Startups should refrain from layoffs

Startup ecosystem in India has been hailed as the bright spot of Indian economy in this decade. Entrepreneurs of different walks of lives have not only made it big in the business world, but they also created lakhs of jobs in a job-starved Indian economy. During a black swan event like the Covid pandemic, when established industries tightened their belts, these new age companies emerged as the biggest job creators. However, a hyperinflationary environment and global events like Russia-Ukraine war have changed the environment. There is no free money moving around. Big ticket fund raising has dried up. Companies that have pursued growth at the cost of profit rely heavily on external fund raising are in trouble now. And so are the employees working in those organisations. In recent months, several startups have started firing staffers in their bids for cost optimisation. The latest one has come from Byju's. The edtech decacorn (valued at more than $10 billion) and the most valued startup in India has begun the process of laying-off around 2,500 employees- five per cent of its 50,000 strong workforce. In a mail, Founder & CEO of the company, Byju Raveendran sought forgiveness from those employees who are in the process of being fired by the edtech firm, as the company eyes profitability by the end of FY23.

Now comes the question of brand image of a company after laying-off staffers. Do employees really forgive employers after such an event? What happens to the brand image of the organisation? Does it remain attractive to attract talent in future? The truth is there is no straight forward answer to these questions. In a capitalist economy, profitability sits at the core of any business entity. Therefore, many argue that such acts are normal in the process of growth and evolution. Another school of thought thinks that companies lose their ability to attract good talent for a long time if such process is perceived as unfair. So, whatever may be the argument, one thing is clear that brand image takes a beating. In this context, it is important to engage with employees and try to make the process as frictionless as possible.

India has a huge young population. This demographic dividend is the strength, which is touted as the basis for country's strong growth prospects in coming years. This young mass requires not only gainful employment but also stable jobs to make this possible. Therefore, at the time of chasing growth, each startup should be aware of the responsibility to the young mass. There is no doubt that not only startups are able to create many white-collar jobs, but also scores of blue-collar jobs have also been created. But, hiring & firing will definitely bring bad reputation for Indian startups. Prospective candidates will think twice before joining any organisation which had done mass layoffs. Though India is an employer market now with a little say of employees, things are likely to change drastically in the next 10-15 years as demographic dividend vanishes. Hopefully, India doesn't start facing a problem like the US or many European countries where companies don't have enough workers owing to aging population and subsequently, wage cost shoots up. For a country of 1.4 billion population with a per capita income of around $2,000, that will be a nightmare.