At the start of 2020, Traveloka-affiliated Airy Rooms shared with its staff a vision of becoming a profitable company, said a former employee of the budget hotel startup.
That vision soured quickly. On April 14, some staff were summoned for individual online meetings.
“We got an invitation from the people operations team for one-on-one meetings to discuss changes in the company’s operations,” the source said. “The management of Airy told me about the company’s situation and that it will lay off more than 70 per cent [of staff],” the person said.
Keeping a job at a startup was already a precarious undertaking in a post-WeWork world, former startup employees told DealStreetAsia. But the COVID-19 pandemic has forced an immediate reckoning, collapsing fragility into finality for a rapidly growing number of laid-off startup workers in Asia. As the downsizing continues, Asia’s startup ecosystem must confront the question of whether it can do better by its people.
Traveloka — the online travel platform that is one of just a handful of Indonesian unicorns — has terminated the employment of hundreds of its employees and seen the departure of several executives, including chief technology officer Benjamin Mann, chief investment officer Hendrik Susanto, and Singapore and Malaysia head Halif Hamzah.
Former employee Haris, who declined to share his real name, had worked at Traveloka for about two years before he was handed the pink slip one fateful day in March.
“I only had 15 days of notice period, with only a two-day window to decide whether or not to accept the golden handshake offer from the company,” he said.
A number of laid-off Traveloka staff have gone on social media to express disbelief and disappointment, with one even claiming to have been let go just one day after joining the company. But Traveloka insiders like Haris said that the company had already been actively cutting costs before the pandemic struck.
Indeed, the stories shared by former startup employees suggest that in a number of cases, the virus merely accelerated and amplified an ongoing trend of belt-tightening.
Take Traveloka, for instance. Haris said that the company had already undertaken multiple restructurings and merged some divisions in 2019, which culminated in an early 2020 announcement that there would be no salary increments and bonuses for the year.
Another Traveloka employee in Malaysia shared that the company had already embarked on an efficiency drive last year with an eye on a possible public listing.
“Since mid-2019, there were talks that the company is planning to go for an IPO,” the Malaysia employee told DealStreetAsia. “So the streamlining processes began as the company wanted to focus on its profitability and its core business, core value. For Malaysia, there is a small team retrenched early this year and the company outsourced the service provided by the team.”
At the end of March, Traveloka chief executive Ferry Unardi sent an internal memo to employees to address the COVID-19 outbreak.
“He said the company may have to make some tough decisions, which we thought could include retrenchment,” the employee said.
Emails sent to Traveloka and Airy had not elicited a response at the time of publishing.
More Southeast Asian startups are feeling the pressure right now.
Fashion e-commerce major Zilingo, which last raised $226 million in a Series D round in April, has confirmed that it has made redundant less than 5 per cent of its 796-strong global workforce as part of a “planned company-wide restructuring.”
In the hospitality space, India’s OYO, a hotel platform, has been letting go of staff around the world, as has Airy.
A list — at SEAcosystem.com — that has been circulating among the Southeast Asian startup community containing former startup employees now looking for a job currently has more than 800 names.
Even Grab, which has not confirmed any layoffs, has described the pandemic as “the single biggest crisis” to affect the ride-hailing decacorn. CEO Anthony Tan said this week that the company will be making “tough decisions and trade-offs” as well as “necessary operational adjustments,” which include right-sizing its costs and managing capital more efficiently, to weather the storm.
According to Erika Dianasari Go, a partner at Indonesian VC firm Alpha JWC, layoffs are undesirable but inevitable to survive in this highly uncertain situation. Despite this, companies doing the deed need to make sure, for the sake of the employees and also the company’s own benefit, that they go about it the right way.
“The company just need to do what its best, to do right amid this bad condition: deliver the message openly, provide worthy severance, offer support in job recommendation, use your network to help them find next opportunities,” she said. “In the end, whether your company survives COVID-19 or not, your reputation will linger. You might need to work with those you lay off in the future in different circumstances.”
However, human resource consultant Anne Caron, believes startups shouldn’t resort too easily to cutting manpower when the chips are down.
“Some companies are too conservative in their plans and fail to put into place alternative measures. Even if some significant cost-cutting has to take place, there are a number of options that companies should consider before getting themselves into drastic reorganizations,” said Caron, who runs her own consultancy practice.
Before resorting to job cuts, companies, she said, could openly discuss cost-cutting measures with employees, redeploy employees to areas most needed by their business, place employees on unpaid leave, ask employees (especially most senior members) to take voluntary pay cuts, or, if push comes to shove, impose general pay cuts while being mindful of personal situations.
While Caron acknowledged that manpower represents the biggest cost item in a company, she argued that downsizing comes with a high cost, which most often exceeds the amount saved on salaries.
According to Caron, citing a Society for Human Resource Management study, each employee lost could end up costing the company between 50 per cent (for entry-level roles) and 250 per cent (for senior roles) of their annual salary. These costs come from the cost of rehiring, the lost expertise and knowledge, the impact on productivity, the higher replacement salary, the cost of training, the impact on customer satisfaction and the impact on team morale.
“A lot of employees are losing their jobs, and more will. Hopefully, companies will consider alternatives to layoffs such as redeploying employees where the companies most need them before going to such drastic measures,” Caron said.
It remains to be seen how the current wave of layoffs will affect the attractiveness of startups to workers.
Caron believes that some former startup employees, particularly those with high financial constraints, will become more risk-averse and look for job security, which may be stronger at more established corporates. For individuals in more stable situations, some may choose to freelance or follow their passion elsewhere.
One recently laid off Traveloka employee, however, said the crisis will not deter him from working at other startup unicorns in the future.
Having worked for two unicorns in his career, the person said he still relished the chance to work on highly complex projects with highly talented people coming from Ivy League colleges, holding tertiary degrees, with top consulting experience, or with experience of working in other unicorns and top tech companies.
With names of reputable startup companies marked on his CV, the source said he has already been contacted by other companies enquiring about his services. His next destination would be another tech company, which he prefers for their “flat hierarchy, which gives a good portion of authority to each team, and bias for action and iterations which means fast movement.”
“These are the conditions I didn’t find in more conservative companies, as they usually tend to have bias more towards safety and loss aversion. So, yes, I’ll join the startup wagon again without a doubt,” he said.
The former Airy employee who learned of his retrenchment on April 14 is trying to take the rapid change of circumstances in a positive light, describing his time at the startup as helping to “build my character, skills, and also career.”
“I love a challenge, so I just look the layoff incident in Airy as an experience,” the former employee said. “If someday, I want to build my own company, I need to have another plan, if a pandemic like this happens again.”
Yimie Yong contributed to this story.