Google CEO Pichai answers questions about cost cuts at a general meeting

Google CEO Pichai answers questions about cost cuts at a 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 COFFRINI | AFP | fake images

As Google tries to navigate an unfamiliar environment of slowing growth, cutting costs 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, productivity management and potential layoffs, according to audio obtained by CNBC.

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Pichai was asked, in a question that was highly rated by employees on Google’s internal Dory system, why the company is “reducing the weight of employees” by cutting budgets for travel and promotional items at a time when that “Google has record profits and huge cash reserves.” , as it did coming out of the pandemic.

“As I say it?” Pichai began his measured response. “Look, I hope all of you are reading the news, externally. The fact that we know that we are being a little more responsible through one of the most difficult macroeconomic conditions in the last decade, I think it is important that, as a company, we come together to get through times like this.”

The latest meeting comes as Google parent Alphabet, Meta and other tech companies grapple with a host of economic challenges, including a possible recession, skyrocketing inflation, rising interest rates and subdued ad spending. Companies that, for more than the last decade, have been known for high growth and a host of fun perks are seeing what it’s like on the other side.

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

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

Still, he seemed annoyed at times in the meeting, reminding employees that “we can’t always choose macroeconomic conditions.”

After the company’s workforce skyrocketed during the pandemic, Chief Financial Officer Ruth Porat said earlier this year that she expects some economic problems to persist in the short term. Google has canceled the next generation of its Pixelbook laptop and cut funding for its in-house Area 120 incubator.

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

How to be more productive

One of the top-rated questions raised by employees at this week’s meeting asked Pichai to elaborate on his comment on productivity improvement and the 20% goal.

“I think it could be a 20-person team or a 100-person team, we’re going to be limited in our growth on a prospective basis,” Pichai said. “Maybe I was planning on hiring six more people, but maybe you’re going to have to do four and how are you going to make that happen? The answers are going to be different with different teams.”

Pichai said leadership is reviewing more than 7,000 responses it has received from employees regarding suggestions from the Simplicity Sprint effort.

Watch CNBC's full interview with Alphabet CEO Sundar Pichai

“Sometimes we have a product launch process, which has probably, over many years, become more complicated than it should be,” Pichai said. “Can we look at that process and maybe take out two steps and that will be an example of making something 20% ​​more efficient? I think all of us contributing and doing it at all levels, I think we can help the company. our scale, there’s no way we can solve that unless team units of all sizes do better.”

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

Another question from employees concerned how the company will share its plans for possible job cuts, after news leaked about the Pixelbook recall and cuts in Area 120, which affected the “ability to focus on work” from the workers.

Pichai responded by saying informing the entire workforce of the cutbacks “isn’t a scalable way to do it,” but said he will “try and notify the company of any major updates.”

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

“It’s an interesting option for Sundar to be in New York for TGIF the week after employee travel is reduced to the most business-critical,” the employee wrote in Dory. “I’m sure Sundar has critical business meetings in New York.” .”

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

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

“We should not always equate fun with money”

He touched on the broader issue of cost cuts, noting that Google’s culture can still be nice, even if some things, like certain promotional items, are removed.

“I remember when Google was small and rudimentary,” he said. “Fun wasn’t always like this; we shouldn’t always equate fun with money. I think you can walk into a startup that works hard and people can be having fun and it shouldn’t always equate to money.”

Employees wanted to know why management is asking employees to adhere to the return-to-office policy “while also saying no travel/connecting in person is necessary.”

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

Kristin Reinke, Google’s chief financial officer, told the meeting that sales teams will have more freedom to travel, as their jobs require meeting with customers.

“We know there’s a lot of value in being around your team, but we just ask that you be considerate and limit your travel and spending where you can,” Reinke said. For example, she asked that employees temper their vacation expectations. parties.

“Where you have summits and big meetings, try doing it in the office,” he said. “We definitely want people to still have fun. We know that Christmas parties are coming up, New Year’s Eve celebrations are coming up, we still want people to do that. But we’re just asking you to keep it small, to keep it casual, to try not to overdo it.”

Toward the end of the meeting, Pichai addressed a question about why the company has gone from “quickly hiring and spending to equally aggressively saving costs.”

Pichai disagreed with the characterization.

“I’m a little concerned that you think what we’ve done is what you would define as aggressive cost saving,” he said. “I think it’s important that we don’t disconnect. You have to take a long-term view in 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’s important to “be smart, be frugal, be rudimentary, be more efficient.”

Bret Hill, VP of “Total Rewards” at Google, answered a question about raises, equity and bonuses and how they will be affected by the changes. He said the company does not plan to deviate from paying workers “at the higher end of the market so we can be competitive.”

Pichai reiterated that sentiment.

“We are committed to taking care of our employees,” he said. “I think we are coming through a difficult macroeconomic time and I think it is important that as a company we align and work together.”

A Google spokesperson said: “Sundar has been talking constantly with the company over the past few months about ways we can be more focused.” The spokesperson added that Pichai reinforced that “company leaders are working to be responsible and efficient in everything their teams do” in a time of uncertainty, and that they are “ensuring that our people are working on the job of greatest impact and top priority. ”

CLOCK: Is it time to trim? Meta and Google reducing costs

Is it time to trim?  Meta and Google reducing costs

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