Daybreak - Who are the 'unhireables' of India's startup world?

Episode Date: May 18, 2023

From amazing salary hikes and other perks being served on a silver platter just a year or two ago to now, when companies are using salary benchmarks to figure out whether they have overvalued employees—the startup ecosystem in India is going through a churn.In fact, as many as a quarter of startup professionals might be what HR and hiring professionals are terming as 'unhireables' at this point.Former overvalued startups that had gone on hiring sprees are now doing all they can to correct their mistakes while employees are resisting, waiting for things to settle with fingers crossed.Tune in.Recommended reading: India’s startup workplaces confront the rise of the ‘unhireables’Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform.Subscribe for more exclusive, deeply-reported, analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. What if I told you that almost a quarter of India's one million startup professionals may be unhirable at this point. It seems like a long time ago, but it was just until last year when billions of dollars were being pumped into startups in the country.

You remember those glory days, right? It was a time when founders and leaders were pushing the mythical narrative of hypergrowth. And in order to convince investors about it, startups were throwing obscene amounts of money to hire and grow a layer of mid-level and senior-level executives. It was almost a you-name-it-and-you-get-it kind of a situation. salary hikes were limited only by imagination. Jerry Jose, a startup hiring specialist, told again that people could ask anything that they wanted and it was given to them.

Some were getting 100% hike in their salaries. But now, just a year later, the tables have turned and how. Overfunded startups are now being seen as a problem. And along with them, all those employees that they hired with fat paychecks, HR executives and hiring specialists are talking about them in whispers. They're talking about how their salaries are out of sync with the reality of the market. And they are using a word for these people. They're being called the unhireables.

Just like with their overfunded startup employers, the demand supply equation has taken a U-turn for these overvalued professionals. The scene has changed now. from having a bunch of options with amazing salary hikes served on a silver platter to now, well, the sound of crickets. So today, let us look at who are the unhirables of the Indian startup world. And how did they even get here? Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Nickda Sharma, and I Don't Chase the New Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story, that is worth understanding and worth your time. Today is Friday, the 19th of May. Let me ask you a few questions to begin with. Are you a 30-something-year-old in a mid- or senior-level position? Do you work in a product or tech role in a series B or above company?

Did you see a salary hike of 30% or more for each of the past three years? And do you earn more than 50 lakh rupees per annum? If you've answered yes to most of these questions, you may have a problem at hand. You could find yourself among a section of professionals whose salaries are out of sync with the startup environment now, which, by the way, is dramatically different from last year or last to last year. Most well-funded startups have a small number of such professionals. And guess what? Their numbers are the highest in growth stage companies.

For example, in used car platforms like Cars 24, in ed decks like Unacademy, in food decks like Zepto, in ride-hailing companies like Ola, or in social commerce startups like Misho. And the most peculiar thing that Jerry, the startup hiring professional, pointed out to the Ken's deputy editor Arundati Ramanathan, was that this is only being seen in startups, not in any other traditional sector. as much as one-fourth of white-collar professionals and startups might be in this category of unhirables according to him. And Shrikant Ayir, the CEO of a startup called Home Lane, in fact, told us that it may be one herd in the product and tech category. All of this obviously has changed the way people are being paid and also how they're hired. The power is shifting back from employees to employers now.

Stay tuned for more. Salaries are dipping. Especially the budget for meaty roles like Vice President of Product, they have been cut by 20 to 30%. And since there are too many people chasing too few jobs, company are taking their own sweet time to wait for the perfect candidate. They are looking for people with the right kind of skill set who are willing to take the salary set by the company.

Now, companies are not compromising. like a year or two ago. Anshamandas, the founder of a talent search firm, told us that now anyone who's hiring has crazy expectations. They think that they can get high-quality talent, underpay and also get a 95% fit for the role. Companies know it is an employer's market and they are satisfied only if they come close to what they want.

And what makes the situation even worse is that the supply of talent is only expected to increase in the future. Thus estimated that startups have laid off about 40 to 50,000 employees so far, which is about 5% of the overall startup workforce in the last several months. And he believes that in the next two quarters, there will be more layoffs. According to him, overall layoffs will hit up to 75,000. For example, Michoud laid off 15% of its entire. entire workforce in three rounds of layoffs in a span of a year. Employees and employers now are

finding themselves at a dead end of sorts. Employers are facing investor pressure to turn profitable and they are having to deal with flat or slashed valuations, which is why it is almost an existential crisis for them. They are feeling the heat and they want to write their previous wrongs. Employees meanwhile have to choose between accepting lower or no salary hikes or a stagnated career growth. Like thus said, more layoffs are expected and employers are only sharpening their knives. Coming up, what to expect next. The first wave of layoffs was a broad stroke of sorts which was meant to pull the shutter down on new initiatives and scale down spending-oriented areas like, for example,

brand marketing. But with each newer round of layoffs now, companies are sharpening who they target. It is when annual salaries tend to go over 45 to 50 lakh rupees that companies start to square off value with salary. So now, companies want to know if they have overvalued employees in their workforce. And to do that, they are turning to a standard tool that they have largely ignored during the boom years. The industry-wide, salary benchmarks. The CEO of a D2C or direct-to-consumer startup told us that all of this is based on factual data. They actually got their salary benchmarking data from the likes of Aon Hewitt, which is an HR consultant company. This was to see how their employees fare against those benchmarks.

And this particular company noticed that it was a little off from the benchmark when it came to brand marketing roles. And when it came to product and tech roles, they were way off. So this D2C company then asked its senior management to convert 15 to 25% of their salaries into stock options. This was so that they could manage the cash that they needed to hand out. It also increased the amount of variable pay component from 10 to 25% with very clear milestones. But didn't the company face resistance? The CEO told us that most people accepted it except for one or two people who, according to the CEO, are living in a distorted reality. When hiring two, companies are combining separate roles into one.

For example, this D2C company used to hire product managers for tech and for engineering separately. But now it has combined these two roles. Now, of course, all of us are thinking the same thing. These companies are coming across as really ruthless. But their leaders argue that continuing to have a large number of overpaid employees has deeper consequences than just paying a high wage bill. Many overpaid employees, on the other hand, are hoping to just write this out. They are just praying and sitting tight, kind of.

They want to wait things out till the situation improves. In the meantime, what can you do? Self-awareness is super important at this point. Ask yourself the question, am I unhirable? But how would you figure that out? And HR at a fintech firm gave some solid advice. They said, go for three interviews. And if no one gets back to you, you are unhirable.

Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snitha Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.