Google CEO Pichai answers questions about cost cutting at an all-hands 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 shifts, 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 CNBC’s audio.

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Pichai was asked in a question highly rated by employees of Google’s internal Dory system why the company is “nickel and diming employees” by cutting travel and swag budgets at a time when in the “Google Has Record Profits and Huge Cash Reserves,” as it emerged from the pandemic.

“How do I say it?” Pichai began his measured reply. “Listen, I hope you’re all reading the news externally. The fact that we’re acting a little more responsibly in one of the most challenging macroeconomic conditions of the last decade means I think it’s important that we pull together as a company to get through moments like this.”

The latest all-hands meeting comes as Google parent Alphabet, Meta and other tech companies face a slew of economic challenges, including a potential recession, rising inflation, rising interest rates and subdued ad spending. Companies that have been known for high growth and a plethora of fun benefits for more than a decade are now 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, and third-quarter revenue growth is expected to fall into the single digits, down from more than 40% a year ago. Pichai admitted that it’s not just the economy that has posed challenges for Google, but also a growing bureaucracy at Google.

Despite this, he sometimes sounded exasperated in the meeting, reminding staff that “we can’t always choose the macroeconomic conditions.”

After the company’s headcount skyrocketed during the pandemic, CFO Ruth Porat said earlier this year that she expects some economic problems to persist for the foreseeable future. Google has canceled the next generation of its Pixelbook laptop and cut funding for its internal Area 120 incubator.

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

How to become more productive

One of the top questions asked by employees at this week’s meeting was Pichai’s comment on improved productivity and the 20% goal.

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

Pichai said leadership is combing through over 7,000 responses it has received from employees to suggestions from the Simplicity Sprint.

Watch CNBC's full interview with Alphabet CEO Sundar Pichai

“Sometimes we have a product launch process that has probably gotten more complicated over the years than it might need to be,” Pichai said. “Can we look at this process and maybe cut two steps and that would be an example of making something 20% ​​more efficient? I think that if we all get involved and do it at all levels, it can help the company. At our size, there’s no way to solve that unless units of teams of all sizes do it better.”

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

Another employee question was about how the company will communicate its plans for possible job cuts after news leaks of Pixelbook withdrawals and cuts at Area 120 affecting workers’ “ability to focus on work.”

Pichai responded that notifying the entire workforce of cuts is “not a scalable way,” 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 staff.

“It’s an interesting choice for Sundar to be in New York for TGIF during the week after staff travel has been restricted to the most business-critical,” the employee wrote of Dory. “I’m sure Sundar holds business-critical meetings in New York.”

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

Pichai dodged questions from employees about cost-cutting executive pay. Pichai earned $6.3 million in total compensation last year, while other top executives earned over $28 million.

“We shouldn’t always equate fun with money”

Addressing the larger issue of cost-cutting, he pointed out that Google’s culture can still be fun even if some things, like certain swag items, are taken away.

“I remember when Google was small and gruff,” he said. “Fun wasn’t always – we shouldn’t always equate fun with money. I think you can go into a hard working startup and people might have fun and it shouldn’t always be equated with money.”

Employees wanted to know why management is asking staff to adhere to return-to-the-office guidelines “while also saying they don’t need to travel/make personal contact.”

“I understand some of the travel restrictions at a time like this and RTO and people wanting to see each other is definitely not ideal,” Pichai replied. “If you haven’t seen your team for a while, it will help your work by meeting 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, the head of Google Finance, said at the meeting that sales teams will have more freedom to travel as their work requires speaking to customers.

“We know there is great value in being alongside your team, but we simply ask that you be considerate and limit your travel and expenses as much as possible,” Reinke said. For example, she urged employees to curb their vacation expectations, according to parties.

“If you have summits and big meetings, please try to do them in the office,” she said. “We definitely want people to have fun anyway. We know there’s holiday parties coming up, there’s end of year celebrations, we still want people to do that. But we’re just asking them to keep it small and informal — try not to overdo it.”

Towards the end of the meeting, Pichai questioned why the company had moved from “quick hires 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 lose connection. In such conditions you have to think long-term.”

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, frugal, piecemeal, and efficient.”

Bret Hill, Google’s VP of Total Rewards, asked a question about pay increases, equity and bonuses and how they will be affected by the changes. He said the company has no plans to move away from paying workers “at the higher end of the market so we can be competitive.”

Pichai reinforced that feeling.

“We strive to take care of our employees,” he said. “I think we’re working through a tough moment macroeconomically right now and I think it’s important that we align and work together as a company.”

A Google spokesman said: “Sundar has been in constant contact with the company over the last few months about how we can be more focused.” The spokesperson added Pichai reiterated that “in a moment of uncertainty, business leaders are working to be accountable and efficient in everything their teams do” and that they are “ensuring that our people are doing their most impactful work and… work with the highest priority. ”

CLOCK: time to trim? Meta and Google reduce costs

time to trim?  Meta and Google reduce costs

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