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Startups should hold back on hiring as long as possible unless they are sure they can employ people for long-term

December and early January are a strange time for startups. Companies simultaneously take a victory lap whilst licking their wounds, as they slow down a bit and gear up for the new year.

While the startup world takes its collective foot off the pedal, trends can be missed as we transition into 2016. In the last six weeks, one troubling trend has managed to slide under the radar — massive firing.

There have been a rash of large-scale firings in recent months. The worst part is that maybe these people should never have been fired. The overzealous hiring practice by these ‘overnight’ successful companies proves that a large number of the people should not have been hired in the first place.

Starting from December 1, 2015, e27 reported on extensive downsizing at Grabhouse, Gozoomo, foodpanda, EasyTaxi, Marcella, Hootesuite, Zomato and Grofers.

All these companies has one thing in common. They found success, expanded beyond their means and were forced to close shop relatively quickly. Some left their respective countries and some their respective regions, while others fired over a hundred people in one shot.

Which brings up the crux of the argument: If the tangible rewards of major expansion are not immediately obvious, the risk of major layoffs should also discourage the practice.

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To be fair, like snowflakes, no two layoffs can be the same — while EasyTaxi and Marcella can be forgiven to a certain extent as superior products simply beat them, Hootesuite has Western responsibilities so when the budget tightens, APAC operations are the first to go.

But the actions of Grabhouse, Gozoomo, foodpanda, Zomato and Grofers are galling, and, frankly, embarrassing.

All these companies raised massive investments in 2015, as in serious dough. Grofers raised US$35 million in April, Zomato, US$60 million in September, foodpanda, a whopping US$100 million in May.

Then, within a year, these firms announced large-scale layoffs in the range of hundreds of people. The firing is not the disturbing part (I am in journalism and am used to massive cutbacks). It is the time frame.

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During the US$10-million Series B announcement, Grabhouse had said it was planning to scale the team. However, two months later, it promptly fired 100 people.

If Grabhouse willingly took a risk by over-hiring, it should be ashamed. If it accidentally overestimated, it should be embarrassed. The damage done to the reputation of the firm from this mass termination far outweighs any goodwill from an interesting product or successful funding round.

When Grabhouse pitches itself as the disruptive solution to society’s scourge — that is realty brokers — hopefully people remember it as a company that hired and then fired a sh**tload of people.

The bubble bugaboo

Grofers, Zomato and foodpanda present an interesting case study of whether or not a company’s reputation should suffer for betting on a bubble.

The foodtech bubble in India has burst, and with it went hundreds of jobs. But bubbles are tricky. Was the industry on the path towards a new taxi-hailing economy? Or, as it seems today, is it the next pet store website?

The issue is most employees are not businessmen, analysts or journalists. Their job is not to track the daily ebbs and flows of India’s foodtech industry. They are salespeople, HR managers and daily grunts who jumped onto an enticing job without fully realising the fact that they were walking into a bubble about to pop.

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To use myself as an example. I am a regular employee with no real control over the direction of e27. For people like myself, getting a job is exciting, but if I could, I would tell the decision makers I interview to remember that it also requires sacrifice.

The new employee may be giving up something quite significant to work for your company. People who have left their jobs are now perhaps spending less time with their children, or have moved away from loved ones, or diverted a career path because the opportunity seemed too good to pass on.

To pink slip those people within a year later is, in a word, cruel!

The post Recent massive layoffs put the spotlight on reckless hiring practices appeared first on e27.

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