Hiring party in startups is over and the reality has ushered in. Much adored startups are downsizing fast and mass layoff is a routine phenomenon. Snapdeal employees are the latest casualties. The company has told 200 employees to go on Performance Improvement Plan.
All of this layoff will be from the customer service department. Management has told these employees to achieve the customer satisfaction score of 85 percent or leave. It does not seem feasible as Snapdeal has never been able to cross 65 percent.
Employees are of the view that performance parameters have been made unnecessarily stringent and there is no valid reason for such layoffs.
An employee on the YouTube has said: “Snapdeal hired us recklessly without any future projections about our role in the company. Management has chalked out PIP parameters deliberately so that we are left with no option than resignation,”.
Employees have also alleged on company of selling counterfeit products and that’s the prime reason of customer dissatisfaction. In the last one year, around 600 people have been fired from the customer service department.
However, Snapdeal management has denied of such layoff. In an official statement it said to yourstory.com, a famous media portal: “There have been no layoffs at Snapdeal. As part of the ongoing performance management and development program, some team members at our Contact Center have been offered a Performance Improvement Plan (PIP). While many team members have opted for this opportunity to improve the requisite skills set, some team members have desired not to undertake the PIP and have instead decided to move on voluntarily.”
In the June last year, Flipkart told hundreds of its employee to join the BPO division which did not go down well with employees. Employees in TinyOwl had even taken hostage of its owner after the layoff decision. In the last six month all famed startup Zomato, Grofers, Helpchat and Peppertap have fired employees and suffered employee unrest.
Where they went wrong
Startup culture in India is a new phenomenon. Even in the United States, only 1 out of 10 companies succeed. These Indian startups focused initially on fast growth and hired a large number of employees recklessly. They ignored profitability at the cost of growth.
Startups lost their focus from sustainable business and generating profits. They expanded in many tier-II and tier-III without doing any market research. Many startups in the hyperlocal space are expected to shutdown their operations.
Shailesh Vikram Singh, Executive Director, from Seedfund, said to XING Magazine: “Profitability is a must for any company. Without it, they can’t sustain.”
Serial entrepreneur Kashyap Deorah, views: “Startups are shifting their focus from growth at any cost to road towards profitability.”
Online grocery platform Localbanya and Townrush also lost focus from growth and have to shutdown their operations in many cities. They never tried to build a sustainable business sans investors capital.
Explaining the reason for mass layoffs in Indian startups Ravi Gururaj, NASSCOM product and executive council, says: “startups fire employees under three circumstances: they don’t have money and want to raise funds; they don’t plan properly and over hire, or they hire the wrong talent.”
Amit Jain, Co-founder, CarDekho says:“Chasing scale without taking care of revenue is a risky thing to do and business ultimately suffers.”
Founders resorted to mass hiring to achieve scale, but when they failed to achieve that scale, most of these employees became redundant. The situation becomes worse when fundings dried up. Firing remains the only way to survive.
Many startups also spent recklessly on unnecessary things such as advertisements. Can you forget Housing.com Lookup campaign.
Sumit Chazzad, Co-founder CredR says, “We know the importance of every penny. So we avoided spending on expensive television ads.”
Mass layoff is also reminder of the fact that funding has dried for such startups and investors are not taking fancy projections such as GMV seriously. They are pressurizing to become profitable.
It will be wrong to say that employees don’t have requisite skills. One of the employees in Tinyowl told XING Magazine: “My manager told me that they made a hiring mistake and you should better look for the new job. I am never going to work for startups again.”
Are investors responsible?
Most investors after putting money in startups tell them to hire fast and ramp up their marketing teams. Both of these advice are wrong. It only makes them prone to next round of funding and they lose focus from building a sustainable business.
The point to understand is that firing, sacking, mass layoff or offering pink slips may be a norm in the U.S. and other developed countries, but it does not go well in the society.
Startup founder often fail to understand that absorbing people at high rates are a risky proposition. Layoffs are a natural course correction. They will have to understand that high growth with lean and efficient teams is a more sustainable way to run the show.
As the story will further unfold, firing in early growth startups will only increase and those seeking jobs in such company should understand this harsh reality. However, startups should also hire diligently and focus on building strong fundamentals in their area of operation.