Inside OYO’s offices ⁠— how a 'high pressure' work environment broke a promising startup brand

• Business Insider spoke to four OYO employees— both existing and former— for insights on what led to hundreds of pink slips being doled out on Monday.
• The tremendous pressure for super fast growth on the $10 billion startup trickled down right from the founder Ritesh Agarwal to the last employee in the organisation, according to employees.
• As OYO’s ‘fast and furious’ strategy backfired, it has left many lessons for India’s budding startups looking to rush for an IPO.

OYO wanted to be the world’s largest hotel chain and has been entering the world's biggest markets with one aim – conquer the market as fast as possible. It entered China market in 2017 and within 18 months went on to become the largest hotel chain in the country. It has since then gone on to make a mark in the USA, Japan, Europe and other South Asian markets with the same approach.

When numbers become the defining metric, quality may suffer. “OYO when it enters a market want to conquer it within a very tight deadline. It’s just very aggressive, and so a lot of manpower is required. But they also hired pretty quickly, and didn’t really filter the candidates,” said a former OYO employee who quit the organisation a few months ago.

Sell, at any cost

Often called SoftBank's jewel in India, OYO reportedly received orders from Masayoshi So to focus on fast growth and profitability. While, OYO founder Ritesh Agarwal has denied any interference from Son in OYO’s business, a source confirmed that there was pressure on Agarwal from investors.

This was one of the reasons why Agarwal reportedly wanted to buy back shares from existing investors in November 2019. It is another matter that the buyback funded by bank loans helped OYO nearly double its valuation to $10 billion from $5 billion, at a time when it also reported its losses to be six times higher at ₹2,384.7 crore.

The pressure was passed down the corporate hierarchy at OYO, according to sources. “You are either OYO or you are not. You will realise it in 2 months of joining. The pressure, the way we work, the aggressive stance they take, the timelines and all these things, many people will not like,” an existing employee told Business Insider on the condition of anonymity.

When Business Insider first wrote about OYO laying off thousands of employees, an OYO spokesperson said the decision was based on performance and merit. “In order to ensure this meritocracy based performance evaluation programme thrives, OYO continuously tracks performances of the individuals and depending on the results (a grading based system) and the individual’s interests, we may replace some candidates after giving them the opportunity to go through a performance improvement programme,” OYO had said.

Everything works during good times

A former employee said that just using the name ‘OYO’ was enough to make a sale and employees were judged on their numbers – the sales they have cracked, whether they are making enough calls, have enough lined up contracts and more.

The grading system worked well until the pressure started building up. While OYO came face to face with complaints from users and hotel owners, the sales staff suffered, said the employees Business Insider spoke to.

But instead of fixing the problem, OYO went about fixing the symptoms.

The company had a profile called “Transformation managers” ⁠— people who overhauled hotel decor for more appeal— and that profile was dropped and everyone was transferred to the ‘Business Development’ role, said one of the employees Business Insider spoke to.

“For one area, there are too many Business Development Managers than what is required. Because of this, there is increased competition. Also, OYO’s image in the market is not good right now which is why not many hotels are enthusiastic about signing up,” said another employee.

The same duplication of efforts possibly led to the mis-selling and, later, job losses. “Unfortunately, some roles at OYO will become redundant as we further drive tech-enabled synergy, enhanced efficiency and remove duplication of effort across businesses or geographies. As a result, we are asking some of our impacted colleagues to move to a new career outside of OYO,” Agarwal said in his recent note to employees.

OYO’s fast and furious strategy is now backfiring

Inside OYO’s offices, employees are tense and are unsure of their future in the company, as news about layoffs, mounting losses, income tax searches have been flooding the news timelines in India.

In China, hoteliers have been protesting outside OYO’s offices complaining about delayed payments. And now, the startup is laying off thousands of employees across China and India, while its Japan business too is in tenterhooks as Yahoo too backed out of its joint venture. “The situation is really bad and employees are worried,” said an OYO employee at the Delhi office.

2020 will be OYO’s year for damage control

OYO wanted to rise quickly, and as it seems, and its employees crossed the lines while the management either missed it or ignored it until things came to the hilt, as was reported in the recent New York Times article. “We take all the allegations very seriously and are looking into each and every one. We, of course, continue to be subject to regular external audits and have reached a stage as a company where we are making significant investments in compliance, training, and governance that ensure operational consistency and accountability,” wrote Agarwal.

The latest message from the founder indicates that OYO will change gears for 2020. “Focus on profitable locations and buildings and avoid growth that dilutes our margins,” Agarwal wrote.

But the panic has already set in. Sources told Business Insider that freshers who are just a few months into the system as well as others who have been with OYO for long are sending SOS messages out – looking for jobs and wanting to move out of the system before the sun comes down upon them.

The means are as important as the end

An initial public offering (IPO) is every startup founder’s dream. But if there is anything that the debacle at OYO has taught other startups⁠— growth at all cost is not a great strategy. When it goes wrong, the damage to the brand and employee morale may end up delaying the IPO until the course correction takes effect.

See Also:
Bizarre! The more losses Oyo makes, the more valuable it gets
Dues, death and an investigation — all that went wrong with OYO hotels in the last 6 months