News: Meesho to lay off 251 employees, cites misjudgment in hiring decisions

Strategic HR

Meesho to lay off 251 employees, cites misjudgment in hiring decisions

In an email to the employees, Meesho's CEO and founder Vidit Aatrey stated that the company is now confronted with the harsh reality of aligning its expenses on personnel with the new business projections.
Meesho to lay off 251 employees, cites misjudgment in hiring decisions

Meesho, an e-commerce startup backed by Softbank, has declared its second round of layoffs in slightly over a year. The move will result in 251 job terminations, accounting for approximately 15% of its workforce.

Moneycontrol has reviewed an email, dated May 5, sent by Meesho's co-founder and CEO, Vidit Aatrey, to the company's employees. In the email, Aatrey attributed the decision to the difficult macroeconomic environment.

Meesho, based in Bengaluru, was one of the early new-age companies to downsize its workforce during a challenging funding environment. Last year, it laid off 250 employees from its grocery arm, which was later renamed Superstore from Farmiso. 

However, the current round of job cuts, which will result in the termination of 251 employees, marks the first time that Meesho's core marketplace model has been impacted.

"As leaders, we made judgement errors in over-hiring ahead of the curve. At the same time, we could have run our org structure in a more effective and lean manner overall," Aatrey said in his email, reported Moneycontrol. 

"Our spans and layers were inflated, and this could have unintended consequences on our speed to execute. While we are confident that Meesho business will stay strong, the economic reality is here to stay. We are now faced with the hard truth of aligning our people costs with the new projections for our business. We should have done better here," he added.

According to the email sent by Meesho's CEO, affected employees will receive an email notification within the next hour regarding their employment status with the company. They will also receive personal meeting links to have one-on-one conversations with their managers. The email further stated that outgoing employees will have access to their Gmail and Slack channels until Sunday evening.

“We have taken a difficult decision to part ways with 251 Meeshoites, constituting 15 percent of the employee base, as we look to work with a leaner organisational structure to achieve sustained profitability,” a spokesperson for Meesho confirmed.

Meesho will offer a package to the impacted employees, which includes full pay for the notice period and an extra month of pay, as well as a tenure-based payment of 15 days for each completed year of service, rounded up to the nearest year. 

The company has also stated that it will provide family insurance coverage until March 31, 2024. Additionally, ESOP vesting norms will be relaxed so that departing employees can continue to be shareholders in the company.

Meesho has not only reduced its headcount, but also cut down its cloud expenses by 50% as reported earlier. The company had already reduced its monthly cash burn by 90% to approximately $4 million in December 2020, according to Dhiresh Bansal, Meesho's Chief Financial Officer, in an interview with Moneycontrol.

Jefferies analysts who spoke with Meesho's management reported that the company is approaching zero cash burn and aims to achieve EBITDA breakeven in 2023. Meesho also reportedly has a cash buffer of approximately $400 million.

According to Tracxn data, Meesho has raised over $1 billion and is currently valued at $4.9 billion. The analysts at Jefferies described it as India's top e-commerce platform, with a gross merchandise value (GMV) of approximately $4.5 billion and a 7% market share, despite the presence of giants like Walmart's Flipkart and Amazon. The Jefferies note also highlighted that Meesho is expanding faster than the market.

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Topics: Strategic HR, #Layoffs, #HRTech, #HRCommunity

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