Grab, one of Southeast Asia’s major tech platforms, announced a round of layoffs last week. Here are some of our thoughts:
1. This round of layoffs affected more than 1,000 people, or around 11% of the workforce. This follows Shopee’s layoffs of 7,000 people over several rounds last year, and American tech giants’ mega layoffs impacting tens of thousands of people. Obviously, it is not easy for each affected individual, especially those who have been working hard.
2. From what we understand, many departments have been affected by this round of layoffs in a proportional way. The Seattle R&D Centre has been hit the hardest – about 80% of the original 50 or so employees were laid off. There does not seem to be any significant adjustments to business lines or functions.
3. Grab conducted a round of layoffs in June 2020, which reportedly affected 360 people, or 5% of Grab’s total workforce. This means that Grab’s employee count pre and post that round of layoffs was about 7,200 and 6,840. The current layoffs of 1000 people represents about 11% of the workforce, which means Grab’s headcount prior to the round was about 9000. In comparison, Amazon’s headcount more than doubled during the pandemic (and prior to their own layoffs).
4. The development after the pandemic has taken almost everyone by surprise. Ecommerce growth has slowed down, the food delivery market in Singapore, Indonesia, and Thailand has contracted, and the capital market has been severely affected by interest rate hikes. It was quite hard to anticipate all these when Grab’s management initiated their layoffs in June 2020.
5. However, looking back, the timing of Grab’s public listing at the end of 2021 was quite good – right before the market sentiment turned. Moreover, de-SPACing and the PIPE round funding gave Grab a substantial cash reserve. Grab’s $4.9 billion net cash liquidity at the end of Q1 2023 could sustain the company for at least 8 years without further financing.
6. Many believed that investor pressure was the main factor behind Grab’s layoffs, but we don’t think so. As mentioned earlier, Grab has a large amount of cash on hand, and the founder, Anthony Tan, holds over 60% of the voting rights through a dual-class share structure. In other words, the company does not need to bow to any short term investor pressure. However, the earlier-than-expected profitability of Sea Group may affect some decisions and expectations of Grab’s management.
7. While Grab should be able to achieve profitability as expected with or without the layoffs, it still has a long way to go to capture the full market potential of Southeast Asia. Currently, Grab’s Monthly Transacting User base only accounts for about 5% of the total population of Southeast Asia. These are the premium users, to serve the next, bigger, tiers of users with relatively lower spending power will require Grab to have a much more efficient cost structure.
8. Therefore, it is necessary to streamline the organisation and make some reductions. Several friends working at Grab, whom we have spoken to, have mentioned that after the team expanded, they spent more time on organisational coordination as compared to execution. This is a common issue many tech giants, American, Chinese or emerging markets, have realised and are trying to address (look at Alibaba now). Resolving these issues depends on leadership, the execution of key people, and the sustainability of the corporate culture.
9. Among the major tech companies in Singapore, excluding some American ones, Grab is probably the best in terms of work-life balance. Overall, Grab’s handling of this round of layoffs has indeed been gentler compared to Shopee’s multiple rounds of cuts last year. We have also heard that several high-level executives affected by this round of layoffs have received assistance from the company’s senior management and colleagues.
10. Large companies in mature industries go through restructuring and retrenchments regularly in response to changing environments – tech companies face the same predicament but in shorter cycles, which forces them to be more agile. During the all-hands meeting, many people asked if there would be another round of layoffs and what the criteria for layoffs would be. The management did not provide a clear answer – they probably cannot, because the economic and interest rate environment is still uncertain. Moving forwards, the best management can do is to embrace change, and communicate timely and sincerely.
