Girnar Software, the entity behind one of India’s leading car seller CarDekho, is on the verge of a massive layoff exercise. The news has now been confirmed by way of an internal memo obtained by The TechPortal. The move is surprising considering that Girnar had been all for increasing employee strength after the last layoff round, that saw the company sack 60 employees.
The Internal memo cites profitability as the main reason behind this round of layoffs. Apparently, the company wants to be profitable and what better way to be profitable than lay off employees, right?
As per the internal communication received by company employees:
We had committed to Board that CarDekho/Girnar will be a profitable company by April-May-June 2017 quarter, so as to reduce our dependence on external investor funds.
The memo went on to say that it was a tough decision and was taken only after keeping the best interest of folks who “would be staying and who would be leaving” in mind. Although, how firing someone could be in their best interests, is something that beats me. Meanwhile, we have also heard that a major portion of these layoffs are taking place at the company’s Gurgaon offices.
Interestingly, the move has been taken with an eye towards ensuring that the company manages to reduce cash burn and becomes profitable as soon as possible. And as the memo says, the downsizing was not related to performance in any way.
We are about to part ways with some of the most talented folks honestly. If we get a chance to re-hire them in the future, we will do so happily.
Along with laying off a significant portion of CarDekho’s workforce, Girnar is also executing a bunch of other maneuvers aimed towards ensuring that the company stops burning cash and becomes profitable. Towards that, it outlines several measures that will be implemented across the company in the near future.
Apart from combining its parallel teams and structures where and when possible, the company is also reducing overheads involved in travel/outings/parties/ rentals/telephony/servers etc. So yeah, seems like CarDekho might be on its way to becoming a less fun place to work at. The Co-Founders have also decided to go off without drawing any salaries until the company becomes profitable.
The memo also touched upon CarDekho’s efforts to ensure that impacted members receive jobs as soon as possible. Without mentioning the exact time-frame, CarDekho said that it had given enough time to each member to find new jobs. Although I don’t think it will be taking those, that don’t succeed in their efforts, back. The company also said that it had circulated the resumes of affected employees among all the portfolio companies handled by CarDekho investors.
Reassuring employees who are staying, CarDekho said that there was “absolutely no scope of losing any more members”. In all honesty though, these layoffs come just 6 months after CarDekho’s last round of layoffs. At that time, the company had said that it would now focus its attention towards growing its team until it reached 3,000-3,500 employees.
With that said, the Girnar does seem to be going about the layoffs in a sensitive manner — rather than unceremoniously asking the affected employees to clear their desks. Internal consultants have been set up to assist affected employees and the company has called upon their employees to pass on any job opening they might be aware of.
Looking into the future, Girnar expects CarDekho to become profitable by the next quarter. In fact, the whole layoff exercise seems to have been planned around the premise of ensuring that it stopped burning cash. It also hopes to have enough capital to power through its expenses in the near future.
Yes, capitalized forever now after this move. Company will be profitable by next quarter and will not be constrained for cash.
Founded in 2008, CarDekho is a popular destination for car dealers as well as individuals looking to sell off their old cars. It also provides a variety of tools and technical support for OEMs and sellers so as to facilitate lead capitalization and boost sales.
The company counts Google Capital, Tybourne Capital, Hillhouse Capital, Sequoia Capital, HDFC Bank, Ratan Tata and Times Internet amongst its investors. It has also established a strong foothold in Southeast Asia with the launch of portals like CarBay.com, CarBay.ph and Oto.com.
Meanwhile, we leave you to draw you own conclusions from the full text of the internal memo, that follows right below.
Team,
You would be hearing a lot of rumors about the rightsizing exercise that we have just gone through and we want to be transparent about the entire situation with you. Transparency, which equates to Trust is a fundamental building block of DELITE. Hence, via this communication, we are addressing some key questions which would be going through your mind. It’s a long read, but please do spare some time on this, as it is important for you to understand the whys and whats of the entire exercise.
What’s happening?
We had committed to Board that CarDekho/Girnar will be a profitable company by April-May-June 2017 quarter, so as to reduce our dependence on external investor funds. Achieving this meant changes and optimization of various costs (which are elaborated further in this mail) but a critical and unfortunate outcome of the exercise was also that we had to take a decision to part ways with 136 members of Girnar family. This was a tough and distressing decision and was taken only after careful due diligence, keeping in mind the best interests of friends who will stay and those who will leave us.
Where will we be after this exercise?
We will be placed profitably at over 130 Cr of revenue run rate at start of next financial year, and will be profitable (net of marketing) by next quarter.
How was the rightsizing exercise planned?
Our aim was to reduce cash burns to achieve profitability in the coming quarter. For this, the following steps were adopted:-
1) Overheads: We have gone LEAN on overheads (travel/outings/parties/ rentals/telephony/servers etc) and have reduced these costs by 30% – This work has been going on for last 3 months now.
2) Zero Salaries: Anurag, Umang and I have forgone our salaries till the time company becomes profitable.
3) Rightsized Teams: Identified places where we can become lean by combining teams (instead of running separate teams for each small business).
4) Unit Economics Correction – This involved structural correction of businesses based on unit economics. This is where our excel models and ground realities didn’t match and it was a question of whether we should keep running the loss making businesses or fix the models. We opted to fix keeping in mind long term vision.
Does this have any link to performance?
No, this has NO link to performance. We are about to part ways with some of the most talented folks honestly. If we get a chance to re-hire them in the future, we will do so happily.
What are we doing for impacted members to get a job?
It is our moral responsibility to ensure each one gets a job as quickly as possible. To enable that here are few things we are doing as company:-
1) We are giving enough time to find new jobs to impacted members.
2) Setting up consultants internally to find jobs for all impacted members
3) Our internal HR team will work very closely with the impacted colleagues to ensure that they get placed smoothly in the next company
4) We have spoken to our investors and resumes will be shared with all our portfolio companies to get our members placed
5) If anyone of you has any referrals or knows of companies hiring, please send that immediately to (e-mail hidden), that’s the best help you can do.
If I am not one of the impacted members, is my job secure?
Yes. We just rightsized the company, there is absolutely no scope of losing any more members. The situation demands from each one of you to step up and play larger roles in the organization.
Will Appraisals be affected?
No. Appraisal process will start Mid-February. One big reason to do this entire exercise now was also to carve a way for appraisals of this year. In April, appraised salaries will be hitting accounts.
Will the appraisals be good?
There is no right answer here, as good is very subjective. That being said, this exercise will have no impact on appraisals which will be as per business performance of the company, which ofcourse has been very strong.
All I can say is company has posted great results and is going to be profitable in next quarter. By achieving profitability, we will be amongst the handful of starts-up who not only have over Rs 100cr in Revenue but are also profitable. Your efforts got us here and it will not go unnoticed during appraisals.
Could this have been avoided?
Not in our opinion. If we were to not tread this path, then we would have remained a company that burns cash.
While taking this decision, there were two things that we were particularly mindful of:-
1) Avoid a panic situation from point of view of impacted members and hence ensure that they get enough time to find a new job.
2) Ensure that deserving growth is given to members who have brought the company to this level. Rather than adopting measures such as freezing appraisals, we opted for course correction exercise. The members who will be impacted are great performers too, but the situation demands that they find new homes where they can grow too.
How were members chosen?
We adopted following two principles to do this:-
1) Businesses with Structurally -ve unit economics were fixed. We need to restructure teams so that business can structurally be profitable in future. This has led to some of the best guys that we know in company get impacted. The way teams were structured would have not led to profitability in the foreseeable future, and not only was that detrimental to the company but also for the folks who were running the show as they may not have seen any growth due to structural incorrectness of business.
2) Optimization/Lean – Lot of businesses ran independently, and had created parallel similar structures and teams. We have combined these teams to create synergies. This led to redundant profiles of many talented folks, who would not have had any meaningful work and growth within our group under the new structure.
We want to emphasize (and re-emphasize) here that this exercise has NO link to performance.
Why Now, why not in April ?
We wanted to minimize the impact and give as much time as possible to find jobs for our impacted members. Least anxiety was our aim. Had we done this in April, we may not have been able to give them extended notice periods. In current situation we will be giving them 2.5 months to find a new job. All impacted members will continue to come and work as normal.
Does company have funds?
Yes, capitalized forever now after this move. Company will be profitable by next quarter and will not be constrained for cash.
Lastly, these are tough times for impacted members and hence most important value of our DELITE framework at this stage is Empathy. We do commit to find a new home for all impacted colleagues where they can grow.
Thanks,
Amit
