Meet targets or Quit! BYJU’s new sales policy spooks thousands of employees.
BYJU’s has now changed how it offers a minimum fixed salary to thousands of its sales team employees as a recent part of a massive restructuring exercise spanning its operations in India.
Employees will now be required to select a current fixed salary tier from which they will be assigned specific revenue targets, then causing new employee discontent. Although all sales targets are not recent for BYJU employees, they were not previously linked to their fixed salaries.
BYJU’s sales executives will now have to opt for fixed salary brackets, which have specific sales and revenue targets assigned based on fixed compensation, according to the updated Revenue Assessment Policy, a copy of which Inc42 reviewed.
During their evaluation period, sales executives must meet minimum revenue targets. Those who have underperformed BYJU’s new sales benchmarks are likely to be asked to leave without any performance improvement plan (PIP).
The sales policy and incentive structure took effect on October 19, 2022, when BYJU’S announced the consolidation of its K-10 operations and the transition to an inside sales model rather than a direct sales model.
Under the inside sales model, most of the sales executives selling BYJU’s courses remotely and on the ground will effectively move to the company’s various offices.
Inside sales, which refers to sales conducted over the phone or virtually, is a strategy to reduce costs associated with closing deals when compared to direct sales, which require sales executives to travel to potential customers.
Furthermore, the edtech behemoth is reducing operations in nearly 60 cities as it transitions to an inside sales model, according to reliable sources close to the development.
According to one source, the company has already asked its employees in Gujarat, Pune, Uttar Pradesh, and other states to relocate to any BYJU’s office in or near their state, and has shut down backend operations in these locations. This comes after BYJUS closed its office in Thiruvananthapuram, Kerala, as part of a similar ongoing restructuring exercise.
“This is a result of the company’s new business structure, which essentially cuts down on direct sales and focuses on inside sales across the organization to streamline costs,” the source added.
According to a BYJU spokesperson, as the company expands its inside sales model, some field sales centers are being closed. Employees in these centers will be given the option of relocating to other BYJU offices for inside sales positions.
“We also have a robust mentoring system that guides and helps employees every step of the way, and BYJU’S culture of guidance and nurturing gives employees enough time to meet expectations.”
In the last three years, we have scaled up our sales team and established a robust 6-week training program before onboarding sales executives. According to a company statement sent to Inc42, “we recently revamped our sales model by further scaling up the inside sales teams in addition to the current outside sales (feet-on-the-street) model.”
BYJU’S had already announced 2,500 layoffs earlier this month, and our source also added that the company loses at least 1,000 sales employees each month.
Even though sources claim that the new model is intended to streamline operations and sales accountability, many sales executives have claimed that the new sales policy is likely to result in a new wave of exits from the company and an increase in attrition levels.
According to the Inc42 layoff tracker, Bengaluru-based edtech decacorn has laid off 4,000 employees across subsidiaries this year alone, accounting for more than half of the 7K edtech layoffs.
Is BYJU’s New Sales Policy Divisive?
BYJU’s reputation as a hard-sell company is not new. However, after reporting a loss of INR 4,588 Cr in FY21 and with an eye on profitability, the company has tightened its revenue assessment policy for sales executives.
According to the new policy, direct sales executives’ revenue expectations for the next eight weeks range from INR 8 Lakh to INR 9.6 Lakh, while inside sales executives’ revenue/sales targets range from INR 1.2 Lakh to INR 6.8 Lakh.
Every month, revenue targets are evaluated based on the previous eight weeks’ performance. Revenue expectations for inside sales executives will vary depending on the fixed salary structure chosen by the employee.
As an example:
An employee who chooses a salary bracket of INR 5 Lakh per annum or less must meet a sales target of INR 1.2 Lakh in the first month and INR 3.6 Lakh in the following two months.
Similarly, an inside sales executive earning INR 5 Lakh to INR 7 Lakh per year is expected to achieve a revenue target of INR 3.6 Lakh to INR 4.8 Lakh in two months.
According to the updated policy, employees who meet less than 70% of revenue targets or less will be required to leave the company without a PIP. Several sources we spoke with confirmed this.
Sales executives who achieve 70% to 100% of their revenue targets will be placed in the PIP for four weeks, after which their performance will be evaluated.
“Previously, executives were placed on PIP if revenue targets were not met, and sales targets were not determined by a fixed salary.” In addition, executives were not forced to leave if revenue targets were not met. This has surprised the entire sales team,” Sudarshan (name changed on request), a business development executive at BYJU in Noida, told us.
However, sources claim that only salespeople who fall short of their sales targets will be asked to leave. Furthermore, we were told that the new sales targets are lower than those typically assigned to salespeople under the direct sales model.
However, many sales team members believe that while the higher targets could have been met through direct sales, the new lower sales target may be unattainable through the inside sales model. According to one Bengaluru-based business development associate (BDA), meeting revenue targets will be more difficult with the new approach than with direct sales.
During the pandemic, BYJU’S shifted some sales teams to inside sales, despite the fact that the majority of their sales were done directly. Only executives who have met 100% or more of their revenue targets are now assigned to direct sales; the rest are assigned to inside sales. Meeting targets through inside sales is more difficult,” this BDA said on the condition of anonymity, adding that he believes tying fixed salaries to sales performance is unfair.
“All businesses set reasonable sales goals for their employees, and BYJU’S is no exception to this ‘high performance, high growth’ culture.” “We have always given our BDAs ample time to meet their targets, and the implication that we have unreasonable expectations is unfounded,” the company responded in a statement.
Employees like Sudarshan intend to leave the company after receiving their October paychecks. Even though BYJU’s has a high attrition rate, the mass exits caused by the pay structure change could harm the company’s sales operations and growth momentum.
According to an official company statement, there has been no change in the pay structure for BDAs, whether fixed or variable. According to the company, it provides “the industry’s best compensation structures and benefits.”
The company also denied putting excessive pressure on its BDAs and stated that it “provides adequate avenues for career growth” to sales associates.
BYJU’S Closes Offices Across India
BYJU’S has taken several approaches in order to recover from heavy losses in FY21 and demonstrate that it can turn a profit even in a difficult market.
BYJU’S has also taken an unsecured loan of INR 300 Cr from its subsidiary Aakash Educational Services Limited, according to company filings. The company clarified that the loan is secured by BYJU’S marketing activities and campaigns for Aakash.
Aside from that, the sales team’s restructuring necessitates the closure of several local offices where direct sales executives previously reported on a daily basis. This is being done in nearly 60 cities across India.
In Gujarat, for example, the edtech firm is said to have closed operations in Surat, Vadodara, and Bhavnagar and relocated a portion of its workforce to the Ahmedabad office. According to sources, a similar shutdown occurred in Pune, where the company fired its sales executives.
Aside from inside sales, many sales representatives would sell courses through BYJU’s Tuition Centres and Aakash coaching centers.
The fact that many employees have been told to relocate to a different location in order to continue working could lead to more resignations.
Inc42 was unable to independently verify the number of employees impacted as a result of some BYJU’s offices closing, but a source familiar with the developments told us that more than 100 employees have been laid off in these cities.
“As part of the ongoing organizational restructuring for profitable growth, BYJU’S is making every effort to offer relevant relocation opportunities to the affected employees,” the company said, adding that those affected by the Thiruvananthapuram shutdown have the option of relocating to Bengaluru.
This was in response to Kerala Labour Minister V Sivankutty’s announcement that the state government would eventually launch an investigation into BYJU’s after some employees claimed that the edtech giant was forcing more than 170 employees to resign without pay.
According to the company, these employees have since been offered severance pay.
BYJU’S is a human resources behemoth, with 50,000 employees across the country, according to our sources. Given the situation in edtech and the slow recovery of the business, additional reshuffling is likely for many companies.
Culture in Education
While India’s edtech ecosystem faces funding challenges, slow business growth, shifts from online to hybrid models, sustainability concerns, and cost-cutting measures, it is the employees who bear the brunt. If the last few months of 2022 are any indication, layoffs are never far away.
While BYJU’S has attempted to streamline its sales, many employees believe they are on the very wrong side of the line through no fault of their own. The edtech downturn has sparked debates and protests, and industry leaders such as BYJU’s must revamp not only their business performance, but also the broader edtech culture.
BYJU’s CEO writes an email to staff, apologizing for the layoffs.
Byju’s CEO and co-founder Byju Raveendran addressed employees in an email on Monday, citing changes in “macroeconomic” factors that have forced the company to lay off thousands of employees. This came after multiple news reports indicated that job cuts may have been greater than previously reported.
According to a source-based report published last week by TheMorningContext, the actual number of layoffs at the Byju’s could be around 12,000 employees, or then 25% of the workforce. However, all the edtech startup denied the report, claiming that only 5% of its employees were affected.
“I beg your pardon if this process does not go as so smoothly as we had hoped…As a result, we are informing all affected all team members individually with the dignity, then empathy, and patience they deserve.” “I want to then emphasize that the overall job cuts do not exceed 5% of our total workforce,” Raveendran said in an internal email to all employees on Monday.
FE reviewed a copy of the CEO’s email, which stated that Byju’s had scaled “quickly and then massively across the world in the last four years,” then reaching more than 150 million registered students worldwide, but had been forced to cut back on jobs to survive unfavorable market conditions.
However, two sources familiar with the rationalisation process told FE that Byju’s has been also scaling down in various locations in the tier-2 towns by closing a few satellite offices in various states. On Friday, Inc42 was the first to report these developments. It stated that approximately 60 office locations are being closed in order to save money.
“The company informed employees that a few satellite offices in the small tier cities and towns would be closed, and encouraged them to relocate to regional head offices rather than continue working.” However, the offline tuition centers affiliated with Byju’s future school are unaffected and will continue to operate in tier-2 locations, as only online learning-related job roles are affected by the layoffs,” one of the sources added.
According to another source, because the layoffs affected thousands of employees, the company management believes that having all multiple office locations in the same state is unfavorable due to high costs. “Even as the company closes smaller office locations, it is opening larger regional offices in each state,” the source added.
Raveendran’s email to employees on the Monday did not go into detail about the office closures. It did, however, note that the company’s decision to reduce job roles was unavoidable given that tech companies around the world are being forced to focus on “sustainability and also capital-efficient growth” due to adverse macroeconomic factors.
“In the last four years, we scaled up quickly and massively across the world…2018 to 2021 were our hypergrowth years…We also significantly expanded our family, both in our core business and also by onboarding team members from our acquisitions,” Raveendran wrote in an email to employees.
Since 2018, the edtech startup has been on an acquisition binge, acquiring around 17 startups in India and the United States. Since 2018, Byju’s has reportedly spent more than $1 billion on these acquisitions. Its largest M&A transactions include the $950 million acquisition of Aakaash Learning, then the $600-million acquisition of Great Learning, and the $150 million acquisition of Toppr, all of which occurred in 2021.
These acquisitions occurred at the height of a funding frenzy into various consumer internet segments, with edtech startups alone raising a record $4.2 billion across 310 rounds in fiscal year 21. “Then 2022 came and went. This was the year in which many negative macroeconomic factors altered the business landscape. These have compelled tech firms all over the world to prioritize sustainability and capital-efficient growth. This is not an exception at Byju’s. “After growing exponentially over the last four years, it is now time for us to grow sustainably,” Raveendran wrote in an email.
He also stated that Byju’s is currently working to achieve profitability at the group level in the current fiscal year because he believes the company has “substantial economies of scale and unit economics” that can be leveraged to achieve profits.
“However, our rapid organic and inorganic growth has resulted in some inefficiencies, redundancies, and duplication within our organization, which we must rationalize in order to realize this.” At the same time, we must continue to reallocate our resources toward projects that promote innovation and long-term growth,” Raveendran said.
According to the email, the edtech behemoth is working to provide the best possible exit package to employees, which includes extended medical insurance coverage for employees affected and their family members, outplacement services led by large recruitment specialists, and a provision allowing employees to look for jobs while still on the company’s payroll.
“I sincerely apologize to those who will be forced to leave BYJU’S. To me, you are more than just a name. You are not a digit. You are not merely 5% of my business. You are 5% of who I am. I understand that nothing can truly compensate for your loss. And I completely understand if you’re upset about this…Please also know that this isn’t a reflection on your performance,” Raveendran added to his message to employees.
Even as it continues to lay off employees, Byju’s has stated that it will hire at all levels in this fiscal year, with plans to hire 10,000 more teachers in the coming year. It claims to have 20,000 teachers on its platform already.
To date, Byju’s has raised over $5 billion in equity and debt capital, including a $250 million fundraising on October 17th from existing investors and the Qatar Investment Authority. However, the startup has been in the news due to a 17-month delay in reporting its audited financials to the registrar of companies (RoC), which drew intense scrutiny from start-up industry experts as well as various Indian government agencies.
In the fiscal year 2021, Byju’s reported a loss of Rs 4,564 crore. According to the financial statement, the company’s net loss increased to Rs 4,564 crore as promotion and employee expenses increased. Revenues fell 3.3% to Rs 2,428 crore as the company deferred approximately 40% of its revenue to subsequent years as a result of its new revenue recognition model.
