Google CEO Pichai questions cost-cutting during an all-party meeting

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

Fabrice COFFRINI | AFP | Getty Images

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

At a company-wide meeting this week, Pichai was faced with tough questions from employees regarding travel and entertainment budget cuts, managing productivity and potential layoffs, according to audio obtained by CNBC.

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Pichai was asked, in a question highly rated by staffers on Google’s internal Dory system, why the company is “embezzling employees” by slashing travel and swag budgets at a time when “Google has record profits and huge cash reserves. ‘, as it came out of the pandemic.

“How do I say it?” Pichai began his measured response. “Look, I hope you all read the outside news. The fact that you know we’re a little bit more responsible in some of the toughest macroeconomic conditions of the last decade, I think it’s important that we work together as a company to get through moments like these.”

The most recent all-hands gathering comes as Google parent Alphabet, Meta and other tech companies are staring at a slew of economic challenges, including a potential recession, rising inflation, rising interest rates and subdued ad spending. Companies that have been known for booming growth and a plethora of fun perks over the past decade are seeing how things are on the other side.

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In July, Alphabet reported disappointing earnings and sales for the second consecutive quarter, and third quarter sales growth is expected to decline in the single digits, from more than 40% a year earlier. Pichai admitted that not only has the economy caused problems for Google, but also a growing bureaucracy at Google.

Still, he sometimes sounded irritated during the meeting, reminding staff, “We can’t always choose macroeconomic conditions.”

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

Google launched an effort in July called “Simplicity Sprint,” which aimed to get ideas from its more than 174,000 employees on how to “get better results fast” 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 top-rated questions from employees at this week’s meeting asked Pichai to elaborate on his comments on improved productivity and the 20% target.

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

Pichai said the leadership is sifting through more than 7,000 employee responses 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 gotten more complicated over many years than it might have to be,” Pichai said. “Can we look at that process and maybe remove two steps and that will be an example of making something 20% ​​more efficient? I think we all get involved and do that at all levels, I think it can help the business. there’s no way we can fix that unless units from teams of all sizes do better.”

Pichai also briefly commented on 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 potential job cuts after news was leaked about the Pixelbook’s withdrawal and the cuts in Area 120, which affected employees’ “ability to engage at work.” to concentrate”.

Pichai responded by saying that telling the entire workforce about cutbacks “isn’t a scalable way to do it,” but he said he will “try to 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 answered 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 has been reduced to only the most business-critical,” the employee wrote to Dory. “I’m sure Sundar has business-critical meetings in New York.”

Pichai replied: “I think so. I think it is qualified.” Some in the audience burst out laughing.

Pichai dodged employee questions about cost-cutting executive compensation. Pichai brought in a total of $6.3 million last year, while other top executives made more than $28 million.

‘We shouldn’t always equate pleasure with money’

He touched on the larger theme of cost-cutting and indicated that Google’s culture can still be enjoyable even if some things, like certain swag items, are taken away.

“I remember Google was still small and cluttered,” he said. “Fun wasn’t always – we shouldn’t always equate fun with money. I think you can walk into a hard-working startup and people might have fun and it shouldn’t always equate to money.”

Employees wanted to know why management is asking employees to adhere to return-to-office policies “while also saying there is no need to travel/contact in person.”

“I understand some travel restrictions at a time like this and RTO and people wanting to see each other is definitely not ideal,” Pichai said. “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. I think that’s why we don’t say no to travel, we give discretion to teams.”

Kristin Reinke, head of Google Finance, said at the meeting that sales teams will have more leeway to travel as their job requires meeting customers.

“We know it’s valuable to be alongside your team, but we’re just asking you to be considerate and limit your travel and expenses where you can,” Reinke said. For example, she asked employees to temper their expectations for holiday parties.

“If you hold summits 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, there are year-end parties, we still want people to do that. But we just ask them to keep them small, keep them casual – don’t try to get over the to go high.”

Towards the end of the meeting, Pichai answered a question about why the company has moved from “quick take and spend 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 lose the connection. You have to have a long-term view through circumstances like this.”

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

Bret Hill, Google’s vice president of “total rewards,” asked a question about raises, stocks and bonuses and how they’ll be affected by the changes. He said the company has no intention of deviating from paying employees “at the top end of the market so we can be competitive.”

Pichai echoed that sentiment.

“We are committed to taking care of our employees,” he said. “I think we’re going through a difficult moment macroeconomically 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 with the company over the past few months about ways we can focus more.” The spokesperson added that Pichai reinforced that business leaders “work to be accountable and efficient in everything their teams do” in a moment of uncertainty, and that they “ensure our people are working at the highest impact/priority work.” .”

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