Article: The hire and fire diaries

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The hire and fire diaries

The Indian start-up scenario doesn’t look to be promising anymore with significant lay-offs that have been seen lately. Does this signal impending doom for the start-ups?
The hire and fire diaries
 

As the Indian economy keeps up its escalating growth trajectory, the job market also looks very positive

 

First, there is fire to hire and then there is fire. 

At least this is true for the start-ups in India. Although this is not an all pervasive start-up phenomenon, the trend has sneaked in the hyperlocal delivery start-ups. The recent layoffs at various Indian start-ups like Zomato, TinyOwl and Housing.com have led many to think that maybe the much hyped start-up business in India is spiraling downwards. This has come amidst speculations and claims by analysts that many of the start-ups may be overvalued, and many are still to show profits. It is not unknown that more than 80 percent startups die within the first three years of starting. Most of them today are struggling with fund-raising and are trimming escalation costs or coping with cost reduction targets that have been set by their stakeholders. Currently, in order to work their business models, the start-ups have accumulated so much human capital that their “not-so-profit-making” business models have suddenly started to see it as a liability. According to Kris Lakshmikanth, Chairman and Managing Director at recruitment consultancy, the Head Hunters India, stated in an interview that “There is no doubt that Indian startups have gone overboard with hiring in the last few years, and that has happened because they raised so much money and they had to spend it in some way. Now as funding starts getting slower, due to reasons like the crash in the Chinese markets, these companies will need to cut costs and then may look at layoffs or freeze hiring.”

Many are also of the opinion that this might be another case of dotcom bubble that so spectacularly burst in the early months of 2000. But why? The reasons for this are attributed to the fact that this is another phase of pragmatic and exponential growth that is coupled with rapid technological advancements in every sector just like it was during the 1997-2000. And although the start-ups are getting magnanimous investments, many of them don’t have any real capital. Another reason for this is that the interest rates in the US have not changed since the financial crisis of 2008. And if the US raises its interest rates, the start-ups will find it difficult to raise funds. According to Paras Adenwala, investment consultant at Capital Portfolio Advisors, “You will see a lot of these start-ups falling by the wayside once the US Federal Reserve starts raising rates and funding dries up.” But are these layoffs a necessary part of putting the start-ups on a sustainable footing? Many do believe that such decisions are a necessary and inevitable part of the evolutionary process of any startup business. 

However, in a stark contrast to this scenario, the hiring trends have been also seen to be on a positive path. According to a recent Monster survey, hiring activity in India has increased by 53 percent in November from a year ago. And about 90 percent of companies are looking to hire especially in pharma, social, mobile, analytics and cloud computing etc. according to Sambhav Rakyan, data services practice leader for Asia Pacific at Towers Watson, a global HR consulting firm.

And this seems to be continuing trend for 2016 as well. The Manpower Outlook Survey reveals that globally, first-quarter hiring confidence is strongest in India. For the first quarter of 2016, India's net employment outlook is at 42 percent, the highest among 42 nations that were surveyed, followed by Taiwan (29 percent), Japan (23 percent), Turkey (19 percent) and the U.S (17 percent). According to AG Rao, Group Managing Director at ManpowerGroup India, "As the Indian economy keeps up its escalating growth trajectory, the job market also looks very positive. Employer hiring intentions remain positive, primarily driven by transportation and utilities, wholesale and retail trade, finance, insurance and real estate and public administration and education sectors.” 

On the one hand there is a definite uncertainty of what lies ahead especially in how the start-up set up in India manifests in the coming months, however on the other hand, the overall hiring sentiments seem to be high. 

Topics: TA Week, Jobs, Talent Assessment

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