Why startups like TinyOwl are resorting to mass firing

8th Sep 2015
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On August 31, employees at the two TinyOwl offices in Pune and Mumbai walked into the office just like they do on a normal Monday morning and were in for a rude shock.

The startup, allegedly, let go almost 100 employees, stating cost cutting as the reason. Last month, Housing.com was in the news when their plans to lay off employees became public, now it is TinyOwl’s turn.

firing

“I was called personally by my manager and told that they had made some hiring mistakes that they want to rectify, and my skill set was no longer required. Of course, they told us that it was not that we were not productive or anything, but it was their problem, not mine,” said an employee who spoke under the condition of anonymity.

Employees were given a month’s salary as severance and a promise that the company would help them find other jobs.

The employee added, “I don’t know how far it is true that they will help, but I am never going to work for a startup again. I joined TinyOwl four months ago hoping things like this would not happen. It was a growing company, which is why this is so unexpected.”

The ones who were not fired were, allegedly, told not to talk to anyone till the dust settled down. They were also advised to “pull up their socks” and increase work efficiency.

This is not the first time TinyOwl has had to lay off employees, and this is definitely not the first time startups have had to downsize their teams.

“If a startup needs to be 10 times better than other government-run companies or large MNCs, they have to fire 10 times faster. Startups grow at such a rapid pace that there is no time for a half-yearly performance review and such,” said Anand Lunia, Founder of IndiaQuotient, an investment fund for startups.

Adding to that he said,

If any of my portfolio founders came up to me and said ‘Anand this guy is not performing, that guy is not performing, I don’t know what to do’ I would say, ‘Get lost. If you don’t have the guts to sack them, you are not a good founder’.

According to Ravi Gururaj, NASSCOM product and executive council, startups fire employees under three circumstances: They don’t have money, and want to raise funds; they don’t plan properly and over hire; or they hire the wrong talent.

Someone with knowledge about the happenings at TinyOwl said that almost 15 employees were laid off from the Pune office, while between 130 and 150 employees were laid off at the Mumbai office. The majority of layoffs were from the sales and marketing teams, and the business intelligence and data teams.

“They just want to show more runway to their investors. They had a runway for around six to seven months when they had 400 employees. Now with over a 100 employees gone, they might have stretched it to a year or so,” said a former employee of TinyOwl.

Talking to YourStory, Tanuj Khandelwal, Co-founder of TinyOwl, said that the number of employees who were let go was less than 100, a direct contradiction to the information we got.

He said in a statement,

TinyOwl has grown immensely in the past year and our efforts continue to be focused on strengthening the brand’s position in the market on a national level. The elimination of certain positions in the company have been made on a strategic level, to increase efficiency, productivity, and re-direct our diverse talent to focused departments, providing the best innovative offerings to our customers. We appreciate the contributions of all the employees in making TinyOwl an amazing growth story. We see this development as a positive move towards growth, and will continue to hire informed talent across the country to provide our customers a seamless food ordering experience.

TinyOwl has raised over USD 20 million in three rounds of funding from Nexus Venture Partners, Sequoia Capital, and Matrix Partners. They have tied up with over 4,000 restaurants across Mumbai, Pune, Gurgaon, Hyderabad, and Bengaluru.

The startup has two products: TinyOwl for food from nearby restaurants and TinyOwl HomeMade for healthy food from local chefs. They process almost 2,000 orders every day.

Tanuj is right about the whole aspect of restructuring; every growing startup goes through that phase, and needs to make these tough calls.

“This usually happens in high growth startups that absorb people at a very high rate. In such cases, any macro strategy course corrections are followed by layoffs. High growth with lean and efficient teams is much more sustainable and best way to avoid such scenarios,” said Ravish Naresh, Co-founder of Housing.com, and CEO of IREF.

There is an unnecessary stigma around letting people go. Some people perceive it as a sign that the company is not doing well, but according to experts it is actually a good sign.

“It is a healthy thing to do. Sometimes founders make the wrong decisions, and it is unhealthy for them to continue with the wrong hiring decisions they make. The earlier it is done, the better. I don’t know why some founders feel nervous about it,” added Ravi Gururaj.

There are ways founders can avoid such situations, says Ravi.

  • Hire contractors first.
  • Don’t make anyone full time unless you are confident, you might be better off with temporary hands.
  • You have to prioritize with work, so you use your employees efficiently.
  • Bring in partners, rather than employees.

Also, experts say that startups are known to lay people off honorably, rather than just leave a pink slip on their desk.

“I know a lot of startups that don’t even fire the way we know firing. They just tell their employees that they must start looking for another job and can continue with them till they find one. And when they do fire people, they give an honorable exit for them. Where else do you see such respect for employees?” added Anand Lunia.

On hiring, Vijay Anand, CEO and Founder of The Startup Centre, says, “Unfortunately, the minute most investors put money into a startup, they insist on increasing two spends: one is to go hire like mad; and second is to increase marketing spend. Sadly both are bad kinds of spend, the kind that keeps you craving for more rounds of funding, than focusing on building a sustainable business.”

He adds that startups should focus on making the right investments so that they can automate processes rather than adding manpower.

If the startup has more manpower than required, firing is the only answer, and just as Ravi says, “Do it quickly, efficiently, and fearlessly.”

Image credit "ShutterStock"

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