Candid admissions are a rare occurrence in the corporate world. And as you move higher up in the hierarchy, the executives as a rule, are more guarded and tight lipped about everything. Which is why when Flipkart Co-founder Sachin Bansal, went out and spoke about why he was replaced as the CEO of the company in a supposedly impromptu moment, well, everyone was surprised by some of the revelations he made.
Flipkart has a pretty great employee culture. There are regular interactions and town hall meetings where the top brass meets with the folks lower down, who actually keep the wheels turning at the poster boy of Indian E-commerce. On Friday, one of these interactions saw Executive Chairman Sachin Bansal admitting to some big mistakes made by the company management over the last year and a half, to the accompaniment of cheers and claps from an audience which consisted mostly of Flipkart employees.
Before going into the details of the event, lets take a look at where Flipkart stands at present. Founded back in 2007 by the Sahin and Binny Bansal duo, the company has come a long, long way from its humble beginnings. Today, the company has annual revenues well in excess of $1 billion and is one of the largest Indian unicorns, with an estimated value somewhere in the neighborhood of $10 Billion. Flipkart now employs over 30,ooo people and has made major acquisitions such as Letsbuy, Myntra and Jabong in recent years. By August 2015, Flipkart had managed to raise funds with a total value in excess of $3 billion, over 12 rounds and 16 investors
However, the company’s fortunes have been somewhat floundering of late. After a massive spurt of growth and a flurry of investments from major firms, the Indian ecosystem — and particularly e-commerce — has slowed down with investors drawing their purse string tights, blaming companies of burning their money through discounts and promotional offers. Flipkart has been caught in the flow too and had its value marked down by several major investors, including a Morgan Stanley markdown that brought its valuation slipping down to $10 billion from an initial $15 billion.
The company has been struggling hard to stay afloat of late. Along with a hold on discounts and promotional offers, it has also introduced a multitude of new measures to grow and streamline its business processes. The measures have unfortunately also included mass layoffs that have seen hundreds of employees asked to tender their resignations to the company. Apart from layoffs, there have been major changes at the very topmost tiers of the company as well with C-level executives leaving or getting replaced after surprisingly short tenures.
Along the same lines, back in January, Sachin Bansal was shifted to Executive chairman from CEO to make room for then COO Binny Bansal to take up the top leadership role. While Flipkart, along with Sachin Bansal himself, said that the change was to give Sachin a mentorship role at the e-commerce giant, the decision caused many raised eyebrows. Many of these eyebrows were within the organization and the Bansals held several meetings to assuage the worries of their employees.
Well, considering the low levels employee morale has dropped to at Flipkart, the management has been holding town halls to allow the top brass to interact with the employees. At one of these events held on Friday, Sachin Bansal came out in the middle of a presentation by incumbent CEO Binny Bansal and said that even his own replacement was performance linked. He made this startling –startling because no one expected him to admit it — revelation after a request for a show of hands for those who believed that the Flipkart management was being unfair, resulted in a surprising number of upraised hands.
Attempting to assuage employee concerns while also assuring them that not even the top management were safe from performance related job cuts Sachin Bansal said,
Just look at who was management six months ago, one year ago, and who is management today. It’s completely changed. Right? Yeah, I mean, nobody is here. I have changed. I was the CEO and I have changed. It was performance linked.
The announcement certainly seemed to placate employees present in the hall to some degree, as many of them took to clapping and cheering to welcome the revelation. I mean yes, there wasn’t really anything to be particularly happy about, but knowing that your bosses are in the same boat as you, was probably good for employee morale.
Which also brings us to weather the moment was planned or not. Sachin certainly interrupted Binny, making a brief appearance to state his pitch. However, it may well be part of a pre-determined strategy as Flipkart attempts to find ways to boost employee morale despite signing them off in their hundreds. According to estimates, the company may have let go of as many as 700-800 employees over the course of the past two months alone.
Meanwhile, CEO Binny Bansal also spent quite some trying to boost morale during the town hall and took his employees through the four-pronged SWOT, in which he spoke about Flipkart’s strengths, weaknesses, opportunities and threats respectively, informing those present about the efforts the company was making to improve its prospects in all four categories.
On the strengths part, Binny mentioned the presence of top talented executives that are from some of the most reputed colleges in the country in case being fresher and have the experience of having worked with some of the biggest brands out there, when experienced. He also talked about great brand recall, a strong supply chain — that is powered by its logistics wing, ekart — and balance sheet.
As far as weaknesses were concerned, customer experience, culture, speed and quality of execution got a mention in this category. You have to give it to Flipkart though, its highly propagandized Big Billion day, along with boosting sales for Flipkart when it worked, also had the added advantage of bringing these exact weaknesses to the fore when it didn’t.
Meanwhile, Amazon — the arch nemesis –and Paytm were listed as the chief threats to the company. The former because of its unsurprisingly deep pockets and the focus it has been laying on India lately. Paytm on the other hand, has been deploying the brand presence it has built as THE online payments service provider in the country, to branch out and enhance its presence in various other verticals — including e-commerce.
Speaking about his earlier statement, when he said that there wouldn’t be any layoffs, Binny said
When I said there won’t be any layoffs, I didn’t mean we will not let anybody go. We will not have layoffs for cost reasons was what it was meant for.
So, there will be — as there have already been — layoffs whenever the company feels a need for it. However, what Binny has promised is that his company won’t be doing it in order to cut costs. The company has however, significantly toughened its appraisal process and employees not performing up to the mark are much likelier to be shown the door, than they were a few months ago.
Here is the statement Flipkart released following the Town Hall discussion.
At Flipkart, we have an open and transparent culture. The town hall that we conduct regularly, is one of the pillars of this culture of openness. Our performance metrics are freely shared to encourage a collaborative environment. Anybody is free to ask any question, challenge existing norms and hold the leadership accountable for business and organization metrics.
And the company has been holding plenty of them in recent times. The last two weeks alone saw Flipkart hold almost twenty town halls, almost crossing the line from great-interactive-culture to signs-of-troubling-times for the company.
We believe this leads to an environment of trust, openness and respect and is one of the building blocks for our organisation of the future. We are also probably the only large company in India to have this open and collaborative culture.
Meanwhile, Flipkart still has plenty of things going for it. Apart from the things CEO Bansal already mentioned as part of the company’s strengths, there are various other factors to its advantage too. For example, the company recently launched a new, enhanced desktop website to boost its sales and is the clear leader in several major verticals — for example fashion apparel, where it has a 65 percent market share thanks to Myntra’s recent Jabong acquisition.
The company has also managed to snatch several exclusive phone sales deals back from Amazon. It should be remembered that Amazon had earlier managed to woo Motorola-branded phones to its platform. Xiaomi, another major foreign brand with a strong growth curve in India, had also launched its newer handsets on Amazon, after first opting for Flipkart in the country. However, Amazon has not been slowed and as per the latest reports, had managed to grow its market share from 29% to 35% in the October 2015 – June 2016 period.
Meanwhile, Flipkart is planning to spend this quarter in doing what it does best — bring brand new innovations to the Indian e-commerce ecosystem. On the company’s agenda for the near future is zero per cent EMIs — which the company hopes will be able to push purchases — and Flipkart Assured, a fast-delivery program under which Flipkart will seek to get your order to you in two to four days — and eventually, even just one. Also on its schedule book is scaling up to 80,000 units a day from the 32,000 it currently offers — no mean feat certainly, but definitely achievable in India’s rapidly growing market.
Binny Bansal displayed a candid streak of his own when he said that Flikpart’s customer experience “sucked”, delivery was slower and that selection wasn’t great. All this was said in response to questions about why Amazon was managing to snap up market share that was being lost by Snapdeal. He stressed that the company seriously needed to enhance its performance on several counts, including consumer experience and growth.
Meanwhile, Flipkart is still the poster boy of Indian e-commerce and while i personally don’t root for a particular company over any other, as an Indian, the economy would probably benefit more from a Flipkart victory than one gained by Amazon — as these two are the largest competitors in the segment. As FactorDaily aptly quoted Rutvik Doshi, director at VC firm Inventus Capital as saying,
If Flipkart loses to Amazon and Ola loses to Uber, [global] limited partners will stop investing in India and go back to their familiar territory of investing in Silicon Valley companies.
And we definitely don’t want that. Global investments are a major factor behind the boom we have witnessed in the recent years along with the rapid growth of Indian startups. Although the investments have dried up somewhat in recent times, the ecosystem could very well do with another surge of interest.