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'A start-up with 100 people has reduced the strength to 60-80 people to reduce cost.'
'Even if there is attrition, they prefer not to replace them.'
Several surveys are out in the public on the job scene in India. As expected, they are not so optimistic.
According to one survey for January 2023, the demand for employment in production and manufacturing decreased by 8%, in healthcare it is a decline of 7%, in IT hardware and software, there is a decline of 7%, in telecom, it is a 5% decline, and in banking, financial services, and insurance sectors, it is a decline of 3%.
According to CIEL HR Services, there has been a 44% decline in hiring in the Indian start-ups.
"The business plans made on certain assumptions during the pandemic are no more valid. The number of people every company wanted to recruit at that time has come down drastically," Aditya Narayan Mishra, managing director and CEO, CIEL HR Services, tells Rediff.com's Shobha Warrier.
The first of a two-part interview:
Your recent survey found that there was a decline in hiring in start-ups. What was the main reason for this?
Is the decline confined only to start-ups?
Though the survey we have conducted was on start-ups, what we are seeing is a hiring decline not just in start-ups, but in IT products and IT Services companies as well.
One of the reasons why the hiring decline has happened in start-ups is because the companies which got funding during the development of a product, has come down.
Many of the start-ups are funded by investors whose origins are in the Western market.
Because of the Ukraine war and the inflation in the global market, they are not very confident of the future now.
So, they have been tightening the investment purse strings.
Would you say funding has dried up for start-ups?
Yes... yes... for the large start-ups, the Series C onwards.
Because of that, they have to slow down their hiring as they have to lengthen their runway before they take off in a big way.
For example, a start-up that has a current project running with 100 people, has reduced the strength to 60-80 people to reduce the cost.
Even if there is attrition, they prefer not to replace them.
This is the major reason why hiring in start-ups has declined.
The second reason is, many of the decisions the start-ups have made don't seem to hold ground now.
For example, a lot of people thought that education was going to be mainly online hereafter.
Was that not a short-sighted vision when even average people knew once the pandemic was over, people would go back to physical classes?
They were over-optimistic about the changes that were happening in the world.
They thought even if the students went back to schools and colleges, they would continue to use their online portals.
This was not only for learning, but for buying and selling and many other online activities.
It is a new world order that we are seeing now; both online and offline.
Wherever a hybrid model is possible, it is happening.
For example, people are going to the theatres and also watching movies on the OTT platforms.
It's not that theatres have closed down completely or people have stopped watching films on the OTT platforms. Both are co-existing.
Similarly, in the case of education also, both online and offline would happen.
If it was 100% online during the pandemic, it will be 80% physical and 20% online in some sectors or 50-50 in some other sectors.
It all depends on the sectors, consumer behaviour and the region.
The business plans made on certain assumptions during the pandemic are no more valid.
The number of people every company wanted to recruit at that time has come down drastically.
This is the reason why hiring has slowed down.
Were they laying off people also like we are seeing in the major companies globally?
Of course, many companies have to lay off people as they overestimated the requirement.
So many companies over-hired as there was a lot of frenzy in hiring at that time.
They thought they would lose out if they do not get the best talent.
Now, in order to lengthen the run way, they have to cut down the number.
You saw what happened in big global firms like Amazon. Many ambitious projects had to be either abandoned or postponed.
Naturally, in such a situation, they have to lay off the people taken for those projects.
My estimate is, they must have laid off 3%-5% of their employees.
You can also look at it this way, no change happened to the 95-97%! That's one view.
The other view is that if 2 lakh people are working in the start-up ecosystem, you are laying off 6,000 people in a month which is a large number.
What will happen to those 6,000 people and their families?
Definitely, there is a huge disruption happening, and it is real.
Remember what Mark Zuckerberg said, that this year was going to be the year of efficiency for Meta.
It also means he is trying to cut down cost by reducing the number of people but expecting better results.
Many start-ups spent a lot of money on candidates and paid high salaries during the pandemic.
Today, they are letting go of these people or replacing them with people for lesser salaries.
Are they compromising on quality to reduce cost?
No. They paid higher salaries during the pandemic as talent was not available.
There was huge competition among employers to hire quality people.
That's how salaries went up.
But today, you get same quality people at a lesser cost as people are available because of layoffs.
So, would you say salaries also have come down now?
I would put it this way, the cost of an employee has come down.
Feature Presentation: Aslam Hunani/Rediff.com