Layoffs in the Indian startup ecosystem
amita-admin2021 was the year of the startup boom in India. Emerging from the pandemic, they attracted $35 billion in private funding, produced a record 44 unicorns, and went on a hiring spree to pursue their indefinite growth targets.
But international and macroeconomic factors have been a wet blanket, and Indian startups have sacked more than 11,000 employees since the beginning of 2022.
India’s prominent food delivery phenomenon Zomato plans to lay off about 3-4% of its workforce, which currently consists of nearly 3,800 employees. In October 2022, BYJU’S, India’s Edtech giant, announced that it would lay off 2,500 employees or 5% of its workforce. Microsoft laid off 1,800 employees in July 2022, and a month later, it laid off another 200 employees. In October 2022, it laid off around 1,000 employees, marking the third round of layoffs in the same year.
Edtech has seen the most layoffs, followed by consumer services and eCommerce. The three sectors have collectively seen 31 startups lay off 15,424 employees.
Growth-stage organizations have also been more vulnerable since they had a lot of cash and went overboard in hiring and creating markets in unsustainable ways.
Startups raise money from venture capitalists (VCs) on the promise of exponential valuation growth. Then they hire a considerable number of people to deploy in projects. But not all projects, verticals, and geographies work, and the redundant employees get laid off.
Startups are committed to achieving high ROI when they take money from an investor. They have to set a target and start chasing it. Once they form a target, they start optimizing for the target. In this scenario, they may have to let go of their vision, and that is where the problem begins.
Ironically, bootstrapped startups like Wingify, Zerodha, and Zoho have fared well recently.
In the current scenario, it is getting harder to raise funds, gaps between fund raises are expanding, bigger cheques are harder to come by, and VC firms are telling their investee firms to conserve cash and ensure an 18-24-months runway. One of the main levers of extending the runway is to cut their personnel.
Layoffs are a sobering reminder that the bigger the startups became, the harder they fell. Just because a startup had touched a sky-high valuation did not immediately mean its employees’ jobs were safe.
Layoffs are difficult. It means a sudden loss of income, instability, anxiety, and a blow to their self-esteem for employees. For the team, it can lead to mistrust towards their employer and a fear of losing their jobs. After a layoff, survivors experienced a 20% decline in job performance. Layoffs demoralize the team and lead to a weaker business.
Here are some tips to help organizations avoid layoffs:
Bring more work in-house
Costs can be cut down significantly by bringing more tasks in-house. Instead of outsourcing marketing or recruitment, startups can look at teammates who possess these skills or training potential. That could ensure that even when the requirement for an employee’s role lessens, their jobs could be restructured. It will also help upskill the team and develop new professional talents and passions.
Focus on Efficiency by Automating Tasks
One step businesses can take to avoid layoffs is to focus on efficiency. Employees can streamline their work processes and make sure to do the things that matter.
There should be a system to avoid wasting time, money, and energy. Automating some processes to free up employees to focus on more important tasks can be another effective strategy.
Work-From-Home Programs
Keeping employees in the workplace costs money. People consume electricity, water, and other utilities. Sending your workers home can cut costs without dumping valued people onto the street.
Get Employees Engaged in Their Work Through Recognition
One way to minimize layoffs is by doing our best to keep workers engaged. Founders need to ensure that employees feel valued by complimenting them for their work publicly and showing them why their work matters.
It is essential to let the team know there is a higher purpose to their work, and they will take it more seriously. The team will be more productive, and their energies diverted into things that drive more revenue and prevent layoffs.
Look to Internal Mobility and Cross-Training
One step that progressive employers take to avoid layoffs is finding vacant roles in the organization and placing individuals whose roles are getting redundant into these new roles.
Cut Funded Trips to Conventions and High Profile Workshops
A great way to avoid layoffs is to find affordable or zero-cost online training and workshops for the team so that instead of letting them go, they develop their skills for the company’s growth.
If Necessary, Furlough Employees
Furlough is a temporary leave of absence granted to an employee because of some unusual circumstances of an organization. It is an unpaid leave of absence. Furloughed employees usually retain their jobs, but it does not entail compensating the staff, nor does it end employment.
The winter in the funding climate is temporary. But these temporary shocks bring in a reality check that organizations should learn to build businesses more sustainably.
“Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees, and the rest follows from that.” Herb Kelleher
Sources:
https://analyticsindiamag.com/bloodbath-in-startups-whom-to-blame-for-layoffs
https://www.goco.io/blog/tips-to-help-small-businesses-avoid-employee-layoffs
