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Layoffs, rejig one-time exercise, will be over soon: Oyo CEO

, ET Bureau|
Last Updated: Jan 21, 2020, 09.20 AM IST
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Oyo CEO
We are a company that is fairly self-critical internally. If there are things that we have not done well in some areas, we are more than eager to learn and improve.

Highlights

  • Before this one-time exercise started, Oyo stood at approximately 12,000 employees across their businesses.
  • "Growing at the pace that we did over the last three years, we did sometimes go ahead of ourselves," said Rohit Kapoor.
  • There is on call 24/7 counselling available for employees if they want to discuss anything.
Some parts of Oyo Hotels & Homes weren’t probably ready for the pace of growth it has witnessed and the hospitality chain is trying to address such issues this year, says its new chief executive for India and South Asia, Rohit Kapoor in an exclusive interview to The Economic Times. While confirming reports of job cuts at the company, he tells Anumeha Chaturvedi that it is asking about 15-20% of its 12,000 employees to go in a “one-time exercise” that “is going to end very soon”. There is no deadline from Japanese investor SoftBank to report operational profitability on some businesses, he says, and adds that the management is committed to improving relations with hotel partners. Edited excerpts:

Oyo founder Ritesh Agarwal has reportedly said the company is asking some of its employees to move to a new career. What explains this?
The question that whether some staff members are being asked to go is correct. Over the last one and a half years, there has been an increase in revenue to about 3x, and we had 1-million-plus rooms globally by the end of 2019. But I don’t think we have any hesitation in admitting that growing at the pace that we did over the last three years, we did sometimes go ahead of ourselves … What we mean is that maybe all parts of the organisation were not ready for that pace of growth and that scale of operations, and 2020 is the year when we are taking active steps to address this. We have a clear roadmap for continuing to drive success for Oyo for this year and beyond based on factors like sustainable growth. The path to profitability for any company is the important question to be asked … in which quarter that happens is immaterial but there is no doubt in my mind that it needs to happen. We are addressing questions this year like what’s the core business, which are the growth avenues we should rationalise, which are the profitable locations we should be in, what is the kind of growth that dilutes margins and how to reduce operating costs. A part of that is clearly looking at our people cost structures as we calibrate for growth.

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How many staff members are being asked to go as part of this restructuring and across which roles? When is this likely to be completed?
Before this one-time exercise started, we stood at approximately 12,000 employees across our businesses. We have asked about 15-20% of the workforce to move to a different career. This is not easy for us, for the employees impacted and we completely recognise that. Yes, there are roles that will become redundant as the company drives tech-enabled synergies and enhanced efficiencies and these (that are being cut) are for example roles that lend themselves to centralisation and remote management using technology, such as partner support, customer support, analytics, reporting. Secondly, as we have combined some of our businesses like Oyo Home, Oyo Townhouse, Oyo Life, Collection O, Silver Key under one umbrella called Frontier businesses, the supervisory layer and leadership roles in the centre and field in these businesses are now consolidated … there will also be some excess capacity across multiple roles that may not be impacted just by technology but by other business decisions. Restructuring is a combination of all this. It is a complex one-time exercise and is going to end very soon. We are not talking months or even next month. After this there is no plan.

What is being done in terms of severance packages for exiting employees and employee assistance?

Let me step into the shoes of the employees and some of the concerns and disappointments they may have. I respect that because I can’t expect anybody who is impacted by the exercise to fully understand the rationale as well as we will do it here. There are five principles on the basis of which we have done this: fairness, a humane approach, providing financial protection for a reasonable time, dealing with empathy and respect and fifth is continuous support.

Can you share some details?

On the financial side, we paid the employees an extra month or even more depending on tenure beyond whatever was their notice period, we gave leave encashment, variable pay for the cycle worked, gratuity paid as ex gratia. From a financial standpoint, we feel this was a reasonable package which was meant to protect the financial outcome for the affected employees. We realised there are uncertainties so we actually transferred a month’s salary the very next day even before the full and final settlement. Outplacement agencies are offering support to 100% of the impacted workforce. They will get help for 90 days of reaching out for other opportunities including counselling for a period of time. The internal team that was set up is constantly monitoring the outreach to companies that are hiring including partner companies and companies in the start up eco system. There is on call 24/7 counselling available for employees if they want to discuss anything. We extended the medical insurance for immediate family members of employees if had they opted for that clause for a period of time. If any employee had a special situation which required an exception we made the exception. Personally a lot of effort was put in to help people. Right down from me to the last person in the organisation, if they can help the impacted employees in any way they will do it and they are doing it. There could be some cases where some process breakdown might have happened. But 99.9% of the time, this is the process followed. I don’t think we have done anybody a favour. It’s still not something that we feel happy about but at least when we had to do the restructuring we did it in a manner where we felt that we followed a good benchmarked approach to doing it.

We are told that Oyo, on direction from SoftBank, has set internal deadlines for its self-operated hotels and ancillary businesses to turn operationally profitable. How are various businesses faring?

I want to dispel the notion that SoftBank is directing us to do x or y or z. Of course, as any other shareholder, they have certain expectations. And Ritesh and the management team work along those. And they are not the only shareholders. This business is first and foremost run by the management team. And like any other normal company there is a dialogue with all stakeholders on targets for the business for the year or future years. We have no such deadlines. In businesses you have targets not deadlines. All our businesses are fairly large. Weddingz is India’s largest wedding company, Oyo Life is India’s largest co living company. These are by themselves sizeable businesses. There is nothing that has been disproportionately impacted because of this. At a portfolio level, there is no major restructuring where we are taking any decisions to close down any vertical completely. That’s not happening.

A recent article in the New York Times has alleged that the company’s growth was fuelled by questionable business practices. How are you addressing this?

The article has raised a few questionable claims. Rest assured that we are looking into each and every claim and stand committed to growing Oyo the right way and in a manner consistent with our values and code of conduct. The said article described behaviour that would violate our code of conduct. We will continue to improve our processes for governance and accountability.

Are there any plans to raise more funds?

We are well funded. Right now, the focus is on making sure the business is sustainable, well run and that it grows.

How do things stand currently with the hotel partners? There have been police complaints and FIRs and allegations ranging from mismanagement of contracts to delayed payments and excessive commissions…
Personally, building a strong and healthy relationship with partners is my top priority. Partner management, partner support and partner success are core to who we are. Absolutely core. If there is some angst because of financial issues, reconciliation or emotional connect, we are fully committed as the South Asia leadership to make a big change in that. It is a big agenda for us. We have always discussed any changes applicable to contracts with asset owners and have communicated timelines for complying with those changes. There is also a stream of communication that is shared with all hotel owners and there are multiple channels. But if they are saying that they are not able to reach us, then we need to get better at what we do. There are 2,000-plus asset owners who have multiple properties with us. Over 1,000 asset owners have been working consistently with us for three years. About 5,500 partners were introduced for the first time to OTAs by Oyo. These data points at this scale do not happen if the asset owner-Oyo relationship is not working. Is there scope for improvement? 100%. Can we do better? Yes, we will always try and do much better.

There have also been customer complaints about quality of inventory and servi
ce…
We are a company that is fairly self-critical internally. If there are things that we have not done well in some areas, we are more than eager to learn and improve. Last year, five Oyo rooms were booked every second, and there was a 2.7 times year on year jump in bookings. Our app globally has 77.5 million users. There is a lot of work that happens on customer metrics- net promoter scores, unhappy percentages… any cases of check ins denied are taken extremely seriously. I personally feel we can do a lot better. However, at the same time I do realise that a large percentage of India is our target client. It’s a tremendous obligation, honour and responsibility and we will make sure we make changes everyday to get better and better.
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