Merely Banking on Cost Savings Isn’t a Sustainable Strategy for GCCs: Perez Katpitia, Falabella

From the inception of its technological collaboration with Latin America to hosting a unique e-commerce marketplace, Falabella India showcases an expansive retail spectrum. Perez Katpitia, Director – HR at Falabella, sheds light on the company’s talent evolution, cultural challenges, and strategic HR investments, offering invaluable perspectives on the contemporary talent landscape in India. 

How have Falabella’s unique business model and tech collaborations contributed to its growth and diversity in the Indian market?

Falabella presents a diverse array of retail formats encompassing home improvement, supermarkets, real estate, malls, banking, and cutting-edge digital payment solutions. Although our Technology Innovation Center in India was established in 2018, our primary focus has been the development of specialized tech solutions in close collaboration with our Latin American counterparts. Our dedicated specialists in India engage in advancing digital commerce, optimizing logistics, innovating store technologies, and harnessing data analytics, all contributing to an elevated customer and retail experience. Furthermore, we actively manage an e-commerce marketplace for third-party sellers, akin to industry giants such as Amazon and Flipkart, thereby reinforcing our multifaceted presence within the retail sector.

How has the talent landscape evolved in India, especially for GCCs transitioning from IT support roles to R&D, engineering, and tech innovation? And, how does Falabella’s journey in the last five-and-a-half years fit into this narrative?

Our journey at Falabella is quite distinctive. Right from the beginning, we didn’t adhere to the traditional services mindset; instead, our core focus has always been on engineering and transformation. Establishing GCCs in India is relatively uncommon for Latin American companies, making our initiation somewhat experimental. We started humbly, to replace a team of 20-30 members from China, initially concentrating on e-commerce and digital retail. Over time, we broadened our scope to encompass logistics, store technologies, and data analytics. Our strategy evolved based on our achievements.

Throughout these five-and-a-half years, we deliberately maintained our emphasis on engineering teams, refraining from delving into the typical back-office or support functions commonly found in other GCCs. This distinct approach has allowed us to keep our team lean, with a headcount of approximately 450, which is relatively modest considering the duration of our presence in India.

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What primary challenges did Falabella encounter when initiating its setup in India?

Falabella encountered its primary challenges predominantly revolving around cultural and language barriers. Although the technological integration proceeded relatively smoothly, many of our recruits possessed prior experience in retail tech transformations from their roles in other GCCs in Bangalore. That gave rise to a few initial concerns. During the early stages, employees raised questions about the potential impact on jobs, and there was apprehension regarding communication difficulties stemming from cultural differences, especially considering that Falabella’s Latin American origins introduced a novel dynamic for many. However, effective leadership support played a pivotal role in successfully navigating these challenges. Notably, Ashish Grover, who spearheaded Falabella India as the Head of e-commerce, was later promoted to the position of global CIO, underscoring our unwavering commitment to our Indian operations.

Falabella as a case in point, the conventional cost-advantage narrative doesn’t hold water. Comparing the Indian rupee against the Chilean peso doesn’t offer the same cost benefits as it does against the dollar. This raises a pertinent question: Given the linguistic barriers and the absence of direct cost advantages, why would a firm like Falabella establish a GCC in India? The answer is talent.

How do the talent attributes in Chile compare to those in India, given Falabella’s operations in both regions?

At Falabella, we take a different approach when it comes to recognizing talent, and we don’t categorize individuals based on their geographical origins. Our organizational structure is truly global, and we don’t label teams as “Indian” or “Chilean.” Instead, we refer to them as platform teams that operate across various locations.

However, one significant difference arises in terms of talent accessibility and scalability. Given India’s extensive talent pool and expertise in retail technology, we often find that sourcing talent and expanding our operations can be more streamlined in India compared to Chile.

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Given the recent layoffs in the tech sector, it’s been reported that GCCs have been able to onboard high-quality talent. What’s your perspective on this?

I agree with that assessment. Despite the broader market slowdown, the GCC sector appears to be resilient and flourishing. The sustained attraction of new GCCs to India underscores the exceptional quality of talent available here. This rich talent pool, though finite, has intensified competition among companies. Undoubtedly, recent layoffs, particularly from larger service-based firms, have presented us with an opportunity to welcome on board some truly exceptional professionals.

How do GCCs view the integration of AI in their talent management approaches?

In talent management, AI often appears intriguing, blending fascination with uncertainty regarding its practicality. While AI holds future promise, its current adoption in this field is in its early stages. As with any emerging technology, there are pioneers and cautious observers.

While AI can automate many HR operations, it’s crucial to remember that talent management centres around human interactions. Data and AI provide valuable insights, but human elements like emotions, instincts, and intangibles remain irreplaceable. In leadership development, data can guide, but a human touch is necessary for true impact.

Concerns about AI job displacement exist, but my perspective is that AI-savvy individuals gain a competitive edge. It’s not solely about AI but how effectively one leverages its capabilities.

What drives Falabella’s hiring strategy in India, especially when there are claims that GCCs are currently recession-resistant and hiring in significant numbers?

The allure for organisations to establish GCCs in India hinges on two main factors. First, the undeniable depth of talent India offers. Second, the ongoing cost advantage India provides, especially with the US dollar’s strength. In the backdrop of a recessionary environment, this cost-benefit becomes a compelling factor for companies to contemplate initiating a GCC in India. However, a nuanced understanding reveals that merely banking on cost savings isn’t a sustainable strategy. It’s imperative to offer meaningful work and learning opportunities to the workforce. The ready availability of skilled talent, especially in the digital domain, often compensates for any ancillary costs. Using Falabella as a case in point, the conventional cost-advantage narrative doesn’t hold water. Comparing the Indian rupee against the Chilean peso doesn’t offer the same cost benefits as it does against the dollar. This raises a pertinent question: Given the linguistic barriers and the absence of direct cost advantages, why would a firm like Falabella establish a GCC in India? The answer is talent. While some roles may indeed offer more significant cost benefits, in many areas, the value of talent eclipses cost considerations. The potential impact that this talent can generate becomes the defining factor.

Also read: upGrad’s Srikanth Iyengar Explains the Dynamic Shift in India’s GCC Skill Ecosystem

Could you break down how the 450 employees in India are allocated across various roles?

Of course. Around 200 are dedicated to digital retail, encompassing e-commerce and marketplace. About 80 focus on our home delivery logistics. The remainder, approximately 70-80, are divided between store technology and data analytics.

In the realm of GCCs, what’s the next promising talent domain poised to rise like AI is today?

That’s an excellent question, and I would emphasize the importance of data analytics. While AI is a component of this field, the broader realm of analytics, especially within our retail context, holds tremendous significance. As a retailer, we possess extensive consumer data, ranging from shopping behaviours to preferences. The potential to craft highly personalized experiences using this data is vast. Given the strong proficiency in data skills found in India, I foresee this becoming a central focus for GCCs in the region.

Having joined Falabella during the COVID period two years ago, what was the primary directive given to you?

When I joined Falabella, even before the pandemic’s full impact, the company already had a degree of adaptability to hybrid and remote working. The pandemic just amplified this necessity. Our rapid adaptation was one facet. More crucially, we prioritised the well-being and care of our employees and their families during these testing times. This wasn’t just in tangible resources like care packages or setting up a crisis management team to assist with urgent medical needs, but also in the intangible aspects, like maintaining consistent communication and support. We empowered our managers – who are closest to the employees – to provide guidance, display empathy, and ensure mental well-being. Initiatives like introducing a COVID Care leave, where employees could take a week’s paid leave if a family member was affected, showcased our proactive approach. Presently, with a workforce that’s largely remote-first (with nearly half of our employees not even residing in Bangalore), we’ve transitioned seamlessly into this new norm. For those in Bangalore, while we encourage in-office work a couple of days a week, it’s not mandated, emphasising our trust in our employees and valuing their comfort and safety.

Also read: DXC Technology’s Lokendra Sethi Explains Why India Dominates as the Top Choice for GCCs

Can you elaborate on the HR-related technological investments Falabella has made since you joined or any you’re aware of from the last five years?

One of the significant investments we’ve embarked upon recently is the transition to a unified HRMS (Human Resource Management System) platform across all our global locations. This change was imperative, as having consistent tools is essential for streamlined operations. Up until this point, our various global offices operated on separate HRMS platforms, which posed challenges in data consistency and accessibility. With the new system, set to go live in India this September, we’ll have a single HRMS platform accommodating all technology teams across the globe. This will not only enhance the user experience for our managers and employees but also facilitate more efficient people analytics. Given that we have a global people analytics team based in LatAm, this unified platform will empower them with homogenised data from all regions, aiding in better decision-making and insights.

What are your hiring plans for this year?

In 2023, our hiring momentum slowed in the first half, reflecting the global economic downturn. While in 2022 we expanded rapidly, adding around 200 employees, representing nearly half of our total strength, we don’t anticipate replicating those figures this year or the next. Instead, our focus will shift to fortifying specific sectors, especially data analytics. Having reached the five-year mark for our GCC, its role and significance are now well-established within the organisation.

We started humbly, with the goal of replacing a team of 20-30 members from China, initially concentrating on e-commerce and digital retail. Over time, we broadened our scope to encompass logistics, store technologies, and data analytics. Our strategy evolved based on our achievements.

With the surge in hiring in sectors and the apparent talent war, how has the compensation structure at Falabella adapted, especially given that you hired almost 50% of your current strength in 2022?

Indeed, until about the end of 2022, the talent landscape experienced unprecedented competition. While India offers a vast talent pool, truly exceptional talents are finite, resulting in companies competing fiercely for them, which in turn drives up compensation packages. This trend has, however, shown signs of stabilising more recently. For instance, our offer-to-joining ratio, which was around 60% in early 2022, has improved to approximately 90-95% now.

To address the variances in pay and to ensure fairness in our compensation approach, we initiated the ‘Fair Pay’ system. Traditionally, companies would offer a certain percentage increment on a candidate’s last drawn salary. However, this method seemed incoherent to us given the diverse backgrounds of our potential hires. Thus, we decided to benchmark our compensation based on the role and its respective market value, irrespective of a candidate’s previous earnings. This approach allowed us to offer what we believed was just compensation for the role in question, and it served as a unique proposition for potential employees, emphasising that we value their skill sets and not their past compensation. To stay updated and competitive, we also engage in market benchmarking every six months, ensuring our compensation remains both fair and attractive.

About the expert: With an extensive HR career that spans more than 18 years across diverse sectors including consulting, banking, and retail, Perez Katpitia has consistently exhibited strategic leadership and visionary thinking.