Start-up layoffs: Why India Inc needs to handle them better
Flipkart had also been reported to having dismissed 700 employees to cut costs, though the company clarified that it had done so to weed out underperformers.
- Aug 22, 2016,
- Updated Aug 22, 2016 11:38 AM IST
Whatever the reason, as the once go-go funding scene experiences a winter chill, layoffs are becoming pretty common. Though it sounds cruel, layoffs are healthy as they help companies survive. It makes them focus on trimming costs driven by market forces. When entire companies shut as in the case of Askme or GoJavas, it allows more competitive, healthy and nimble rivals to survive. The process of creative destruction, while painful to those impacted, is the bedrock of a healthy economy. Even globally established companies like Cisco and Microsoft routinely lay off people to respond to changing market dynamics. However, start-ups in India need to handle layoffs and restructuring better. More so than other cultures, in India the job one holds (unfortunately) defines the individual. So, to begin with, companies need to have a culture where it communicates on a continuous basis to employees on what is happening in the market. They may do that to investors but they need to be more transparent with other stakeholders like employees and media. Second, they need to provide as much handholding to employees being made redundant, as possible. Things like outplacement services, which are commonplace in the West, are still in their infancy in India. Absence of social safety nets means that employers sacking workforce, should try and provide as much cushion as possible. Where possible, pay and other benefits of a few months ought to be given so that a worker has time to land on his or her feet.
Layoffs and redundancies in a modern economy are facts of life. There is no escaping it. Companies who handle this with grace and tact will attract the best talent through ups and downs.
Whatever the reason, as the once go-go funding scene experiences a winter chill, layoffs are becoming pretty common. Though it sounds cruel, layoffs are healthy as they help companies survive. It makes them focus on trimming costs driven by market forces. When entire companies shut as in the case of Askme or GoJavas, it allows more competitive, healthy and nimble rivals to survive. The process of creative destruction, while painful to those impacted, is the bedrock of a healthy economy. Even globally established companies like Cisco and Microsoft routinely lay off people to respond to changing market dynamics. However, start-ups in India need to handle layoffs and restructuring better. More so than other cultures, in India the job one holds (unfortunately) defines the individual. So, to begin with, companies need to have a culture where it communicates on a continuous basis to employees on what is happening in the market. They may do that to investors but they need to be more transparent with other stakeholders like employees and media. Second, they need to provide as much handholding to employees being made redundant, as possible. Things like outplacement services, which are commonplace in the West, are still in their infancy in India. Absence of social safety nets means that employers sacking workforce, should try and provide as much cushion as possible. Where possible, pay and other benefits of a few months ought to be given so that a worker has time to land on his or her feet.
Layoffs and redundancies in a modern economy are facts of life. There is no escaping it. Companies who handle this with grace and tact will attract the best talent through ups and downs.