Employee Efficiency Considered Realistic for GOTO Growing Healthier

CORPORATE STRATEGIC - JAKARTA. The dynamic and challenging economic situation has prompted many world-class companies to redesign their business strategies. Various ways are taken, such as efficiency and cost optimization, prioritizing core businesses and services, up to reducing the number of employees as the last option.

The ultimate goal is to ensure that the company's performance can continue to grow in the midst of a global situation that will still be overwhelmed by uncertainty next year.

The Research Head of Praus Capital, Marolop Alfred Nainggolan said, business efficiency is an urgent needs for almost all companies in the world. It has to be done as a result of the energy crisis which creates rising inflation and a high-cost economy. Even though the global economy has not fully recovered due to the COVID-19 pandemic that has occurred since 2020.

“The world-class companies must be realistic in facing the economic challenges ahead. If we read in various media, almost all large companies with jumbo valuations are restructuring their business, including reducing the number of employees. The same will also be the need for large companies in Indonesia,” said Alfred in Jakarta on Friday (18/11/2022).

Alfred views that global economic uncertainty is driven by the energy crisis that occurs in almost all European, American countries and spreads throughout the world. The increase in energy prices is not only in oil, but also other commodities such as coal, gas, and food.

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“The World Bank expects the world GDP next year will be 0.5%, there is a contraction of about 0.4% and that meets the technical definition of a global recession. This situation then encourages many companies in the world to take various anticipatory steps entering 2023,” he clarified.

Therefore, Alfred considers the steps taken by PT Goto Gojek Tokopedia Tbk (GOTO) to carry out employee efficiency to be very realistic. Moreover, as the largest technology ecosystem in Indonesia, GOTO is required to be more efficient in running a business, so that the company's operations can be financed from its business revenue.

Alfred disclosed, the existence of GOTO has become a necessity for millions of consumers and also a source of life for millions of driver partners and business actors in the ecosystem.  Therefore, it is very important for GOTO to ensure that the company is able to grow healthier, maintain its performance and ensure the long-term sustainability of its business.

“Restructuring and efficiency, including reducing employees is not something extraordinary, it’s natural in the business world. It’s also done by Amazon, Facebook, Shopee, Indosat and also other companies in Indonesia. The business must be realistic, measurable and provide certainty,” Alfred said further.

Today GOTO has announced that the company will reduce the number of employees to as many as 1,300 people or about 12% of the GOTO's total employees. In its explanation, the GOTO management said that global macroeconomic challenges have a significant impact on business actors around the world.

GoTo, like other large companies, needs to adapt to ensure the Company's readiness to face the challenges ahead. The company must accelerate its efforts to become a financially independent business and grow sustainably in the long term. This is done, among others, by focusing on core services, namely on-demand, e-commerce and financial technology.

To support the acceleration of growth, since the beginning of the year GoTo has also evaluated the optimization of costs as a whole, including alignment of operational activities, integration of work processes, and renegotiation of various cooperation contracts. At the end of the second quarter of 2022, the Company managed to make structural cost savings of IDR 800 billion from various aspects of savings, such as technology, marketing and outsourcing.

“However, in order to navigate further in the midst of an increasingly challenging global economy, GoTo must focus on things that are within the company’s control. This includes taking the difficult decision to streamline 1,300 employees or around 12% of the total permanent employees of the GoTo Group,” said the GOTO's official in a statement on Friday (18/11/2022).

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According to Alfred's calculations, the restructuring of GOTO employees will reduce the huge cost burden in the future. Especially in the technology industry so far, the standard level of employee salaries is higher than other business sectors considering the need for a highly skilled workforce and the number is still scarce in the market.

It would be very positive, if GOTO could maximize future cost reductions while efficiently driving its revenue. Thus, operationally GOTO can finance itself without having to depend on financier subsidies. This creates healthier growth and financial position for the company.

Alfred said, it is no secret that the operational costs of startup companies such as GOTO, Shopee, Grab and many others still depend on investors' capital deposits. In the current global economic situation, these companies are required to no longer depend on investor subsidies.

“By seeing the potential of the Indonesian economy which has the opportunity to continue to grow positively in 2023, the efficiency strategy carried out by GOTO should have a positive impact on its fundamentals. Everyone now has an interest in GOTO, including investors, investment managers and others,” Alfred added.