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Google CEO Pichai fields questions on cost cuts at all-hands meeting

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Alphabet CEO Sundar Pichai gestures during a session on 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 worker dissent over cultural changes, CEO Sundar Pichai is finding himself on the defensive.

At a companywide all-hands meeting this week, Pichai was faced with tough questions from employees related to cuts to travel and entertainment budgets, managing productivity and potential layoffs, in response to audio obtained by CNBC.

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Pichai was asked, in a matter that was highly rated by staffers on Google’s internal Dory system, why the corporate is “nickel-and-diming employees” by slashing travel and swag budgets at a time when “Google has record profits and large money reserves,” because it did coming out of the pandemic.

“How do I say it?” Pichai began his measured response. “Look, I hope all of you’re reading the news, externally. The indisputable fact that you understand, we’re being a bit more responsible through one in every of the hardest macroeconomic conditions underway prior to now decade, I believe it’s essential that as an organization, we pull together to get through moments like this.”

Probably the most recent all-hands meeting comes as Google parent Alphabet, Meta and other tech firms are staring right into a slew of economic challenges, including a possible recession, soaring inflation, rising rates of interest and tempered ad spending. Corporations that, for the past decade-plus, have been known for prime growth and an abundance of fun perks, are seeing what it’s like on the opposite side.

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In July, Alphabet reported its second consecutive quarter of weaker-than-expected earnings and revenue, and third-quarter sales growth is predicted to dip into the one digits, down from over 40% a yr earlier. Pichai admitted that it is not just the economy that is caused challenges at Google but additionally an expanding bureaucracy at Google.

Still, he at times sounded annoyed within the meeting, and reminded staffers that, “We don’t get to decide on the macroeconomic conditions all the time.”

After the corporate’s headcount ballooned throughout the pandemic, CFO Ruth Porat said earlier this yr that she expects some economic issues to persist within the near term. Google has canceled the following generation of its Pixelbook laptop and cut funding to its Area 120 in-house incubator.

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

The way to be more productive

One among the top-rated questions posed by employees at this week’s meeting asked Pichai to elaborate on his commentary regarding improved productivity and the 20% goal.

“I believe you might be a 20-person team or a 100-person team, we’re going to be constrained in our growth in a looking-ahead basis,” Pichai said. “Possibly you were planning on hiring six more people but perhaps you will must do with 4 and the way are you going to make that occur? The answers are going to be different with different teams.”

Pichai said leadership is combing through over 7,000 responses it’s received from employees regarding suggestions from the Simplicity Sprint effort.

Watch CNBC's full interview with Alphabet CEO Sundar Pichai

“Sometimes we’ve got a product launch process, which has probably, over a few years, grown more complicated than perhaps it must be,” Pichai said. “Can we take a look at that process and perhaps remove two steps and that’ll be an example of constructing something 20% more efficient? I believe all of us chipping in and doing that across all levels, I believe might help the corporate. At our scale, there isn’t a way we are able to solve that unless units of teams of all sizes do higher.”

Pichai also briefly acknowledged the recent worker survey, wherein employees criticized the corporate’s growing bureaucracy.

One other worker query concerned how the corporate will share its plans for potential job cuts, after news leaked in regards to the Pixelbook pullback and the cuts at Area 120, which affected employees’ “ability to give attention to work.”

Pichai responded by saying that telling the complete workforce of cuts is “not a scaleable option to do it,” but he said he’ll “try to notify the corporate of the more essential updates.”

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

“It’s an interesting alternative for Sundar to be in Latest York for TGIF the week after travel for workers is cut to only probably the most business critical,” the worker wrote on Dory. “I’m sure Sundar has business-critical meetings in Latest York.”

Pichai responded, “I believe so. I believe it qualified.” Some within the audience erupted in laughter.

Pichai dodged worker questions asking about cost-cutting executive compensation. Pichai brought in total pay last yr of $6.3 million, while other top executives remodeled $28 million.

‘We shouldn’t all the time equate fun with money’ 

He did address the larger theme of cost cuts, and indicated that Google’s culture can still be enjoyable even when some things, like certain swag items, are getting taken away.

“I remember when Google was small and scrappy,” he said. “Fun didn’t all the time — we shouldn’t all the time equate fun with money. I believe you’ll be able to walk right into a hard-working startup and other people could also be having fun and it shouldn’t all the time equate to money.” 

Employees desired to know why management is asking employees to stick to the return-to-office policy “while also saying no have to travel/connect in-person.”

“I do understand a number of the travel restrictions at a time like this and RTO and other people wanting to see one another, definitely just isn’t ideal,” Pichai responded. “Should you haven’t seen your team shortly and it’ll help your work by getting together in person, I believe you’ll be able to do this. I believe that’s why we will not be saying no to travel, we’re giving discretion to groups.”  

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

“We all know there’s a variety of value in being next to your team but we’re just asking simply to be thoughtful and limit your travel and expenses where you’ll be able to,” Reinke said. For instance, she asked that employees temper their expectations for holiday parties.

“Where you’ve summits and massive meetings, please attempt to do them within the office,” she said. “We definitely want people to still rejoice. We all know there’s holiday parties coming up, there’s year-end celebrations, we still want people to try this. But we’re just asking them to maintain them small, keep them informal — try to not go excessive.”

Towards the top of the meeting, Pichai addressed a matter about why the corporate has shifted from “rapidly hiring and spending to equally aggressive cost saving.”

Pichai disagreed with the characterization.

“I’m a bit concerned that you’re thinking that what we’ve done is what you’ll define as aggressive cost saving,” he said. “I believe it’s essential we don’t get disconnected. You want to take a long-term view through conditions like this.”

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

Bret Hill, Google’s vp of “total rewards,” fielded a matter about raises, equity and bonuses and the way they will probably be affected by the changes. He said the corporate doesn’t plan to deviate from paying employees “at the highest end of the market so we could be competitive.”

Pichai reiterated that sentiment.

“We’re committed to taking good care of our employees,” he said. “I believe we’re just working through a troublesome moment macroeconomically and I believe it’s essential we as an organization align and work together.”

A Google spokesperson said, “Sundar has been chatting with the corporate consistently over the previous few months about ways we could be more focused.” The spokesperson added Pichai reinforced that company “leaders are working to be responsible and efficient in all that their teams do” in a moment of uncertainty, and that they are “ensuring that our persons are working on the very best impact / highest priority work.”

WATCH: Time to trim? Meta and Google reducing costs

Time to trim? Meta and Google reducing costs

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