Of late, there has been an ongoing crisis in the startup industry on hiring front. Some leading startups like Flipkart, Grofers, StayZilla have deferred and revoked job offers for several students coming from reputed colleges like IITs and IIMs. Grofers has revoked offer letters of over 67 students from colleges all over India. The students came to Gurgaon for commencing their professional life. However, the company revoked their offer letters due to market conditions. Flipkart has also laid off 700 employees recently, to cut costs.
While the IITs are contemplating to blacklist some of the e-commerce firms and startups who have left the students high and dry, it is pertinent to get to the root of the problem. Also, it is equally important to find out whether startups can take concrete measures to avoid the revoking of job offers and reduce the havoc in a student’s professional life.
First, some of the reasons behind revoking job offers. A key reason is because of over hiring of the employees in order to scale up. There is an immense pressure from investors to focus more on profitability rather than focusing on other important issues like the growth of the startup companies.
As such, startup companies work on wafer thin margins and rely on the schemes like heavy discounts to attract potential buyers. Due to this, companies are facing major slump in the market. The market conditions is one of the major reasons why startups are revoking job offers.
Another trend witnessed at the C level hiring in startups recently is “temporary leadership management.” That is, startups these days are exercising financial prudence but at the same time they do have a requirement of getting top management to set up and streamline core business divisions. So they are recruiting C level executives for a short fixed tenure.
According to Rajeev Thakur, founder, Grassik Search, a leading C-level executive search firm, the Indian startup ecosystem is maturing fast but still young. “A lot of experienced talent is still needed to scale these companies profitably. We have seen a lot of growing startups looking at a new trend of recruiting star hires at attractive packages, but with pre-decided fixed duration in order to help their business scale up and at the same time exercise financial prudence.”
Ronesh Puri, MD, Executive Access, says, “Revoking of job offers is obviously unfortunate and most avoidable for any organisation. Therefore, organisations need to have a better perspective before going to campus and making job offers. They must take the worst case scenario and make the offers which they know they will follow. It is prudent to keep some people on the bench and be transparent about it because startup’s requirements can fluctuate given what the business environment is. Therefore it is better to be conservative and make offers you can live up to in any scenario. Sanctity of an offer is lost if you revoke it.”
Explaining the reasons behind revoking job offers, Sahil Thakur, e-commerce head at Grassik Search, remarks: “Funds drying up, lack of demand in a particular city or region, pivoting to a new business model, slowdown in the growth rate, are a few common reasons why job offers are revoked at the last minute.” In his opinion, consolidation, a consequence of having a lot of players operating within a particular space, often requires a resizing exercise. As a result, plans of hiring large teams are shelved and the work is distributed among the current employee base.
Elaborating his viewpoint, Thakur says, “In order to disrupt a particular space, a startup, in its initial years, tends to scale up teams quickly and depends heavily on discounting to onboard a large set of customers. Subsequently, when there is a drop in demand, the focus shifts towards unit economics and companies often change their strategies, which lead to layoffs or revoking of offers. In some cases, mis-communication amongst the senior management, hiring managers and functional heads can lead to an incorrect assumption of hiring numbers.”
Is there a way out? Definitely, says Thakur. Startups can certainly take concrete measures to reduce the havoc in student’s professional life. “Proper hiring plans need to be in place, especially before the admission season starts, in order to avoid any retractions later. Also, HR teams should work closely with each functional head in order to understand their hiring needs and then reach a final consensus. ”
Then the question arises whether startups are taking the right steps to retain the right talent. According to the e-commerce head at Grassik Search, startups make a lot of efforts to keep their employees happy by providing them good facilities and a good environment to work in. However, the work pressure can be very high and the work timings long, which can lead to attrition. “Startups provide a lot of options such as work from home, flexible work hours, longer maternity leaves etc. Even from a compensation perspective, companies provide attractive packages with options of ESOPs or a retention bonus. Over achievement of targets has a multiplier effect, which increases one’s compensation substantially,” says Thakur.