C U L T U R E A N D C H A N G E

STRATEGIC HUMAN

RESOURCE MANAGEMENT

Fabindia: Weaving Ideology and Values through Human Resources

A Unique Business Model

Being Accountable

Customers

Fifty year old Fabindia, a leading ethnic wear retail chain of 147 stores, is well known for its craft-based jewellery,

clothing, home furnishings, furniture, organic food and spices, amongst a host of other products sourced from

artisans across the country.

The company has seen exponential growth since 2005. Fifty stores were added in just the past two years. This near vertical

trajectory has proved to be a challenge for the company on several levels including, the availability of manpower at short

notice, inability to allocate enough time for training and development as people are expected to move into their roles

quickly and most importantly, having to move people to higher responsibilities before they are ready.

This case study elaborates on how Fabindia deals with these challenges and drives its people policies and strategies

based on its strong ideology.

A young American, John Bissell, founded Fabindia in 1960 with two clear mandates:

The company is here to do business, to make money and is answerable to its shareholders and employees

The creation of skilled, craft-based, sustainable jobs in the rural sector

The company's socially conscious business model is therefore, designed to ensure a deep reach to artisans in

remote corners of the country with a commitment to keeping the traditional crafts alive in India. As a direct

consequence of which, Fabindia has very specific business imperatives:

To keep interest alive in the artisans

To ensure that what they manufacture has a direct link to the market

To create a market for their products

To ensure that the customers are satisfied with what they are paying for and getting an authentic product

Fabindia has three key stakeholders, whom it empowers by encouraging participative ownership of the brand.

Fabindia is a highly labour intensive and service driven business. It puts customers at number one because they

consume the goods created by the artisans and thereby create a market for these products. The organisation

fiercely protects brand loyalty by meeting and serving customer expectations.

Customers

Artisans

Owner

&

Employees

Fabindia

Fig 1.1: Stakeholders in Fabindia

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Artisans

Owners and Employees

People Facts and Challenges

Using values and Ideology to Drive Business and People

Hiring for Ideological Fit

To help artisans make their goods more accessible, Fabindia has facilitated the setting up of 17 Community Owned

Companies (COCs) three years ago. These public limited companies function like aggregators, where geographically

close clusters of artisans hold shares and have individual votes in decision-making. Fourteen of the COCs have already

started turning a profit, of which 12 declared dividends for their shareholders in 2010. This has not only resulted in a

strong sense of ownership in the artisans but also ensures and maintains Fabindia's supply chain.

Seventy per cent of staff across all levels own shares in Fabindia because of which employees have a voice in the

company's business decisions. The sense of responsibility in the company has increased because every employee is

made aware of his or her rights and obligations as a shareholder.

Fabindia has a very strong value system and culture, of which continuous improvement is an intrinsic part. The HR

department is relatively new to the company. It was created one HR process at a time, by first introducing concepts

and creating openness in the minds of employees.

The ratio of HR to staff is 1:125, which translates into 13 HR personnel for 1500 employees. A single HR Resource

handles each region. The team has no specialists other than one Training Manager handling Learning and

Development for the company. All others handle all aspects of HR.

The exponential growth from 15 stores in 2005 to 147 as of date, means that the maximum number of employees have

been added in the last five to six years. Seventy-one percent are below the age of 35 years and are not highly qualified.

Managing their aspirations for growth which is limited by their education and capability and yet engaging and

motivating them has been a challenge. Attracting, developing and retaining the right talent is critical to the company's

expansion plans of adding 300 small format stores in 111 cities around the country over the next few years.

Fabindia has articulated a set of seven core values, which include honesty, transparency and fairness in intent,

based on the feedback and experience of the employees. Besides reinforcing these core values during induction,

the HR team along with the functional supervisor revisit these values on the shop floor every six months. The values

are also included as a key result area in every employee's appraisal.

Fabindia's ethos read - Hiring to translate passion for our business ideology into satisfying careers.

The process of identifying the right fit starts at recruitment. HR uses several tools, including Behavioural Event

Interviews, to assess if the individual's priorities align with the opportunities being provided by Fabindia. Even

campus interviews are only conducted in Institutions that provide technical training required by the company.

The demand for ideological fit is more stringent above a certain level. The stress on ideology, especially the strong

artisan connect, is reinforced through induction and orientation. These are designed to groom employees as per

internal requirements and with the intent to create a constant pipeline of trained resources. The employee needs

to understand and respect the product in the stores as being a creation of an artisan and a direct way to keep

traditional crafts alive in the country.

The company's ideology is further cemented by incorporating it into Fabindia's assessment programmes and

financial management. A demonstrated belief in organisational values is one of the key result areas in performance

assessment for senior roles. The company maps and tracks expressions of any ideological or value system

aberrations through 360 degree employee surveys and makes the necessary corrections.

Still, hiring mistakes do occur and the company has accounted for these by using six-month probation and a

mid-term review with feedback to catch them before they become a problem.

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Gender Bender

Employees as Owners

Cultivating an Entrepreneurial Work Culture

Creating the Drive for Excellence

Fabindia employs 1500 people, of whom 1100 are on its rolls and 400 are contracted. It is an equal opportunity

employer with a favourable 1.78:1, men to women ratio across the organisation. However, at the executive level 76

percent are women. Most stores have women at leadership levels, which is also very challenging because women

juggle many priorities at the same time. The organisation supports the careers of women, some of whom have

joined the organisation straight out of school or college, with leadership training, employment opportunities and

leadership positions across all levels. The predominance of women in leadership positions is a direct translation of

Fabindia's philosophy of empowering women.

In recognition of the contribution made by employees in achieving the 50-year milestone in 2010, Fabindia gave shares

to every employee who had served a minimum of one year. Around 650 employees were empowered by this process.

Why are shares so important to Fabindia employees? It is because Fabindia is not a public listed company. Given

that the company posted a substantial net profit on standalone revenue in 2010-11, this translates into wealth

creation at a sizeable level. An exponential increase in the value of shares last year has made it worth the

employees' while to invest in the company.

When Employee Stock Options were offered in 2010, all except four eligible employees took up the offer. In less

than 15 days, the employees earned a 75 percent dividend on their shares and 225 percent over the course of the

year. This commitment to the creation of wealth for employees makes them feel invested in the success of the

organisation, both literally and figuratively.

In Fabindia, each geographical region is handled in a decentralised fashion, with market regional heads working as

entrepreneurs to generate sales and contribute to the revenue of the company. Each store is a business unit with its

own profit and loss accountability. Since the company has a strong profit sharing philosophy, a bonus system

rewards overachievement. For instance, a 110 percent achievement of sales, translates into a 110 percent

incentive. However, there is a threshold for poor performance, where sales below 80 percent receive no incentive.

There are two fundamental reasons for this - a responsible employee is obliged to contribute to the bottom line of

the company and performance needs to be recognised and rewarded immediately.

Another aspect of the entrepreneurial culture is expressed through the COCs. Existing employees were offered the

opportunity to become a part of these companies as senior management and Managing Directors. Even though this

required relocation to second and third tier metros, several employees took on the responsibility because of the

implied autonomy and to some extent, the weight of the designation. These employees are now working hard to

generate business and create value for not only themselves but also the shareholders.

As with most organisations, Fabindia faced difficulties in getting:

Employees to attend training programmes

To use what they learnt through training, on the shop floor

To overcome this challenge and generate enthusiasm and healthy competition within the organisation, the

company identified four stores across the country, which performed brilliantly against a defined set of measures

and named them Centres of Excellence (COEs). It was careful to pick those stores that had young and relatively

new teams with high energy, who could be ambassadors of the best service. Fabindia publicised these stores in

the system and gave them great visibility detailing aspects of metrics where they were scoring exceptionally

high. The company also pumped the employees of these stores with classroom, on the job, technical and

behavioural training programmes, knowledge and recognition. The COEs became drivers for service

enhancement and focus on continuous improvement.

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Other stores started questioning this attention, prioritisation and special treatment with an eye to attaining the

status of a COE. They also understood that the attention was translating into higher sales, which leads to higher

bonuses, which in circular logic made training and getting the best skills very attractive. As a result, the demand for

training has increased by leaps and bounds. Where earlier it was a push, it has now become a pull factor.

This drive for excellence has tapped into the intrinsic motivation of employees making it completely self-driven

and sustaining.

Fabindia has an Internal Job Postings programme, which offers growth opportunities to all staff. The organisation

helps employees prepare for the next role and is considerate of individual needs, especially in cases where

relocations are required.

The HR system at Fabindia relies heavily on a framework of behavioural and technical competencies required to

deliver each role. The company also helps specialise generalist skills by using functional and behavioural

competencies for every position. Development needs are assessed biannually through multisource feedback.

There is a strong alignment between the Learning and Development curriculum and competencies.

Fabindia ensures that the training budget is available even during recession. Training is seen as an opportunity for

employees to put their best foot forward in terms of customer service and also as means to grow in their career and

move into higher roles.

Historically and traditionally, Fabindia has hired generalists. It has supported the development of these employees,

through mistakes, with training, learning and opportunity enabling them to perform well in their responsibilities

and take decisions that affect the performance of the organisation. In addition, having 76 percent women in

leadership positions, given that the average percentage of women leaders in the top 50 in the Great Place to Work

(GPTW) survey is just 20 percent, it is commendable. It has been able to achieve this by empowering women,

making them feel safe, secure and offering them growth and leadership opportunities.

Roles determine the level in Fabindia. Therefore, if an employee moves up a level, the role changes, which in turn

determines the specific learning and training that the company provides. Using a competency based HR system has

allowed the organisation to focus on the specific requirements of each role and employee.

Fabindia lives its ideology; it is a part of its DNA. The perception of the brand and organisation is strengthened by the

consistency with which the company conducts itself, amongst its employees, customers and the artisans. Its core

culture has not seen a dilution even though the environment has changed. Despite rapid growth, every employee is

made to feel connected and is able to recognise his or her role in the company's success story.

Question: Make a report of 2500 words that include

1: Summary

2: Central idea

3: conclusion

4:how this case study is related to organization theory and design?

5: History of FabInida?