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Byju's said to have served 'performance notices' to over 5,000 employees

Byju's said to have served 'performance notices' to over 5,000 employees

Byju's said to have served 'performance notices' to over 5,000 employees
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By Moneycontrol News Nov 1, 2022 8:55:48 AM IST (Published)

Byju’s has shifted its focus to profitability over growth for the coming financial year, according to a recent statement by its India operations head Mrinal Mohit.

“When you walk inside the office every day, I don’t see a human walking, I see a number. That number is the difference between your target and what you have managed to achieve,” Gaurav Tanna’s manager told him a few weeks before Diwali, one of India’s biggest festivals.

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Tanna (name changed), 26, is a business development associate (BDA), or sales executive, at the Bengaluru office of Byju’s, the world’s most-valued edtech startup.
“Get ready for saying ‘bye-bye’ to the company soon!” the manager told him on an official WhatsApp group. Moneycontrol has seen a screenshot of the chat.
October 12 was when the first revenue assessment for BDAs like Tanna was to end, according to an internal policy change notified by Byju’s on August 31.
According to the policy, BDAs who failed to meet more than 70 percent of their weekly sales target for eight weeks would be evaluated by their managers and the HR team, and “appropriate action” would be taken, including separation without a performance improvement programme (PIP). Moneycontrol has seen a screenshot of the notification that was sent to sales executives.
“My manager keeps saying things like this in front of everyone. And it’s not just my manager, all the seniors here are like that. It’s very common. So, I wasn’t very worried about losing my job as these are usual pressure tactics,” said Tanna.
“Even after the policy notification, we all thought this was just to increase pressure on us so that we generate more sales. None of us expected to exit without PIP to happen. But on the same day, we saw the news that Byju’s is laying off 2,500 employees and our WhatsApp groups started buzzing immediately. While many said they saw it coming, the fact that was actually happening was a completely different feeling.”
Tanna was referring to Byju’s announcement on October 12 that the company would lay off 5 percent of its workforce, or about 2,500 employees, across departments, to rationalise costs.
As things stand, thousands of BDAs like Tanna are anxiously waiting and hoping that they do not receive pink slips. Already, more than 5,000 employees across departments, out of Byju's total workforce of over 50,000, have been given performance notices, according to at least nine internal sources and four external sources, including employees. The number has been discussed on an unofficial group of Byju’s BDAs, a screenshot of which was viewed by Moneycontrol.
BDAs are full-time employees of Byju’s who work as sales executives. Following the assessment, the edtech company has started issuing pink slips to its employees.
“We strongly deny that 5,000 employees ‘across departments’ have been given what you call a ‘notice’. There has not been any change in our payment structure, whether fixed or variable, for our BDAs,” a spokesperson for Byju’s said in response to queries from Moneycontrol.
"Sales employees are, of course, given monthly and quarterly targets but those targets are not rigid. Indeed, targets are the industry-established method to objectively measure sales performance in order to provide more incentives, awards and promotions to the best performers. What cannot be measured cannot be improved," the spokesperson added.
Financials
The aggressive cost rationalisation comes as the world’s most-valued edtech startup posted the biggest-ever loss for an Indian startup in FY21, which spooked investors. The loss swelled to Rs 4,589 crore for FY21.T he company recently raised $250 million at an unchanged valuation of $22 billion, suggesting a flattening of Byju’s otherwise steep valuation curve.
As it happens, Byju’s has shifted its focus to profitability over growth for the coming financial year, according to a recent statement by its India operations head Mrinal Mohit.
It recently shut operations in Thiruvananthapuram in Kerala and asked over 170 employees to resign, Moneycontrol had reported. The company, however, claimed the affected number of employees was 140 and said that it was giving them “generous and progressive” exit packages that include extended health insurance benefits, outplacement services and garden leave.
Earlier this week, Moneycontrol reported that Byju’s would borrow Rs 300 crore from wholly-owned subsidiary Aakash Educational Services at an interest rate of 7.50 percent per annum for ‘principal business activities.’ The company said the loan was towards spending on marketing activities for Aakash.
Measures to conserve cash come even as Byju’s continues to spend heavily on advertisements and marketing campaigns, according to company staffers.
Byju’s is spending on marketing and advertising to help boost sales. The company has raised billions of dollars, especially over the past two years, projecting high revenue, according to people involved with the company’s fundraising procedures. Byju’s has raised over $5.2 billion in equity and debt to date, out of which, over $3 billion was raised over the last two years, according to data from Tracxn.
Employees perturbed
“Tera kitna tha?” (How much was yours?) was the most-asked question on an unofficial group of Byju’s BDAs last week as anxious employees sought to reassure each other about their sales targets.
“That evening reminded me of the evening before the government announced a nationwide lockdown during Covid. Just as there was panic and chaos everywhere, there was panic and chaos among employees,” said a BDA, who has worked with Byju’s since 2019, requesting anonymity. “Everyone was just wondering who would get laid off. We all were counting our sales and giving each other some support.”
To compound matters, the new policy stated that if a BDA has an RCN (returns, cancellation, and not confirmed) rate higher than a specified level, the BDA's employment would be terminated without a PIP even if the executive exceeded 70 percent of the sales targets.
The RCN rate is based on the number of returns, cancellations and ‘not confirmed’ leads the BDAs get compared to their total leads, according to the executives.
The policy also mentioned BDA sales targets, which vary depending on how long they have worked for Byju’s. A fresher, who typically comes straight out of college, has a weekly sales target of Rs 30,000-62,500. The fresher BDA’s assessment period will be the first four weeks of his or her stint.
The weekly sales target for someone with two to six months of experience is Rs 50,000-75,000. A BDA who has spent more than six months is expected to generate sales of Rs 60,000 to Rs 90,000 per week, while someone who has spent more than a year is expected to make sales of Rs 70,000 to Rs 1 lakh.
The assessment period for these targets was from August 15 to October 12. There will be two more eight-week assessment periods for those who met the 70 percent sales targets with an acceptable RCN score.
Moneycontrol has viewed the screenshots of the emails sent by Byju’s to its BDAs that mention the sales and RCN score targets. These periods are from September 15 to November 9 and October 13 to December 6, and according to the policy, BDAs placed on PIP three times will be terminated immediately.
"We want to emphasise that the fair targets assigned to our BDAs have not changed significantly. What has changed is the frequency of our appraisals, which has been done to provide prompt guidance and course correction opportunities to our BDAs," Byju's said.
"We continue to offer the industry’s best compensation structures and benefits to our BDAs on a fixed plus variable basis. The fixed CTCs that are offered to our BDAs range from INR 4.5 to 10 Lakh per annum, along with a variable component that is decided based on their fixed pay, experience, and prior performance. Based on their performance, they are entitled to bonuses that can range from 30 percent-100 percent of the fixed component. The new revenue assessment policy allows them to earn higher bonuses more frequently in a meritocratic manner. It also makes the entire process more transparent and counters bias by making real-time data available to all stakeholders," the spokesperson added.
“This policy was notified in August, but suddenly everyone was going through the details only last week,” said a manager of a team of BDAs, requesting anonymity. “It feels like a cost-cutting initiative to me. We are net hiring but are primarily focusing on freshers. We get them at a package of Rs 5-8 lakh per annum and the current BDAs are on a package of Rs 9.5-15 lakh. So it looks like a churn to bring the CAC (customer acquisition cost) down.”
Revamping sales machinery
Byju’s also appears to be reorganising its sales team in order to cut costs. BDAs with less than a year’s experience are typically offered packages of Rs 5-8 lakh per annum, according to at least nine sales executives.
BDAs with more than 12 months of experience are offered compensation ranging from Rs 13.5 lakh to Rs 15 lakh, with monthly sales targets of Rs 4 lakh, according to BDAs and screenshots of targets viewed by Moneycontrol.
“The biggest advantage for Byju’s to keep attracting freshers out of college is their packages. We all know how big a problem placement is for college graduates. In our college, other companies had come for placement, including some of Byju’s direct peers like Vedantu, but their package was the best,” said a BDA who has worked with Byju’s for a little over a year, requesting anonymity.
“And from our seniors, we had heard all places, especially startups, are the same, when it comes to sales. So Byju’s was automatically the option for most of us.”
A BDA manager who is on his notice period at Byju’s said that freshers are unofficially given higher targets and told that if they do not meet them, they would not get positive feedback during assessments, which can affect their growth within the firm and even outside when they look for different jobs.
“If you put pressure on a fresher, they are going to succumb to it and these sales managers know that. Plus, the advantage is they are fresh out of college, they don’t know how other workplaces are, for them the packages Byju’s offers are a lot better than anything else and so they feel they are supposed to do whatever the company demands,” the sales manager cited earlier said.
“Also, if managers are getting more sales at smaller packages from freshers, you can claim an increment for getting the company more sales at cheaper prices.”
Byju's spokesperson said that there has not been a 'significant' change in the churn rate of its BDAs over the last two months.
"Every BDA who has performed below par is given adequate avenues to meet or exceed the assigned target through mentoring. Every line manager is empowered to look into the reasons for underperformance and provide opportunities for improvement to their reportees," said Byju's spokesperson.
"We, take a strong note of underperformance on the RCN metric because it is correlated with student escalations and mis-selling. As a customer-centric company with zero tolerance for mis-selling, we use RCN as a red line in our BDAs’ performance reviews," the spokesperson added.
Aggressive sales pitch
The scramble for higher revenue at lower cost is now reflected in more aggressive sales. According to at least seven BDAs that Moneycontrol spoke with, Byju’s has urged BDAs across cities to increase the number of calls made every day to offer courses to the parents of students.
BDAs said the increased number of calls has resulted in their pitches to parents becoming shallower, affecting the conversion rate. At times, BDAs end up overselling certain courses in order to convert leads.
“We end up pitching something to parents that’s not a part of the package, requesting anonymity.
In the face of higher targets, edtech sales tactics become challenging. BDAs have been assigned a call time target of two hours every day, and if they do not meet it, they are marked absent and forfeit pay for the day, according to at least 10 employees.
Parents are usually cautious and ask many questions. And sales agents must canvass hundreds of parents, various BDAs said.
“So we end up saying something just so that they buy the course,” the BDA cited above said.
"It would be naïve and counter-productive to put our BDAs under undue pressure to deliver results; in fact, the company sees them as its most valuable and valued growth assets. The standard target is a calling time of just 120 minutes per day," Byju's spokesperson said.
"Two hours per working day is a fair target, and even here the managers are encouraged to look at the quality rather than quantity of work. The managers are empowered to relax the time requirements if and when necessary. If there are exceptions to this rule, we are quick to identify and rectify them," the spokesperson added.
The increased aggression in sales at Byju’s began a little over a year ago, BDAs said. This approach has resulted in Byju's and its group companies being accused of mis-selling and overstating the value of courses.
According to some media reports, the government is looking into the matter. In January, the Internet and Mobile Association of India (IAMAI) established the Indian Edtech Consortium (IEC) as a self-regulatory body for edtech companies.
The majority of complaints the consortium receives are against Byju’s and its group companies such as Great Learning, according to IEC officials.
To be sure, complaints have also been filed against Byju’s competitors including Unacademy and Vedantu.
According to IEC insiders, these complaints have been filed by parents or students and pertain to refunds (if loans have been taken for subscriptions that are subsequently terminated), advertisements (misleading sales pitches), and the quality of content, among other things.
Byju's claimed that on an average it has received only three complaints per month and said that all the complaints have been resolved.
Byju’s is also ramping up its outside marketing efforts by tying up with various schools.
Amod Malviya, co-founder of business-to-business e-commerce startup Udaan, recently tweeted that he had to download Byju’s mobile app to see the results of a test his child took at school.
“You could easily show the results on a website, but no, got to bump up those installs. Folks at Byju’s keep doing these growth hacks, and soon no one in the industry will want to work with you,” Malviya tweeted.
Byju’s is also increasing its presence in tier-2 and lower-tier cities and towns with K-12 offerings.
A former Byju’s BDA executive, requesting anonymity, said that until last year, executives would prepare proper pitches and parents would decide whether to accept or reject them.
“This year, we were told that we should not hear a ‘no’ from parents, so I must make up things just to lure them. I just couldn’t do it after a while, so I left it in May this year,” the former BDA added.
Byju's said that the mix of fresher and experienced BDAs has not changed and nor does it intend to alter it.
"All organizations have fair sales targets for their employees and BYJU’S is no exception to this ‘high performance, high growth’ culture. We are also ramping up our inside sales team which reaches out to inbound leads remotely and more effectively and efficiently. This means that many of our field sales executives will get the opportunity to move to inside sales," Byju's spokesperson said.
Ad spending continues
While Byju’s is making changes to its on-ground sales strategies to ‘optimise costs’ and boost sales, the company remains aggressive in its advertising and promotional activities.
The company spent more than Rs 2,500 crore on advertising and marketing in FY21, according to its regulatory filings. This was before the company signed up to be the official sponsor of the FIFA World Cup. Byju’s is spending about $40 million for the sponsorship, according to media reports.
By bringing on celebrity Shah Rukh Khan in 2017, the startup established a strong brand even before online education had its breakthrough in India. It became the lead sponsor of the Indian cricket team in 2019 and recently renewed its deal with the Board of Control for Cricket in India for $55 million, according to media reports. Byju’s is also one of the lead sponsors of the ongoing International Cricket Council Men’s T20 World Cup in Australia.
The company has launched a number of special offers and discounts and has bundled them to make its packages even more affordable, especially in the K-12 segment, according to at least 10 parents Moneycontrol spoke with.
Byju’s, for example, has bundled its offline and online classes and offers the package to students at significantly lower prices than traditional offline coaching centres.
Offline tuition classes at Byju’s cost between Rs 3,000 and Rs 3,500 per month and include digital study material, according to sales executives. Traditional offline tuition centres charge about Rs 50,000 per year, and the majority of their material is physical.
The edtech giant manages to offer cheaper packages as it has the advantage of going hybrid by asking students to attend tuition classes in person when necessary and attend classes online otherwise, insiders said. Byju’s is also partnering with companies such as Flipkart, Zepto and Cadbury’s Bournvita to offer free introductory lectures in an effort to increase sales.
Valuation concerns
The aggressive sales pitches, marketing spends, and cost optimisation initiatives highlight the mounting pressure on Byju’s as the edtech decacorn (company valued at $10 billion or more) scrambles to boost post-pandemic sales.
The company is trying to meet its multibillion-dollar revenue projections, which helped it raise billions of dollars from investors at sky-high valuations, according to sources. For instance, Byju’s was expecting revenue of over Rs 4,500 crore for FY21, Raveendran had told Moneycontrol in an interview. However, the startup managed to clock revenue of Rs 2,428 crore, which in fact, declined 3 percent from its FY20 revenue.
The fall in revenue was surprising given that FY21 was the first year of the pandemic, which aided edtech companies in India and worldwide in an unprecedented way as classes shifted online. Revenue for Byju’s closest competitors—Tiger Global-backed Vedantu and SoftBank-backed Unacademy, grew fourfold in FY21.
The company’s lacklustre performance, especially in FY21, brought valuations of Byju’s and other edtech companies into the spotlight as investors increasingly raised concerns over their abilities to match their revenue projections. Consequently, Byju’s had to raise $250 million earlier this month at its existing valuation, albeit in a challenging macro environment and when some of its peers have struggled to raise money. Moneycontrol had reported how Byju's was offered a valuation of $11-12 billion.
Byju’s had announced an $800 million fundraise in March this year, with cofounder Byju Raveendran leading the round with a $400 million cheque. Two investors backed out, and Byju’s never received about $250 million from two of its previous rounds. Byju’s said that the two investors walked away because of the uncertain macroeconomic environment.
The proposed $800 million was to be raised at a valuation of $22 billion. According to a person in the know, Byju’s expects its FY23 revenue to top $1.9 billion (Rs 15,660 crore), thus the company managed to raise the money at a TTM (trailing twelve months) multiple of a little over 11, according to an investor directly aware of the matter.
Moneycontrol reported last month how a decline in Byju’s FY21 results had made it the most expensive edtech in the world for investors, having a LTM (last twelve month) revenue multiple of a little over 40.
In FY21, Byju’s said it had to defer 40 percent of its revenue to subsequent years after its auditor, Deloitte, advised it to change the way it recognises its revenue.
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