India’s leading cab aggregator Ola Cabs may be on the verge of substantial consolidation which includes a massive firing spree.
Seems like the golden era of growth-at-any-cost for technology market is nearing its end. Now, according to highly placed sources, Ola may be set to fire approximately 1000 employees under the guise of redesign and restructuring the organisation.
In the second half of the year 2019, the global and national market has taken a hit due to the economic slowdown. That is now affecting the Indian startups. This belt-tightening across large startups is a fallout of the global scrutiny of high cash burn businesses post failed IPO of American co-working space WeWork.
SoftBank’s Cost-Cutting Pressure
During 2019, Ola has seen many of its top employees leaving the organisation one after another along with 500 other employees being laid off. The company is facing cost-cutting pressure from its biggest investor SoftBank that funded WeWork too. The fundraising and valuation of new startups are more scrutinised than it was six months ago. Just last month, unicorn startups like OYO and Quickr have considerably sized down.
The cab-aggregator service Ola has been on a tireless expansion spree and is now looking to consolidate its core mobility. A leaked email from the management to Ola employees stated, ‘Ola will continue to focus on measuring productivity metrics or consolidating some functions while other initiatives will be driven by evaluating how we can leverage technology to significantly transform processes which are currently largely manual.
Ola has been exploring new geographies including tier-3 cities in India and overseas markets. The company has also made several strategic investments in a bid to explore new verticals like financial services, food, public transport technology, and electric mobility.
Redesign of Organisation and Processes
The mail further reads, ‘As a business, we need to exercise sharper focus on real metrics like revenue, growth and profitability. We also need to refresh the way we run our daily operations – processes, people, productivity etc. Hence, a redesign of our organisation and processes is the need of the hour. As part of this redesign, it is imperative to right-size and bring efficiencies in our core mobility business and leverage our talent base across all our business verticals.’
Meaning, despite rapid growth, Ola has been hurt by market and policy uncertainty. Therefore, Ola is looking to redesign the organisation by (right-sizing) laying off and firing its employees.
What’s Next for Ola?
As per insiders, the new working model will form ‘the foundation of the next chapter‘ in Ola’s journey in India and overseas. The message mentioned the redesign to be a part of Ola’s vision to be a ‘future-ready organisation with profitable and sustainable growth.’
As per recent media reports, Ola is looking to adopt a standardised model of commissions for driver-partners, shedding its current incentive-driven business model. Another major step will be a shift towards leasing as it seems to explore further “new high-margin categories like corporate, self-drive and scooter rentals”.
Ola has standardised commissions to 25% across India in the last couple of months, a move it says will offer “predictability of income to its driver-partners.” Furthermore, Ola expects the move will help it in cash conservation. It has also sharply cut driver-partner incentives to roughly 5% of earnings.
However, Ola has been on an upward path. In the previous year, Ola was able to trim its losses by 9% as the total expenses were limited to a growth of 6.3% and it saw a spike of 37.7% in operating revenue. According to its regulatory filings with the MCA, it earned Rs 2,543.63 crore against Rs 1,847.53 crore in the previous fiscal.
Apart from it, the firm witnessed a decline of 8.8% in the total losses amounting to Rs 2,593 crore in FY19 despite the growth in total expenses approximately by Rs 319 crore to Rs 5,385.81 crore.