Google CEO Pichai asks questions about cost cuts at the full-fledged meeting

Sundar Pichai, CEO of Alphabet, makes a gesture during a session of 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, lowering costs and employee dissent over cultural change, CEO Sundar Pichai finds himself on the defensive.

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

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Pichai was asked, in a question that was highly praised by Google’s internal Dory system staff, why the company is “shrewd employees” cutting travel and swag budgets at a time when “Google has record and huge profits. cash reserves, “if he had come out of the pandemic.

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

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

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

In July, Alphabet posted a second consecutive quarter of lower than expected earnings and revenues, and third quarter sales growth is expected to drop to single digits, down from more than 40% the year before. Pichai admitted that it is not only the economy that is causing challenges for Google, but also an expanding bureaucracy at Google.

However, at times he seemed annoyed during the meeting and reminded the staff that “We can’t always choose the macroeconomic conditions.”

After the company’s staff increased during the pandemic, CFO Ruth Porat said earlier this year that she expects some economic problems to persist in the short term. Google canceled the next generation of its Pixelbook laptop and cut funds for its Area 120 in-house incubator.

Google launched an effort called “Simplicity Sprint” in July, 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 hopes to make the company 20% more productive by slowing hiring and investment.

How to be more productive

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

“I think you could be a team of 20 people or a team of 100 people, we will be constrained in our growth in a forward-looking perspective,” Pichai said. “Maybe you were planning on hiring six other people, but maybe you will be dealing with four and how are you going to make that happen? The answers will be different with different teams.”

Pichai said leadership is reviewing more than 7,000 employee responses to suggestions from the Simplicity Sprint effort.

Watch the full CNBC interview with Sundar Pichai, CEO of Alphabet

“Sometimes we have a product launch process, which has probably, over the course of many years, become more complicated than it perhaps should be,” Pichai said. “We can look at that process and maybe remove two steps and this will be an example of how to make something 20% ​​more efficient? I think we all fit in and do it at all levels, I think it can help the company. scale, there is no way to solve it unless units of squads 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 was how the company will share its plans for potential job cuts, after news of Pixelbook retirement and Area 120 cuts leaked, impacting “ability to focus on work.” “of the workers.

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

The whole, 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 was reduced to only the most business critical,” the employee wrote about Dory. “I’m sure Sundar has business-critical meetings in New York.”

Pichai replied: “I think so. I think he is qualified.” Some in the audience burst into laughter.

Pichai avoided employee questions about reducing the cost of executive compensation. Pichai earned a total salary of $ 6.3 million last year, while other senior executives earned over $ 28 million.

“We shouldn’t always equate fun with money”

He addressed the broader topic of cost cutting and indicated that Google’s culture can still be enjoyable even if some things, like some luxury items, are taken away.

“I remember when Google was small and shoddy,” he said. “Fun hasn’t always been: we shouldn’t always equate fun with money. I think you can get into a hard-working startup and people could have fun and it shouldn’t always be synonymous with money.”

Employees wanted to know why management is asking employees to adhere to the return-to-office policy “while also claiming that there is no need to travel / connect in person”.

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

Kristin Reinke, Google’s chief of finance, said at the meeting that sales teams will have more freedom of movement as their work requires meeting with customers.

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

“Where you have summits and big meetings, please try to do them in the office,” he said. “We absolutely want people to have fun again. We know there are parties coming up, end of year celebrations, we still want people to do it. But we’re just asking them to keep them small, to keep them informal, trying not to overdo it.”

Towards the end of the meeting, Pichai asked a question about why the company went from “hiring and spending fast to equally aggressive cost savings.”

Pichai did not agree with the characterization.

“I’m a little worried that you think what we’ve done is what you would call aggressive cost savings,” he said. “I think it’s important that we don’t disconnect. You need to have a long-term view under conditions like this.”

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

Bret Hill, Google’s vice president of “total rewards”, asked a question about increases, 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 high end of the market so they can be competitive.”

Pichai reiterated that sentiment.

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

A Google spokesperson said, “Sundar has been talking to the company constantly over the past few months about ways we can be more focused.” The spokesperson added that Pichai reiterated that “the leaders of the company 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 to their best. impact / work with the highest priority. ”

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