The startup world may be battling a funding winter, but not all of them have left their employees high and dry.
Several startups are in the middle of bringing down staff costs even as they assist in employee outplacement, facilitating terminated staff find new jobs. Aditya Narayan Mishra, director & CEO of CIEL HR Services, said the firm is helping startups in outplacement. Inflationary trends and the threat of a global recession have prompted investors to be cautious about their investments.
Many people have gone off the rolls in the last few months as external scenarios force investors to become cautious about funding. Experts from the HR services industry said companies are outsourcing such functions for a smoother runway.
Mishra of CIEL said: "Startups are asking their portfolio companies to cut down costs. To cut costs, many companies have resorted to prune businesses that are not yielding desired traction and, hence, resorted to layoffs. More than 10,000 employees have been laid off in startups this year. But letting go of the employees with just the severance pay would harm the employer brand of the company. So, these companies are seeking professional help for outplacing the employees. This trend will remain until investment activities pick up pace again. "
Priti Sawant, CEO & founder of JoulestoWatts, said, "More than 80% of these layoffs are due to costcutting, restructuring, financial constraints and automations. Marquee investors have prompted portfolio companies to cut costs and increase runway. As a result of this shift, talent architecture and manpower planning has become imperative. "
Sawant said, depending on the level of automation and operational weight of a business model, payroll makes up a sizeable chunk of fund allocation. "The current employee-utilisation rate is only 60–65% when it should be at 90–95%. Thus, in early and growth stage startups, prompt talent architecture and manpower optimisation hold the key," said Sawant.
An industry expert who didn't want to be named said, because of ongoing external uncertainties, there's a liquidity crunch that is affecting all funded companies. "Valuations have come down and companies are being forced to re-assess their runways. We see a little bit of consolidation in almost all sectors. Companies are raising queries around outplacements and these services should pick up over the next six months. We reckon it's going to be a sizeable number across the board," the expert added. To create sustainable and reasonable businesses, and prevent scenarios like layoffs, Sawant of JoulestoWatts said the focus should be on short-term capacity planning and optimal staff utilisation. "As the difference is wide, ongoing counselling is also required to help people return to an excellent organisation at a higher band. Only 20-30% can get placements because they don't fit into the traditional business bands in salaries. If the entire talent architecture, execution engagement, and outplacement strategy is carried out six months in advance, 40% of the population won't lose their jobs. We work with organisations to outline relevant talent metrices and extract applicable analytics that aid decision making. They now have a chance to develop a more aggressive plan for talent acquisition, improvisation and consolidation," said Sawant.
Mishra said most candidates — with an average age of 25-32 years — are wary of going back to working in other startups. "They look for secure jobs in MNCs and established companies," said Mishra.
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