Layoffs and Downsizing Implications for the Leadership Role of Human Resources


Over 23,000 employees in startups have lost their jobs since the pandemic began in 2020, making India among the top five countries in terms of startup layoffs, a crowd-source database shows. Downsizing or laying off employees is usually the strategically planned elimination of large numbers of personnel or workforce to enhance organizational effectiveness and economic outlook. Downsizing has some temporary or immediate advantages such as boosting profits, avoiding bankruptcy, creating new relationships, re-organization, and getting rid of “deadwood” or disengaged employees.

In a widely-circulated 2020 memo, marquee investor Sequoia had warned portfolio companies to keep their staffing levels sustainable. US-based startup accelerator, Y Combinator, also asked founders of its portfolio companies to “plan for the worst.” It could get worse in the near future as experts predict that 60,000 startup employees could lose their jobs this year.

Falling valuations, slowing funding rounds and faltering investor sentiment seem to have prompted many start-ups to lay off employees in a bid to conserve cash. Recently SoftBank-backed Cars24, a leading e-commerce platform for pre-owned vehicles, which has laid off over 600 staff, according to sources in the know.

Seven unicorn startups — Ola, Blinkit, Unacademy, Vedantu, Cars24 and Mobile Premier League (MPL) — were part of the firing list as well. Notably, Blinkit (formerly known as Grofers) was a unicorn when the layoffs were carried out but the company lost its billion-dollar valuation during Zomato acquisition.

Byju’s, currently valued at $22 billion, has laid off over 2,500 employees across its group companies as the Byju Raveendran-led unicorn is looking to aggressively cut costs with demand for edtech services moderating after two consecutive years of hypergrowth.

Byju’s has laid off full-time and contractual employees from Toppr, WhiteHat Jr, and its core team across sales and marketing, operations, content and design teams

There are myriad other ways to curb spending—a hiring freeze, curtailed marketing, saving on real estate—but laying off is evidently quick and easy. This is particularly so at tech startups which typically tend to over-hire while business is brisk.

Companies that shed workers lose the time invested in training them as well as their networks of relationships and knowledge about how to get work done. Even more significant are the blighting effects on survivors. After a layoff, survivors experienced a 20% decline in job performance.

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