According to sources, Flipkart is offering employees who have failed to meet professional expectations the choice to either resign or be sent off with severance pay. The decision is expected to impact 700 to 1,000 staff and is a cleanup process to make Flipkart a lean organisation, a lean organization that strikes a balance between savings costs and achieving growth targets.
While such a practice has not been regular at Flipkart and the number does look large at once but considering the fact that the company has about 30,000 employees, which means the decision affects some 2.3-3.3% of the workforce. 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. It however did say that:
“This is a fairly common practice across various industries- especially in high performing internet organisations,”
Recently we have seen how investors are looking discretely at the profitability of the startup and not taking long to stop funds flow, e-commerce companies are hunting furiously for cost-saving and efficiency avenues. Flipkart had also been in news for 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. The last time cutbacks happened at Flipkart was in May 2013, when some 250 employees were affected, constituting about 10% of the workforce at that time.