Google CEO Pichai questions cost-cutting in general meeting

Alphabet CEO Sundar Pichai gestures during a session at the World Economic Forum (WEF) annual meeting in Davos on January 22, 2020.

Fabrice COFRINI | AFP | Getty Images

As Google tries to navigate an unfamiliar environment of slowing growth, cost-cutting and employee dissent over cultural changes, CEO Sundar Pichai finds himself on the defensive.

At a company-wide meeting this week, Pichai faced tough questions from employees related to cuts in travel and entertainment budgets, performance management and potential layoffs, according to an audio recording obtained by CNBC.

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Pichai was asked, in a question that was highly regarded by employees of Google’s internal Dory system, why the company was “expensive employees” by cutting travel and sales budgets at a time when “Google has record profits and huge cash reserves,” as it happened after the pandemic.

“How should I say it?” Pichai began his measured reply. “Look, I hope you all read the news, externally. The fact that, you know, we’re a little bit more responsible during some of the toughest macroeconomic conditions in the last decade, I think it’s important as a company that we come together to get through times like this.”

The latest all-hands meeting comes as Alphabet, Meta and other Google parent tech companies face a host of economic challenges, including a potential recession, rising inflation, rising interest rates and subdued ad spending. Companies that for the past decade or more have been known for high growth and an abundance of fun perks are seeing what’s on the other side.

The pace of interest rate rises is putting the economy and markets in a

In July, Alphabet reported its second straight quarter of weaker-than-expected earnings and revenue, and third-quarter sales growth is expected to reach single digits, down from more than 40% a year earlier. Pichai acknowledged that it’s not just the economy that has caused challenges at Google, but also the expanding bureaucracy at Google.

Still, he sounded irritated at times during the meeting and reminded officials that “we can’t always choose the macroeconomic conditions.”

After the company’s headcount increased during the pandemic, CFO Ruth Porath said earlier this year that she expected some economic problems to persist in the near term. Google canceled the next generation of its Pixelbook laptop and cut funding to its in-house incubator Area 120.

Google launched an effort in July called the Simplicity Sprint, which aimed to solicit ideas from its more than 174,000 employees on where to “get better results faster” and “eliminate waste.” Earlier this month, Pichai said he hoped to make the company 20 percent more productive while slowing hiring and investment.

How to be more productive

One of the top-rated questions asked by staff at this week’s meeting asked Pichai to clarify his comment about improved productivity and the 20% target.

“I think you could be a 20-person team or a 100-person team, we’re going to be limited in our growth going forward,” Pichai said. “Maybe you planned to hire six more people, but maybe you have to deal with four, and how are you going to do that? The answers will be different with different teams.”

Pichai said management is reviewing more than 7,000 responses received from employees about proposals from the Simplicity Sprint effort.

Watch CNBC's full interview with Alphabet CEO Sundar Pichai

“Sometimes we have a product launch process that probably over many years has become more complex than maybe it needs to be,” Pichai said. “Can we look at this process and maybe remove two steps and that would be an example of doing something 20% ​​more efficiently? I think all of us participating and doing this at all levels, I think it can help the company. scale, there’s no way we can solve this unless units from teams of all sizes do better.”

Pichai also briefly acknowledged a recent employee survey in which employees criticized the company’s growing bureaucracy.

Another question from an employee concerned how the company would share its plans for potential job cuts after news leaked of the Pixelbook withdrawal and layoffs at Area 120, which affected “workers’ ability to focus on work.”

Pichai responded by saying that notifying the entire workforce of layoffs “is not a scalable way to do it,” but he said he would “try to notify the company of the more important updates.”

The all-hands event, known as TGIF (Thank God It’s Friday), took place in New York, where Pichai answered questions in front of a live audience of employees.

“It’s an interesting choice for Sundar to be in New York for TGIF week as employee travel has been reduced to business essentials only,” the Dory employee wrote. “I’m sure Sundar has business critical meetings in New York.”

Pichai replied, “I think so. I think he qualifies.” Some in the audience burst out laughing.

Pichai dodged questions from employees asking about cutting executive compensation costs. Pichai brought in a total salary last year of $6.3 million, while other top executives made more than $28 million.

“We shouldn’t always equate fun with money”

He addressed the larger theme of cost-cutting and pointed out that Google’s culture can still be enjoyable even if some things, like certain items, are being taken away.

“I remember when Google was small and weak,” he said. “Fun wasn’t always – we shouldn’t always equate fun with money. I think you can go into a hard-working startup and people can have fun, and that doesn’t always have to equate to money.”

Employees wanted to know why management was asking employees to stick to the return-to-office policy “while saying there is no need to travel/contact in person.”

“I understand some of the travel restrictions at a time like this and the RTO and people wanting to see each other are definitely not ideal,” Pichai replied. “If you haven’t seen your team in a while and it will help your work by getting together in person, I think you can do that. I think that’s why we’re not saying no to travel, we’re giving the teams leeway.”

Christine Reinke, Google’s head of finance, said at the meeting that sales teams will have more leeway because their jobs require meeting with customers.

“We know there’s a lot of value in being there for your team, but we’re just asking that you just be careful and limit your travel and spending where you can,” Reinke said. For example, she asked employees to moderate their expectations for holiday parties.

“When you have high-level meetings and big meetings, please try to do them in the office,” she said. “We definitely want people to still have fun. We know there are holiday parties coming up, there are year-end celebrations, we still want people to do that. But we just ask them to keep it small, keep it informal – try not to overdo it.”

Toward the end of the meeting, Pichai questioned why the company had gone from “rapid hiring and spending to equally aggressive cost savings.”

Pichai disagreed with the characterization.

“I’m a little concerned that you think what we’ve done is what you would call aggressive cost-cutting,” he said. “I think it’s important not to be interrupted. You have to take a long-term view of conditions like this.”

He added that the company is “still investing in long-term projects like quantum computing” and said that in times of uncertainty it is important to “be smart, be frugal, be humble, be more efficient.”

Brett Hill, Google’s vice president of “total rewards,” asked a question about raises, equity and bonuses and how they would be affected by the changes. He said the company has no plans to move away from paying workers “at the top end of the market so we can be competitive.”

Pichai echoed this sentiment.

“We are committed to taking care of our employees,” he said. “I think we’re just going through a tough macroeconomic moment, and I think it’s important that we as a company come together and work together.”

A Google spokesperson said, “Sundar has been consistently talking to the company over the past few months about ways we can be more focused.” The spokesperson added that Pichai emphasized that “company leaders are working to be accountable and effective in everything , what their teams do” in a time of uncertainty and that they “ensure our people are working on the highest impact/highest priority work. ”

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