Info-tech

Singed by bad hiring calls, start-ups embrace ‘strategic recruitment’

Priyanka Pani Mumbai | Updated on January 16, 2018

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Experienced leaders being hired at the top; temps preferred at the bottom

Even as the Indian start-up and e-commerce ecosystem has been battling a series of lay-offs in the past few months, most companies are now reviewing their hiring processes as they chart a road towards profitable growth.

For example, e-commerce biggies such as Flipkart and Snapdeal, which have laid off hundreds of employees in recent months, are now hiring temporary workers on a project basis. The companies are hiring over 10,000 temporary workers each for the upcoming festive season.

Similarly, many smaller players such as Tiger Global-backed Zopper.com, Rubique, and TranServe are opting for experienced professionals to strengthen their leadership team and have reduced their hiring of freshers.

With hundreds of start-ups shutting down and many focussing on a profitable growth in a tight funding scenario, employees were at the receiving end.

Over-the-top salaries

According to various recruitment firms, over 10,000 people were laid off by well-funded start-ups in 2016 as their excessively ambitious growth targets went unmet. That number is expected to double in the next six months.

The start-up hiring activity was at its peak during 2013-14 on the back of abundant foreign investor funding. This also resulted in over-hiring. However, a lot of them are rectifying their mistakes and looking at ‘strategic hiring’ even as they work to improve sales and profits.

Most of these hirings were done as campus placements, with freshers taking home package upwards of ₹15 lakh. To put that in perspective, many Indian software companies’ campus offers start at ₹4 lakh. Besides, many also took to appointing senior leadership at inflated designations and salaries.

Time for judicious hiring

Recruitment agencies and industry experts point out that start-ups in India chased growth and scale, but overlooked profitability and unit economics. After the bruising lay-offs, the companies are now being judicious in their hiring plans.

Maanendra Singh, Managing Partner at global recruitment company, ANTAL International, said, “Hiring more people with average talent on low salariesis the worst thing for a start-up. This is what happened in the past few months. Growth, scale, funding, skyrocketing valuations, GMV, and other fancy terms do not appear to be helping them anymore.”

According to him, a start-up should hire diligently and keep a hawk-eye on the burn rate. Hiring in start-ups accounts for as much as 40 per cent of overall cash burn.

Singh added that start-ups are constantly changing their business models, which too is leading to job losses as many roles and functions become redundant in the new structure. Hence, companies should hire diligently on a project basis or on a need basis.

“Most of the reckless hiring over the past two years was based on investor backing on the pretext of projected growth and scale; however, several companies have failed to achieve the growth,” Singh added.

The valuation of e-commerce poster boy Flipkart was, in fact, downgraded several times this year by its own investors as it failed to perform as expected.

Neeraj Jain, CEO and Co-founder, Zopper.com, a start-up that deals with consumer durables, said the company has stopped hiring just for the heck of it.

“Bad hiring decisions can not only lead to unstable operations, but can also create loss of valuable capital resources that could have been put to better use,” Jain added.

Salaries are the key

Lendingkart’s CEO Harshavardhan Lunia said salaries are often the single biggest expense driver on a business’s balance sheet, and this is therefore prompting start-ups to review their hiring strategy regardless of their size and scale.

“At the end of the day, everyone is working towards making a profitable venture,” he said. The recent firings, he added, have earned a bad name for start-ups.

Published on October 02, 2016

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