Handing out the Pink Slip: What's the most cautious approach to mass layoffs?

Entrepreneur gets in touch with people leaders to understand the most humane ways to tackle layoffs

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The crunch in startup investment has led the entire global startup ecosystem to a bad downturn. The year 2022 has seen a heavy downturn in terms of finances and businesses have been impacted substantially. The grim picture that we currently see is in many ways the stark opposite of last year, where ample of funding had been poured in to startups and many were aggressive in their approach to hiring. Last year, when investments were at a boom, companies were offering lucrative deals to new joinees, some even put keys to luxury bikes on the offer table. Now, in order to survive this 'funding winter', as Unacademy's Co-founder and CEO Gaurav Munjal dubs it, companies have had to take decisions to make their workforces' slighter in order to cut costs. Over 10,000 Indians have lost their jobs in 2022 alone as a consequence of these decisions.

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At the onset of these mass layoffs, we had a word with Amit Ratanpal, Founder, BLinC Invest, who shared that the layoffs were as a direct result of startups being unable to follow the anticipated growth strategy that they had in place in 2021. This is a reason why overall funding scale has changed and the number of investment deals have definitely gone down. "I saw companies raising $20-30 million at seed stage with nothing ready to back that investment up. Is this sustainable? Definitely not. This euphoria will come down now, as more investors would be looking at realistic numbers for good quality sustainable business," he said. The issue is more relevant than ever and investors foresee that we can see more and more layoffs from startups in the time to come, until the funding freeze hits rock bottom and things turn to normalcy.

The reception of the layoffs have varied from case to case. When American Mortgage company Better announced their layoffs, there was a huge media uproar about the way they carried out the entire debacle. Subsequently stories from disgruntled employees also started making rounds on the internet. However, the case for edtech giant Vedantu, much less anguish from the employee side along with media criticism. Hence, it is fair to assume the effect on the employer branding for both the companies would have been very different. Given the inadvertent nature of these layoffs, we tried to understand whether there is a right way to downsize, a method through which there is a minimal effect on the employer brand.

Amit Chincholikar, Global CHRO, Tata Consumer Products, believes what went south for startups was the lack of proper communication to the employees.

"Normally, when you have to lay off people at a large scale, what is happening is that companies are just handing out letters which are followed by short conversations, this then appears as a shock to many. What is apparent to me is that companies must be having a fair idea of when their funds would become dry beforehand. When that idea is already there then the important thing is to give people a heads up of the things to follow. Communicating the decisions logically and in a timely fashion is not a very difficult thing to do but the problem is that I feel people wait until the very last minute to carry out the termination," he said.

He believes that when it is not about performance then there is no harm to draft out letters in that way as getting terminated is still a big stigma in India. Employers don't take really kindly to terminations. So if you are able to make it clear with a small gesture of a letter or something like that then that helps in finding their next engagement. Further, you need to ensure that the employee is well taken care off during the transitional period, that is, before they find a new role. 'The amount of severance that should be doled out should be sufficient enough so that the person could stay afloat for at least six months. Companies need to be generous with their severance pay and should also look at extending the employment benefits to the relieved employees,"Chincholikar expresses.

Heading the people function for an older, more established company, Chincholikar believes that the waves of this people downturn in the startup sphere will bring back things to a point of normalcy.

"These layoffs would definitely be in the favour of more established companies. For Tata Consumers, we could say we offer an environment in which people can put in the work be innovative, things that they look for when they decide to engage with a startup. With the milding down of the offers that such companies were doling out along with the dent in the employer brand for startups as a whole, people are definitely now going to be leaning towards securing employment in a more established company," he asserts.

Obviously carrying such mass layoffs has got to be a difficult task that an HR department of a company will have to conduct in a cautious manner. To understand what the process is like we spoke to Amit Sachdev, who heads the people function at Tata insights and quants (Tata iQ). Having faced the experience of layoffs once, Sachdev divulges that the entire process needs to be seamless in order to minimise the dent on the company's employer brand.

"When we had to do layoffs sometime back, there was a proper strategy that was followed. You need to ensure empathy, a decent emotional quotient, and a level of engagement with the person relieved. The closed room has the employee who is to be laid off, their reporting manager, and the HR. You need to list down consistent talking points, and a similar story should be given across departments where the layoffs are to take place. It is okay that the company is not doing well, just share what went wrong in a well-structured manner so that there is no disparity in what employees have to say," he said.

Sachdev said that the HR needs to be discreet about the place where the meeting is being held. He also added that having a female HR person should be a must in the room to neutralise any type of emotional outburst, because of the naturally higher empathetic way they bring on the table.

As a preparation, the relieving officers could have a pre-printed sheet which has the numbers and names of consultants that can help the affected secure another job. "In my experience, I gave the laid off employees a list of four-five consultants with whom I had already established a dialogue regarding the employment of the person laid off," he suggests.

Sachdev proposes the formation of a community within the HR fraternity in India, where companies could have a coordination between each other so that at the time of layoff for one company, other companies who have a requirement of talent could source them directly from the company who have had to lay off.

While given the size of the layoff might point to a bigger issue, the effects of the funding freeze is disproportionate, and hence the layoff story is also different from company to company. Anil Mohanty, Head of People & Culture, Medikabazaar tells us that companies like his have not had issues as of yet, adding that the issue of layoffs is more relevant to product based businesses. "The healthcare sector has not been as badly hit as other sectors. The way a company spends their capital must be scrutinized, I believe due diligence should be given at the time when a company is expanding," Mohanty said. Medikabazaar secured a series D funding round last year, however, had the sense of judgement to remain cautious in the way they expanded their team, only hiring when it was necessary. Mohanty said that the company has made adjustments within the existing workforce and hired only when it was extremely critical. Hence, there haven't been any issues as of yet.