#dnaEdit: Placement nightmare

The deferring of campus placements by India’s e-commerce bellwether, Flipkart, and other start-up companies, is a sign that after years of splurging money on discount-driven customer acquisition, the coffers are beginning to run dry. A business model that could absorb losses through the largesse of venture capitalists who, until now, were content to keep watching the growing sales volumes, could be unravelling. In the immediate term, what has damaged Flipkart more is the public perception that is bound to change after the very public showdown with IIMs and IITs. These institutions were predictably upset that Flipkart and other start-ups which had demanded Day-One hiring during placement season to net the best talent were suddenly deferring joining dates, just days before the new hires were set to join the company.  What alarmed the students, institutions and parents was that the joining date was pushed by a very long period — 7 months — to December. Like Hindustan Lever and other FMCG companies in the 1980s, Infosys and the IT firms of the 90s and 2000s, e-commerce companies have become the middle class darlings of this decade, and it is no surprise that many enterprising graduates would want to try their luck at start-ups.

The hiring freezes have come soon after it was reported that Flipkart’s sales have not grown month-on-month since December, while that of another big e-tailer Snapdeal has been declining since December. Many start-ups are struggling to raise money with prospective investors uncertain about current valuations and existing investors preparing to mark down valuations on the back of lowered expectations. In two consecutive markdowns, Morgan Stanley has down-rated Flipkart’s valuation from a high of $15 billion last year to $9.3 billion now.  If the fortunes of the company don’t improve by December 2016, the new hires can expect further deferment of their joining dates. In a free market hire-and-fire model, these are the risks that students everywhere are subjected to, more so in a startup where uncertainty characterises funding cycles, technological changes and market penetration from one quarter to the next.  The threats by IITs and IIMs that they will blacklist these companies, is at best a pressure tactic. What placement cells in these campuses must do is to tap their industry contacts and alumni networks and prepare alternative opportunities to these students. 

Surely, Flipkart and the other companies cannot be accused of wilfully cheating the students. For those sold on the idea of ease of doing business, one cannot have it both ways. A company that cannot shed excess flab in times of distress will be cautious in making hiring decisions during better times. But the company also has the responsibility to generously compensate employees who are losing jobs. The deferment of placements is nothing new in India. In the IT recession that followed the dotcom bust in 2001, most software companies had reneged on placement commitments to new hires in many engineering institutes. What has changed now is the arrival of social media and the ability of discontented people to raise their voices against such actions by companies. Flipkart appears to have realised the damage that has been caused to its brand and is trying to undo it by offering internships for the new hires. The IIT and IIM graduates who feel let down by Flipkart reveal the limitations of our premier management and technical institutes. These are students who are the cream of India and who are expected to be world-beaters.  With fee structures rising, it is but natural for middle-class students to look for high paying jobs and campus placements. However, we do expect our IITs and IIMs to produce students who can rise above such challenges. These institutes would do well to mull whether it has succeeded in inculcating the spirit of scientific inquiry, independence and entrepreneurship among its graduates.