Why Did OYO Fire 1,800 Employees as the Year Begins?

Mega hirings and mass recruitment drives are an everyday headline from India Inc. with opportunities pouring in from several sectors. But we hardly remember those companies that make mass layoffs part of their corporate cost-cutting strategies. Not only does this reflect poor management decisions from such companies, but it also makes a severe dent on the structures of the country’s industries and economy. 

The Economic Times in December reported that around 2,000 workers would be let go to save “manpower costs” and “make some of its processes more tech-enabled.”

The Gist

The SoftBank backed budget hotel chain let go of nearly 1,800 of its employees, with 1,200 and 600 terminations in India and China, respectively. This comes as part of founder-CEO Ritesh Agarwal’s company-wide message that Financial Express made public:

“One of the implications of the new strategic objectives for 2020, is that, like the leadership team, we will reorganize more teams across businesses and functions. And this means that, unfortunately, some roles at OYO will become redundant as we further drive tech-enabled synergy, enhanced efficiency and remove duplication of effort across businesses or geographies. As a result, we are asking some of our impacted colleagues to move to a new career outside of OYO. “

The 26-year-old unicorn founder further described the company’s sentiments while deciding the move:

“This has not been an easy decision for us. We are doing everything we can to ensure that our outgoing colleagues receive as much assistance and support as possible through this transition. Every OYOpreneur is important to OYO, and ensuring their well-being both during and after their tenure is our number one priority. I want to thank them for their efforts and apologize for the impact this is causing. One is an OYOpreneur forever, and we will always be grateful for your efforts. 

As an organization, we stand strong with our people – not just with those who are impacted, but also with those who will remain an integral part of OYO beyond today.”

Agarwal owns and runs OYO through Oravel Stays Pvt Ltd, which is backed by Sequoia, Softbank, and the Thiel Fellowship. The budget hospitality chain will somewhat face the consequences to its reputation as far as employer branding is concerned.

How OYO Will be Seen Now

Frankly? Not a speck of difference. Because when a well-established brand like OYO does something like mass firings, their image hardly is affected. As mentioned earlier, however, the logic does say that the company should face backlash. Still, almost no one will hesitate to join the company if they’re offered a job even after knowing about the company’s fire background. The concerns are accompanied by the fear in the employees who remain at the company and fear spontaneous termination on the grounds of another “restructuring exercise.”

With platforms to review the treatment towards employers, for instance, Glassdoor, employers should be considerate which hiring policy to implement when and where. The reasons for such a move are being explained as a super-normal increase in business scale after the company secured almost $ 1.5 Billion Series F funding led by SoftBank. 

The company also made significant changes in its chief official personnel that started in January last year. Since then, OYO has welcomed a new CEO for OYO Technology & Hospitality Company, a new COO for its Vacation Homes business and a new South East Asia & Middle East CEO. Those are quite the changes, and such hires would’ve cost the company some huge cheques.

What Does All This Mean?

Although the markets have mixed reactions, the move is not a surprise to everyone. Many investors and VC forums discuss that the company reorganized the employee benefits expenses to manage the profit and loss sheets before FY 2019-20 closes. Since the decision has come into effect in January, all the affected employees will have left by the time annual reports are prepared, i.e., the end of March. 

Although these are all speculations and no substantial accusations can be proved, there is little confirmation in the exact nature and intention of the decision besides financial. The exact repercussions will be seen as the financial documents reveal the revenues to the markets at the closing of the financial year.