Start Up layoff ..Impact on Society

Losing a job is not just about the loss of income. It is not having the answer to the second question that everybody asks after they've met you: "What do you do?" In a place like India where employees are already tremendously stressed (46%), and depressed and anxious (42.5%), layoffs put an additional burden on their emotional and mental health according to the research. Most workplaces in India do not have mental health policy, to take care of the well-being of employees, and almost none offer counselling services to support those who're laid off or fired.

Start-ups are an important part of the Indian economy. The dream of $5 trillion will be achieved through these start-ups hence the ecosystem of the same needs to be stronger and sustainable.  The innovation lab of India needs huge support from the government of India.  In the last decade, we have seen how start-ups have come up and created new business models and channels redefining the traditional culture. In this decade we will witness some dramatic changes coming from these start-ups where the dynamics of the game will change. Start-up creates a new society but at the same time, the current rule of the game is destroying more rather than creating opportunities.

The start-up layoff story is a big threat for the employment segment as volatility of employment creates an impact on GDP and consumption sentiments.  Yes, the point on which I want to highlight is that disruption is creating disruption within the employment market. Before we get into the subject line we need to understand the dynamics of the same so that we get a clear understanding about how to take the matter forward. Well while reading you might feel that I sound like a bureaucrat but the truth is that layoff has a significant burden on the society for a longer period of time.  

In the first two weeks of 2020 already, Walmart India let go of a third of its top executives and hotels group OYO has handed pink slips to 2,400 employees.  It has more numbers to come in the coming few months. Lime, the largest electric scooter-sharing company in the world, is laying off 14 % of its workers and exiting 12 markets, according to a report in Axios. There are many companies in the same line and this is an on-going practice of improving profits.

But start-ups business model is going to be under question in the coming days based on the way they are building business in the long term. When you have your business to be expanded and you are bust in attracting PE then you recruit a significant number of employees to scale the business. Well PE has many reasons to invest but size of the scale is the key important. This scale attracts a huge number of employees.  Temptations based model like the cashback, discount model are all the ways to scale followed with hiring a huge team to support the back end through which the business scales its size. The 1^st two levels of Funding is based on the idea of scaling the size and reaching to every corner. Bleeding of capital is the essence of the game. This is going to be a high risk game in this decade.

In this decade disruption against disruption will rule the world. Yes till now one disruption was affecting the other companies, now one disruption will disrupt other disruption. Hence the PE segment will face intense pressure for the revenue. Now the old days will be gone soon where one used to recruit huge teams and then used to lay-off. Yes, this layoff is part where profitability improvisation is being worked upon.  

After a certain level of bleeding capital why we need to cut down manpower so at the turn the company on an immediate profitable organisation.  When we run a start-up business-like hire and fire then the job market is bound to get impacted and the chain of action of economic collapse starts happening. An employed person takes up EMI and other commitments. These commitments go for a toss when the job is lost and the candidate become jobless. The mass layoff has now become a trend for the start-up business. The unplanned business model has a huge impact on society when things go for wild toss.

The start-up business model needs a makeover in its approach from day 1. The coming decade will punish those who play with human labour and the economic growth of the society.  No will like to join a start-up in the coming years with the lesson learned from poor job stability. Now please don’t confuse with performers and non-performers. That distinction and the necessary rules applicable to the same are valid but when the lay-off is to turn an organisation into profit raises many questions about the planning and governance issues.  In many cases, it has been found that as soon as the funding dries up and they are unable to pay fat pay-packets to their workforce they cut down the staff.

The social cost of layoff is so high that in many cases life is lost behind the curtain of layoff. Layoffs can create a dent in employees’ confidence and morale; causing anxiety and depression. This led to massive unrest in the society and particularly among the young generation who are the maximum employee of the start-up cult. Losing a job and then getting another one is always a negotiation game and not an easy task. The mental pressure on the family and on oneself creates a significant impact on the mind of the families. We need a policy for protecting and mass layoff just to improvise the profitability and hunger of capitalism.  The government should protect the society and the employees’ form these startup so as the exploitation of resources does not happen and the ecosystem remains unscratched.  Start-ups need to plan very meticulously about every step so that they don’t damage the ecosystem of the same. The government should penalise these start-ups for these unhealthy practices which will compel the management of these start-ups to improve the corporate governance and also business models.

The profit planning and scaling should be done with a sustainable business model and not with a roller coaster ride. PE and other sources should be utilised efficiently so as on a later death the organisation as a whole gest destroyed due to poor business strategies. The star-up cult needs a revamp towards creating a sustainable business and not to become a victim of capitalism.