Flipkart cuts 1,000 jobs, poor performers to go

Flipkart, the largest online shopping e-commerce website in India, and based out of Bangalore, has asked almost 700 to 1,000 employees to pack up and leave since they are failing to meet professional expectations by the employer. According to a report on Economic Times, the e-commerce giant has asked its underperforming employees to either resign or be laid off with a severance pay. The information comes from three sources, who are directly aware of Flipkart’s developments.

The decision will impact a shopping 700, to 1,000 employees, which included two of the sources too, who are part of the senior management team. One of the sources told ET that the cleanup is part of Flipkart’s process for creating a lean organisation.

This move by Flipkart is because of the challenging times the company has to face by managing profits and increasing growth if they have to stay at par in the industry. Flipkart has a round 30,000 employees, and the present job cuts could mean downsizing the company by almost 3 – 3.5 per cent. Flipkart has been rapidly growing since the past few years, and this move is an eyebrow-raiser.

In a statement to ET, Flipkart said that if employees do not make progress’’ despite being on a performance improvement plan, they are encouraged to seek opportunities outside the company where their skills can be better utilised.’

This move by Flipkart is a common practice across various industries, especially high-performing internet-based organisations. Microsoft too announced a job cut of almost 2,850 employees this week. Rising importance of profits and in order to stay in the race are the main reasons why companies have to take these decisions. Flipkart has also been known for curbing discounts and limiting salary increments in the past, in order to increase profits and lower their monthly burn rates.

On the other hand, ET reports, Snapdeal had also walked down the same route with almost 200 employees being asked to quit early this year.    

Flipkart made a similar move in 2013, almost 10 per cent of their employees were asked to resign due to low performance.  

"Managers should have good facts and data substantiating why a particular person is a non-performer, and base his decision on factual data," said Harish Kumar, Managing Partner at Wenger & Watson to ET. "There is also a lot of referencing that happens in this space and an organisation should be helping them in that regard as well," he added.

Flipkart, which was launched in 2007, announced the acquisition of online fashion retailer Jabong for almost $70 million, earlier this week.  Flipkart had also acquired Myntra for $300 million last year. The move has made Flipkart stand stronger against rivals Amazon and Snapdeal in the Indian online e-shopping industry. Sadly, earlier this year, Flipkart’s value was seen tumbling down from $15 billion to $11 billion. Fierce competition by between rivals Amazon, Snapdeal and Flipkart offering discounts and additional services to keep customers happy are the main reasons why profit margins are low and employees have to suffer in the bargain.

*UPDATE*: According to a new report filed by IANS, Flipkart has denied all allegations with regards to the lay offs. "Flipkart denies all allegations of a lay-off," a company spokesperson said in a statement to IANS.