New Delhi: Flipkart cofounder Sachin Bansal made a startling disclosure that he was replaced as chief executive “because of performance,” expertly placating employees riled by recent downsizing while also making a case for the deliver-or-go culture that’s come to haunt internet companies.
Bansal made the confession at a monthly meeting on Friday that was heating up with employees questioning why they had to pay the price for management decisions gone wrong, according to two people present there. Bansal’s admission diffused tensions immediately, bringing applause and cheers for the kind of candor that’s become rare in the corporate world.
India’s largest online marketplace has been buffeted this year by a series of valuation markdowns by mutual funds, several high-profile executive exits and staff reductions amid an intensifying battle with Amazon, the world’s largest online retailer.
Bansal’s candidness is being seen by some experts as a strategic move that could help Flipkart win back employee trust and boost morale at a time when it is preparing for the pivotal festival season that begins next month. Amazon India, with an expanded budget gifted by its US parent, is expected to outspend Flipkart in terms of marketing and discounts.
Bansal, who was replaced as CEO by cofounder Binny Bansal in January and made executive chairman after eight years at the helm, defended the company’s decision to downsize saying it was done on merit, emphasizing that the management team, too, was not spared.
“Look at the top level around you. Everyone has changed. In fact, even I am gone,” Sachin Bansal said, according to the people present at the meeting, who declined to be identified. “Some of our targets have been missed and everyone, including the top management, has paid the price.”
“At Flipkart, we have an open and transparent culture. The town hall that we conduct regularly, is one of the pillars of this culture of openness…..While the performance management philosophy was part of the last town hall discussion, an overwhelming majority of the time was spent on discussing the great strides that Flipkart had made in its business performance,” said a Flipkart spokesman in an emailed response (full response below).
Binny Bansal and human resources head Nitin Seth were also present at the meeting held at Flipkart’s swanky 2 million-sq.ft. campus, Cessna Business Park, that was opened about a year ago.
About 200 employees had gathered for the evening meeting, a monthly event that allows employees to send questions anonymously and have the most-voted questions addressed by the top management.
The August 19 meeting was the first to be held after Flipkart recently asked 700-1,000 employees to either resign or be sent off with severance pay. Several consumer internet startups including Ola, Snapdeal and Grofers, too, have had to let go of employees with investors mounting pressure on them to cut costs and work towards profitability.
Flipkart’s downsizing had caught its employees by surprise. When Flipkart effected a series of management changes earlier this year, the company had sought to assure staff, called ‘Flipsters,’ that while it may not hire more people layoffs were not being considered, according to an employee who, too, declined to be identified. ET could not independently verify this.
Employees’ consternation with the downsizing and the manner in which it was handled carried on to the Friday meeting. Sachin Bansal’s admission, however, not only drove home the message that no one was above board but also seemed to have brought renewed faith in the founders.
“It was like a reminder of the Big Billion Day glitch in 2014, when Sachin and Binny both emailed and apologized to the customers. They are the kind of people who acknowledge things when they screw up,” said another employee who was at the meeting. Flipkart’s debut mega sales event that year was marred by technical and delivery glitches.
“It is a very positive and rare development that they had the confidence and courage to own up to the entire process, and address it in a town hall,” said Anandorup Ghose, partner-talent and rewards, at human resources consultancy Aon Hewitt, adding that he could not recollect such forthrightness, especially in a new-economy company, in the recent past.
“They have owned up to the fact that the management change was done was due to performance issues. Talking about it plainly with employees is a big positive,” Ghose said.
Among Sachin Bansal’s most-controversial decisions was his strategy to focus attention on Flipkart’s and fashion subsidiary Myntra’s mobile applications over the desktop and mobile websites. That resulted in the company ceding leadership in desktop and mobile website traffic to Amazon India. As Flipkart expanded its seller base aggressively and outsourced its delivery and logistics handling, customer experience also suffered.
In January, Binny Bansal was handed charge of running all business areas including commerce, Myntra and the in-house logistics unit Ekart, with Sachin Bansal focusing on strategic direction, mentoring the senior leadership and looking for new investment opportunities.
Several top executives have left Flipkart this year, including Myntra founder Mukesh Bansal who was heading the company’s commerce platform; Ankit Nagori who was chief business officer; former chief product officer Punit Soni; and more recently Rajinder Sharma, who was the legal head.
In June, Kalyan Krishnamurthy, managing director at Flipkart’s largest shareholder Tiger Global Management, joined the company to lead the commerce platform. Krishnamurthy, a senior operations executive with Tiger Global since 2011, had worked at Flipkart between 2013 and 2014 when he served as chief financial officer and head of category management.