Whom to Blame for Layoffs?

Whom to Blame for Layoffs?

Layoffs: There has been a screeching halt to the great Indian startup party. Over 11,000 startups have laid off employees in the first half of this year as capital flow slows. Analysts predict that another 60,000 employees may lose their jobs this year due to a lack of funds over the next couple of years. 

Indian unicorns layoffs most

Organizations have long used layoffs to reduce costs; reducing staff can have a significant impact instantly. To reduce expenses, organizations that aim to reduce costs tend to focus on reducing “people” costs–compensation and benefits. In general, it is believed that announcing a layoff will boost a company’s stock price quickly, although studies contradict this claim.

A total of 10 startups laid off their employees came from the e-commerce industry and 7 startups came from the edtech sector. There were seven unicorn startups among these – Cars24, Ola, Unacademy, Byju’s, Vedantu, and Mobile Premier League (MPL). Blinkit, which used to be known as Grofers before it was acquired by Zomato, also fired people as a unicorn. 

Startups in India grew at an accelerated rate than those in its neighboring regions. Despite the layoffs, startups become more difficult to sustain the bigger they become. Startups did not automatically protect their employees’ jobs just because their valuations reached sky-high levels. 

Introducing 2,500 layoffs, Byju’s is quickly establishing itself as the poster child for startups that grew too fast. One of India’s most valuable startups, the edtech company is valued at USD 22 billion, but profitability has yet to materialize. 

A loss of INR 4,588 crore was reported by BYJU for the fiscal year ending March 31, 2021, which is 19 times greater than its previous value. According to the company’s press release, the financial data won’t be released until September 2022. The company is led by Byju Raveendran. Similarly, revenue in FY21 fell from 2,511 crores in FY20 to 2,428 crores. 

“There is no scope for short-term optics. Our company has made mistakes, just like everyone when they grow this fast. We apologize to them. When you have the privilege of making such a huge impact, it’s criminal to be complacent.” Raveendran said in an interview with YourStory.

Several industry leaders, including Harsh Goenka and Kiran Mazumdar Shaw, publicly criticized the company’s valuation for being too high. 

The effectiveness of job-trimming practices in improving an organization’s fortunes has been little studied, even though layoffs have become a standard business practice. As businesses seek to reduce costs and meet financial forecasts, they often resort to mass layoffs rather than pursuing innovative cost-reducing solutions.

If you’ve ever been laid off or had to implement a layoff, you know how important it is to consider alternatives that may be both more appropriate and more effective than a layoff. Identifying and implementing alternatives to layoffs takes a strategic approach, just as it does with so much effective human resource management.

VCs say otherwise

Mismanagement was prevalent among employees of startups that expanded too quickly and too much. 

Sanam Rawal, who was incubated by Blume Ventures, spoke with Analytics India Magazine. Founders of Blume’s portfolio startups benefit from Passion Connect’s networking and foundation-building services. 

Rawal responded, “That’s not true at all.” when asked whether this was an edtech issue. This is a problem that could affect startup companies in all sectors since it is a macro-level problem based on the stage of the startup.” Rawal points out that mass firings are often viewed in a “sentimental” way. According to her, there are valid reasons for this, since jobs are so fundamental to people’s livelihoods. A wrong notion about startups is that they are overbearing, says Rawal.

Startups should deploy more resources as part of their strategy. To achieve profitability, startups must cut costs once they reach the Series C funding stage. As a result of the dynamic macroeconomic environment in this ecosystem, startups have to adapt very quickly to changes in the regulatory environment – for example, ByteDance was suddenly banned in India. Even now, the biggest global tech companies are firing in huge numbers,” she said. Every big company has laid off people in the past – even now, every big company has had to lay off people. 

Rawal also dissociates himself from the narrative that venture capital firms are encouraging companies to expand ahead of schedule. “VCs only assist companies in solving their problem statements and achieving profitability. “They are guiding startups to reach their profit-making goal, not placing undue pressure on them,” she explained.

Prospective employees should also research the startup they intend to join before joining. There is more to the CTC than what was offered to them. She emphasized the importance of understanding the company’s stage, runway, and funding. 

Does bootstrapping make sense?

Wingify, Zerodha, and Zoho, on the other hand, have thrived as bootstrapped startups. The macroeconomic conditions in India have been adversely affecting startups that rely on VC investments. Bootstrapped startups have benefited from this. 

Nithin Kamath, Zerodha’s co-founder, and CEO explained in a Financial Express interview that, depending on the industry, startups could be bootstrapped. Furthermore, he explained how bootstrapping has its advantages. 

Investors trust you with their money as soon as they give you theirs. Setting a goal and chasing it is the next step. You start optimizing once you set a target. “In this scenario, you might be able to let go of some of the motivations behind starting the business in the first place,” he explained. The stock brokerage firm was co-founded by Kamath’s brother, Nikhil Kamath. They don’t have any angel or venture capital funding. Two billion dollars have been raised for the startup. 

Zoho, the Chennai-based SaaS firm led by Sridhar Vembhu, announced last week that its revenue reached USD 1 billion.

Technologists need to be humble, as Vembhu has often said. 

According to Vembu, the third bubble of the century is coming due to the current financial crisis, which appears to be the biggest ever. It usually takes almost a couple of years before everything returns to normal following a bubble burst, he explained, adding that bubbles burst in proportion to their size. 

Also referring to startups of Byju’s type, Vembhu said, “We can’t understand the present without understanding the past.” 

In addition to cost-cutting, economic decline, mergers, and other factors, many factors can cause an organization to downsize through layoffs.

It is recognized that layoffs are handled differently from terminations for poor performance or cause, but this article highlights policies and practices that are highly relevant to layoff situations. 

It is important to take into consideration many federal and state laws when contemplating a layoff. Layoffs can also increase the strength of some common law claims.

Employers may be exposed to a multitude of legal claims as a result of firing one employee, whereas layoffs may expose the employer to multiple legal claims from many employees.

An employer’s biggest challenge is implementing a layoff successfully. Nonetheless, management has developed effective practices to perform the process in a logical, legal, and compassionate manner. In addition to cost-cutting, economic decline, mergers, and other factors, many factors can cause an organization to downsize through layoffs.

It is recognized that layoffs are handled differently from terminations for poor performance or cause, but this article highlights policies and practices that are highly relevant to layoff situations. 

It is important to take into consideration many federal and state laws when contemplating a layoff. Layoffs can also increase the strength of some common law claims.

Employers may be exposed to a multitude of legal claims as a result of firing one employee, whereas layoffs may expose the employer to multiple legal claims from many employees.

An employer’s biggest challenge is implementing a layoff successfully. Nonetheless, management has developed effective practices to perform the process in a logical, legal, and compassionate manner.