BENGALURU: Flipkart is offering employees who have failed to meet professional expectations the choice to either resign or be sent off with severance pay, according to three people directly aware of the development at India’s largest online retailer.
The decision is expected to impact 700 to 1,000 staff, two of the sources, who are part of the senior management team at the Bengaluru-based company, said.
“The cleanup is a part of the process of making Flipkart a lean organisation,” said one of the people cited above.
The move, while not unique to Flipkart, is reflective of the challenging times for the online retail industry, as well as the company, which is attempting to find a balance between saving costs and chasing growth.
While the absolute numbers look large, Flipkart has about 30,000 employees, which means the decision affects some 2.3-3.3% of the workforce. What is raising eyebrows is also the fact that such occurrences are not common at Flipkart, which has expanded rapidly in recent years and tended to take a benign view of those at the bottom of the performance hierarchy.
Now, however, things have changed as chief executive Binny Bansal strives to maintain the market leadership of India’s most valuable startup while putting the company on a path to profitability. Flipkart came in for some criticism earlier this year after it deferred the joining dates for campus recruits from the Indian Institutes of Management.
In a statement Flipkart said that in situations where employees do not make “progress” despite being put on a performance improvement plan, “they are encouraged to seek opportunities outside the company where their skills can be better utilised.”
It did not directly address the question of how many employees would be affected or how common it is for such a thing to happen.
“This is a fairly common practice across various industries- especially in high performing internet organisations,” Flipkart said.
With the rising importance of profitability in the calculus of investors, ecommerce companies are hunting furiously for cost-saving and efficiency avenues. In April, ET reported that Flipkart had begun curbing discounts and capping salary increments. It is also aiming to cut its monthly burn rate to $40 million from the about $ 80-100 million in the first half of 2016.
Rival Snapdeal, too, has been taking a harder look at those it believes are among its worst performers, ET reported in February. Around 200 of them were asked to shape up or ship out.
The last time there were drastic cutbacks at Flipkart was in May 2013, when some 250 employees were affected, constituting about 10% of the workforce at that time.
In recent months, roles and expectations kept changing, said one employee of Flipkart who resigned from the online retailer on Tuesday. “I chose to resign and sent a formal mail to my manager, which was immediately accepted,” this person told ET. He had worked for three years in the company in several roles, with the last one in the marketplace division.
“While the company has been patient with its employees over the last four years, this time it was not,’ he said.
Experts are of the view that cutting down excess fat in an organisation is important to keep the culture of the company focused on goals and delaying the cycle isn’t good for the employees who are under-performers.
“Managers should have good facts and data substantiating why a particular person is a non-performer, and base his decision on factual data,” said Harish Kumar, Managing Partner at Wenger & Watson. “There is also a lot of referencing that happens in this space and an organisation should be helping them in that regard as well,” he added.