Google CEO Pichai asks questions about cost-cutting at every 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 | Getty Images

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

At a company-wide all-hands meeting this week, Pichai was faced with tough questions from employees related to cuts in travel and entertainment budgets, managing productivity 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 “nickel-and-diming employees” by cutting travel and swag budgets at a time when “Google has record profits and huge cash reserves,” as it did coming out of the pandemic.

“How shall I say it?” Pichai began his measured response. “Look, I hope all of you are reading the news, remotely. The fact that, you know, we’re being a little bit more responsible through one of the toughest macroeconomic conditions that’s been going on in the last decade, I think it’s important that we as a company take together to get through moments like this.”

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

The pace of interest rate increases puts the economy and the markets into one

In July, Alphabet reported its second straight quarter of weaker-than-expected revenue and earnings, and third-quarter sales growth is expected to fall into the single digits, down from over 40% a year earlier. Pichai admitted that it is not only the economy that has created challenges at Google, but also a growing bureaucracy at Google.

Still, he sounded irritated at times at the meeting, reminding employees that “We don’t always get to choose the macroeconomic conditions.”

After the company’s headcount increased during the pandemic, CFO Ruth Porat said earlier this year that she expects some financial problems to persist in the short term. Google has canceled the next generation of its Pixelbook laptop and cut funding to its own Area 120 incubator.

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

How to be more productive

One of the highest-rated questions asked by employees at this week’s meeting asked Pichai to elaborate on his comment regarding improved productivity and the 20% target.

“I think you can 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 had plans to hire six more people, but maybe you’re going to be dealing with four and how are you going to make that happen? The answers are going to be different with different teams.”

Pichai said management is combing over 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 probably over many years has become more complicated than maybe it needs to be,” Pichai said. “Can we look at that process and maybe remove two steps and that would be an example of doing something 20% ​​more efficiently? I think everyone we work with and do it at all levels, I think can help the company. scale, is There’s no way we can solve it unless units of teams of all sizes do better.”

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

Another employee question concerned how the company will share its plans for potential layoffs, after news leaked of the Pixelbook recall and Area 120 cuts affecting workers’ “ability to focus on work.”

Pichai responded by saying that telling the entire workforce about cuts is “not a scalable way to do it,” but he said he will “try and notify the company of the more important updates.”

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

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

Pichai responded: “I think so. I think it qualified.” Someone in the hall burst out laughing.

Avoiding questions from employees, Pichai asked about cost-cutting compensation for executives. Pichai took in total pay last year of $6.3 million, while other top executives earned over $28 million.

“We shouldn’t always equate fun with money”

He addressed the larger topic of cost-cutting, indicating that Google’s culture can still be nice even if some things, like certain swag items, are taken away.

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

Employees wanted to know why management is asking employees to comply with return-to-office guidelines “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 is definitely not ideal,” Pichai replied. “If you haven’t seen your team for a while and it would help your work by getting together in person, I think you can do that. I think that’s why we don’t say no to travel, we give discretion to teams. ”

Kristin Reinke, the head of Google finance, said at the meeting that the sales teams will have more leeway to travel since their jobs require meeting with customers.

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

“Where you have summits and big meetings, try to do them in the office,” she said. “We definitely want people to still have fun. We know there’s holiday parties coming up, there’s year-end celebrations, we still want people to do that. But we’re just asking them to keep it small, keep it casual — try not to go over the top.”

Towards the end of the meeting, Pichai asked a question about why the company has gone from “rapid hiring and spending to equally aggressive cost-cutting.”

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 cutting,” he said. “I think it’s important that we don’t get disconnected. You have to take a long-term view through relationships like this.”

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

Bret Hill, Google’s vice president of total rewards, asked a question about raises, equity and bonuses and how they will be affected by the changes. He said the company doesn’t plan to deviate 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 working through a tough moment macroeconomically, and I think it’s important that we as a company align 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 Pichai reinforced that the company’s “leaders are working to be accountable and effective in everything their teams do” in a moment of uncertainty, and that they are “ensuring our employees are working on the highest impact/highest priority work.”

SEE: Time to trim? Meta and Google reduce costs

Time to trim?  Meta and Google reduce costs

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