge of the performance measures that are critical to quality. Thus,
this study presents a critical and hitherto unexplored link between an organization’s
market and LO and its quality management capabilities.
The study raises significant implications for both practitioners and policy makers.
First, the current educational curriculum does not fully cater to the needs of the BPO
industry. There is a need to develop a curriculum that addresses the BPO sector’s diverse
needs for both voice and non-voice services. Second, practitioners need to consider
training and learning from a relevance perspective. In other words, an appropriate
balance between formal and informal training appears to be the best way for SMEs to
impart new learning. Third, given the generally scarce resources at the disposal of most
SMEs, practitioners should know which organizational capabilities and resources to
invest in so as to improve client satisfaction and maintain their cost advantage. This is
particularly important when SMEs are competing in the low-end, routine, and
mass-service markets. The findings indicate that appropriate levels of investment in
quality management help to develop an advantage (differentiation) in terms of cost and
service quality. Thus, investment in quality management capabilities is not just the sole
purview of firms competing on the basis of differentiation. The opportunities to invest in
quality exist for SMEs in both mass- and differentiated-service markets. The role of
quality management and the application of numerous tools and standards employed by
the industry are highly relevant for staying competitive and should be an essential part
of the skills curriculum. Quality management systems encapsulate the focus of service
quality from both an external (customer’s) and an internal (focusing on process
efficiency and productivity gains) perspective. However, one must keep in mind that
over-investment in quality management systems can be counterproductive – such
investment must be at an appropriate level. Practitioners need to have a systemic view
of the organization in order to understand how its quality management capabilities
MRR interact with and have an impact on the development of other organizational
34,1 capabilities. To better respond to the constant changes typical in a dynamic outsourcing
environment, practitioners also need to manage the high-employee turnover costs
associated with recruitment, training, and the quality of service delivery.
HCT assumptions (Becker, 1964) that firms would invest in firm-specific rather than
general skills training did not find adequate support in this context. HR and operations
128 managers see limited relevance in differentiating between the two types of training,
because the nature of any training to be provided is a direct demand placed upon the
firm by its clients. Moreover, the novel nature of the training required leaves firms little
option but to employ a mix of “make” and “buy” approaches to staff management
and development.

Conclusion
Process complexity, staff turnover, and client specifications are key factors that shape
the nature and extent of training in the SMEs reported in this paper. The impact of
quality management systems, although linked to these factors in previous training
demand models, has been explored in much greater detail to explain how it helps in the
development of SMEs’ learning and MO capabilities and in influencing a firm’s training
provision. A metrics-based quality management ethos permeated all the case study
organizations. This metrics-driven culture led to the identification of specific tasks and
training needs. The temporal dimension of a process or task in its maturity cycle is a
significant factor in explaining the variation in training between firms. Future studies
could employ an ex-post facto survey design to establish the strength of the
relationships uncovered in our study. In particular, future studies can be directed at
analysing the impact of a firm’s competitive strategy on the development of
organizational capabilities and, consequently, training provision. Further studies could
also test the relationship between a firm’s market-based organizational learning
capability and its personnel and quality management capabilities. How do varying
levels of organizational capability influence the learning content and processes in firms?
The issue of linking training choices to managing employee turnover can be the focus of
subsequent research. Finally, as the study was conducted during a time (2005-2006)
when the sector was witnessing high growth, the findings offer a fertile ground for
future research and comparison with training provision and the role of training in a time
of global economic recession, especially when the external labour market has deep
pockets of skills to be exploited.

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About the authors

Ashish Malik is a Lecturer in HRM at the University of Newcastle, Australia. Ashish has taught
in India, New Zealand, and Malaysia at undergraduate and post-graduate levels. Before moving
to Australia, Ashish Malik completed his PhD from Victoria University of Wellington,
New Zealand and has held teaching and centre management positions at The Open Polytechnic
of New Zealand, New Zealand. Ashish Malik’s work has been published in the New Zealand
Journal of Employment Relations and Journal of European Industrial Training and presented at
numerous national and international conferences including the Academy of Management,
University Forum HRD-UK, Academy of HRD, and the Australia and New Zealand Academy of
Management. Ashish Malik’s research interests are in international HRM, strategic HRD,
and HRD issues in the high-technology and outsourcing industry sectors. Ashish Malik is the
corresponding author and can be contacted at: ashish.malik@newcastle.edu.au
Venkataraman Nilakant is an Associate Professor at the University of Canterburg,
New Zealand. His teaching and research interests are in change management, management
development and training, and human resources management. His research has been published
and presented at numerous international conferences and he has published several articles in
journals including the Journal of Applied Behavioural Science, Journal of Management Studies,
Organization Science, and Management Decision. He is a co-author of two books on managing
change and has contributed to several chapters in books on management and organizational
studies.

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