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Blacklisting Startups – A Step In The Right Direction Or Hasty Move?

Blacklisting Startups – A Step In The Right Direction Or Hasty Move?
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In a meeting of All IIT Placement Committee held in Mumbai, placement heads of 16 institutes decided that seven startups that went back on their word to hire graduates from the IIT will be blacklisted across all IITs in the upcoming placement season.

As per the Placement advisor at IIT-Madras, Babu Viswanathan, these startups will be barred from hiring from IITs in 2016-17. He clarified that the blacklisted companies will be allowed to visit campuses next year after they appear before the placement committee.

But what comes as a surprise was Flipkart managed to evade the ban. The eCommerce giant made a timely move by giving an alternative of paid internship opportunities in about 10 startups for the hired graduates.

As per the offering – the fresh grads will be paid Rs.50, 000 per month during the course of this internship, with the option to either join Flipkart in December or continue to be employed at the startup.

IITs, IIMs and ISB are premium schools that are popular among the startup hiring managers. Generally, startups don’t go to the campuses with well-defined roles; they hire talented people and then give those roles basis on their passion and their company priorities.

Commenting on the same, Sujayath Ali, CEO and Co-founder, Voonik said, “IITs blacklisting startups doesn’t mean that there will be a larger talent pool for the other startups. Companies will still fight for the best students and the top of the class students will still have a good set of options to choose from. However, the startups will have to be more creative in designing remuneration packages to attract the right candidates.” Voonik, a personal shopping app has been hiring across top business schools and engineering colleges for 2 years now.

While Voonik felt salary package could be the differentiator, Dr Andrew Dutta, Associate Professor, HRM Area, Management Development Institute, Gurgaon said, “Why blame the startups for things that are beyond their control? The current startup situation in the country is quite different from what it used to be even a couple of years ago. It’s not about VC funds drying up for the startups but more for the global volatilities in markets, economies and deliveries.”

Many startups have simply miscalculated their projections--be it revenues or people. And now they are grappling with numbers that they did not expect to come. One of the impacts of this miscalculated euphoria of the startups has been their exaggerated offers in some b-school campuses.

And now the situation is like what Warren Buffet said many years ago, "It's only when the tide goes out that you learn who's been swimming naked.”

But do you think blacklisting a company really solve the problem? Just think about this, if a company has given a provisional or contingent job offer, then it can easily and legally withdraw its job offer. In this case, how many companies would these prestige campuses blacklist?

“In other developed countries, there are clear contingent clauses in the offer letter and every company on the campus retain the right to revoke the job offer under dire conditions. Postponement of joining date is normal compared to other harsh realities for which even there are legal precedents if appropriate clauses are mentioned in the job offer letter. Fortunately, such things were very rare occurrences in the b-school campuses in the past. But times are changing and Darwinian Theory says that only those who adapt finally survives,” said Dr. Dutta.

But this incident will make both startup and the graduates little cautious when it comes to hiring. When asked how this will affect startup hiring in the time to come, Premlesh Machama, MD, CareerBuilder said, “Due to withdrawal in offers and recent shut-downs of some companies, students will be more sceptical in joining startups. Because of reckless decisions, students might perceive the startup environment as unstable and might change their mindset when it comes to choosing a career path with early growth companies.”

Speaking on the same lines, Ali said, “It will not have many far-reaching impacts if this is just one off incident and does not get repeated. I am sure, startups going to campuses will be more cautious about number of hires, colleges will make their rules stringent and students will be a bit sceptical about startup offers. But with the “Startup India” campaign, Government’s business friendly policies etc, the startup sector is poised for sustainable growth. I don’t think colleges can de-prioritize startups if they want 100 per cent placement of students.”

After the recent incident, perhaps startups will be also cautions of increasing number of offers per school. This is not great news for the burgeoning Indian youth population.

Edition: December 2016

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