Startups have been facing flak recently for revoking job offers, which has left many students in the lurch. Even institutes like IIM and IIT are on the warpath against startups, blacklisting many who made offers to their students but backed out at the last minute or deferred joining dates.
2015 has been an eye-opener for startups and the economy as a whole. While startups experienced a shower of funding, the year also witnessed the sacking trend. Big names like Zomato, Foodpanda, Housing, Flipkart and Stayzilla have laid off employees, which worried some, but also provided a good lesson to the ecosystem. `
Top Reasons growth-seeking startups are forced to fire employees and revoke job offers
Firstly, funding crunches and falling valuations cause entrepreneurs to panic, which leads to the most impactful route to survival- mass firing. When audacious growth strategies don’t work and targets are not met, pressure builds up from investors, who seek high returns and expect an elevated valuation. As investors tighten the purse strings, sacking becomes the inevitable and pragmatic option.
Increased focus on profitability and over-hiring are the reasons why companies like Housing and Zomato executed layoffs. Companies draw up unrealistic targets and goals, and to meet the demands, over-hire resources and, also, the wrong talent at times. Moreover, startups work on a different business model, relying on heavy discounts and thin margins to attract customers. This is one of the major reasons why companies are facing a major slump in the market today.
Secondly, mass firing also takes place when startups get acquired or merge with another entity. For this, they avoid duplications in talent, processes and products, which helps streamline internal business operations and improve efficiencies. An example of such an event would be the merger of Common Floor with Quickr.
So what steps can startups take to avoid massive lay-offs and reduce the trauma for aspiring young students looking to jumpstart their professional careers?
Planning sensibly at the initial phase
The most important phase for any startup is the initial phase of expansion. Here, companies need to plan properly, with a long-term approach, accommodating future goals and tangible targets sensibly. Hiring based on a long-term approach considering all phases of business growth will avoid retractions in the future.
Using HR tools
HR teams should be actively involved in each phase of expansion and work closely with senior management in order to gain an understanding of current hiring needs. Moreover, using the right HR technology and tools, like cloud computing and pre-assessment tools, organisations can cut down the cost of hiring, and would be able to extract the best talent quickly. Online tools hold an immense potential as well, especially when it comes to finding the right talent for an organisation. However, these tools have yet to be fully explored in the Indian startup scenario.
Cloud computing also provides umpteen opportunities for streamlining internal and external trails, aligning them to the targeted business goals. These systems are cost effective, and support the functioning of various practices within an organisation throughout its lifecycle. It allows HR personnel to conduct extensive research and gain insights into current scenarios, deliver new perspectives, and make predictions that can help businesses make wise and informed decisions.
Hiring interns and contract employees
Hiring college students who are on a summer break for a period of two to three months is a great option to avoid full time expenditure, especially when the future of a startup is unclear. Interns are flexible and trainable, with benefits of low cost optimisation. The trend of hiring contract-based employees is also increasing as startups can appoint talent with a high skill set for definite time spans.
With startups taking centre stage in the job market, the culture of “Hiring and Firing” is no longer an unknown phenomenon for job seekers. This culture could raise a serious question on the credibility of startups as a career option, especially for students. Planning wisely and optimising internal management practices will help startups maintain their reputation, and attract the right talent as well.
The article was first published at Yourstory.com.