#Asia Snapdeal’s laying off people, but here’s why it’s a good thing

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Photo credit: Garry Knight

Today Snapdeal, India’s third largest ecommerce company, announced that it was laying off staff to “rationalize” its workforce as it aims to “become India’s first profitable ecommerce company in two years.” Sources in the company say the layoffs haven’t actually begun yet, but are going to impact roughly 500-600 employees.

That’s a whole lot of firings that have been amply covered by media.

See: Snapdeal founders to take 100% pay cut amidst layoffs. Here’s their letter to employees.

There has been much talk about how startups in India are overvalued, getting top heavy, and need to do some serious rethinking of their strategies to keep their businesses floating.

Multiple investors have told Tech in Asia over the past week that the valuation bubble is going to burst, and that it will depend on the founders and lead investors of various big-name startups to make tough calls to ensure the success of their businesses.

See: Does very high salary = lower loyalty for startup employees?

Softbank-backed Snapdeal has been losing ground to Amazon in the country, and there have been multiple reports in local media about how its future as a standalone company is threatened.

Snapdeal Co-founder Rohit Bansal. Photo credit: Snapdeal.

As founders Kunal Bahl and Rohit Bansal state in their letter to employees, Snapdeal probably holds “the record for the company that got written off the most number of times by internet pundits.”

One detects a tone of humor there, but it is time for the Indian startup community to sit up as one and appreciate the seriousness of Snapdeal’s moves today.

These few years, Indian startups have become synonymous with fragile egos, lying, crazy one-upmanship, unwarranted comments and demands, and a madness in general that does not behoove entrepreneurs building serious, world-class businesses.

See: Why I have trust issues with Indian startups

In this environment, Kunal Bahl and Rohit Bansal’s letter comes as a welcome break, showing leaders willing to walk the talk and accept mistakes.

“Has our company and industry been going through a troubled time? Absolutely. Did we make errors in our execution? No doubt about that. Over the last 2-3 years, with all the capital coming into this market, our entire industry, including ourselves, started making mistakes,” the letter reads.

Snapdeal is a distant third in the ecommerce race between itself, Flipkart, and Amazon. This is surely the driving force behind the layoffs and cost cuts, and the cynic in me is questioning the founders’ intentions to honor their words. But it is important to give them a chance, to show them the courtesy of taking their words at face value.

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Snapdeal CEO Kunal Bahl. Photo credit: Wikimedia.

To start with, the founders are leading this trimming initiative by letting go of their salaries (yes, they will have other means of income apart from salaries and it won’t impact them as much the people being let go, but it’s a start.) Sources in the company say other senior executives too have have volunteered to follow their lead.

Secondly, it shows that Kunal Bahl and team have, at least on paper, recognized the need to step away from “a me-too race to the edge of the cliff and accept responsibility. Again, it may sound like loser-speak to those so inclined to read it so, but it can also be interpreted as an honest confession and acceptance of the erratic ways in which the business was being run till date.

And don’t we all know, the first step toward change is acceptance?

There are other boxes that Kunal and Rohit’s email ticks when one evaluates “turnaround strategies.” According to most industry experts, a serious upheaval in a company needs three broad moves:

1. Asking for help from the right people

Snapdeal seems to have started on this track earlier this year when it hired Jason Kothari as chief strategy and investment officer. At that moment the company was selling the story of how Jason and Kunal are friends and go way back, but we soon started seeing changes in the business.

See: Why is a turnaround expert joining Snapdeal?

Snapdeal’s unit Shopo got shut, layoffs were announced, and Freecharge got taken over by Jason.

2. Ditch the cloak and dagger

Childish as it may sound when billions of dollars are involved, people working for or with India’s startup community will be able to regale you with stories of broken internal communications, half-truths, ostrich-like behaviour, and a me-too-ness that is more the stuff of high school drama than serious business. That the Snapdeal leadership decided to come clean about its mistakes and communicate those clearly with employees is a departure from that. Clear communication is important, as veteran industrialist Ratan Tata says.

3. Be ready to swallow pride

Again, very evident from the changes in store for Snapdeal. It can’t have been easy to accept that they “started diversifying and starting new projects while we still hadn’t perfected the first or made it profitable. We started building our team and capabilities for a much larger size of business than what was required with the present scale.”

Whether Snapdeal follows through with these promises will be clear in two years – the timeframe the company has given itself to turn profitable. For now, it’s safe to say it’s stepping in the right direction.

This is an opinion piece.

This post Snapdeal’s laying off people, but here’s why it’s a good thing appeared first on Tech in Asia.

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