MASSIVE LAYOFFS AT GOOGLE EXPOSE FIRM’S UGLY SIDE

Alphabet Inc., Google’s parent company, is the latest tech giant to announce significant layoffs.

In a memo, which was sent last month to fellow “Googlers,” CEO Sundar Pichai announced that the company will let 12,000 employees go. This is equivalent to about 6% of its worldwide workforce.

The magnitude of the layoffs is puzzling given the fact that the company is extremely profitable. According to most recent financial data, for the past 12 months, revenue stood at $282 billion (U.S.) and net income at $67 billion.

The company sits on mountains of cash- it has $116 billion in its bank account and is spending around $60 billion annually on share buybacks, a practice which helps inflate its share price.

Moreover, just six months ago, during the 3rd quarter of 2022, Google was on a hiring spree, adding 12,000 new jobs. Hence, the explanation Pichai provided in his memo – “we hired for a different economic reality than the one we face today” – is unconvincing, especially since he also highlighted the exciting opportunities the company is facing in the future, mostly in the AI (artificial intelligence) space.

A more likely explanation is that the axe was the result of pressure from Wall Street to deliver even better financial results. For example, in November, TCI, an activist hedge fund, with a $6 billion stake in the company, sent a letter to Pichai arguing that

Alphabet “has too many employees and the cost per employee is too high … (it) needs to take aggressive action. In a second letter, dated Jan. 20, 2023 – after the layoffs were announced – TCI’s fund manager, Christopher Hohn, writes to Pichai and the board of directors: “I have appreciated our recent dialogue concerning Alphabet’s cost base. I am encouraged to see that you are now taking some action to right size Alphabet’s cost base.” Yet, Hohn argues that additional layoffs are required for a total of 20% of the company’s head count.

But independent of whether the layoffs were due to bad planning on the company’s part or in response to pressure from investors and analysts, it’s the brutality in which the company executed them that really stands out.

“I appear to have been let go via an automated account deactivation at 3 am this morning” Justin Moore, an engineering manager who worked at Google for 16 years, wrote on LinkedIn. Moore must have been pretty good at his job if he kept it for so long in a competitive firm like Google. Yet, none of this mattered. Many other employees shared similar stories of being fired “electronically” in the middle of the night –“Elon Musk style.”

Less than a week after announcing disappointing 4th quarter results, Google has started trimming jobs in Canada as well. The job cuts, which are part of a 12,000 person downsizing announced in January, began to take effect last month, company spokesperson Lauren Skelly confirmed via email.

While Skelly wouldn’t comment on the size or location of the cuts in Canada, it appeared that many of the job losses were in the Kitchener Waterloo area and involved people who had worked on the company’s now shuttered cloud based video game service, Stadia, judging by postings on LinkedIn and other social media sites.

Within days of Pichai’s announcement, Google shared that it would close the Edmonton office owned by its artificial intelligence subsidiary DeepMind. The U.K. headquartered subsidiary plans to consolidate its remaining operations, but maintain its Montreal and Toronto offices, which are located within Google managed buildings

There is no doubt that rolling out mass layoffs at a large, multinational corporation like Google is extremely difficult and carries its own risks. Laid off employees can look for revenge, steal data, etc. Yet, “unplugged” employees who spent their entire careers with the company in the middle of the night, is as cruel as it gets.

This is all the more depressing when it occurs at a company whose mottos for the longest time have been “don’t do evil” and “do the right thing.”

Here is a short quote from Google’s old code of conduct where the company elaborates on the motto of “don’t do evil”: “Trust and mutual respect among employees and users are the foundation of our success, and are something we need to earn every day.” It feels like a joke in today’s context. Why was it so urgent for CEO Sundar Pinchai – who received total compensation on $294.3 million over the past three years – to fire 12,000 people now when the company has $116 billion in cash?

Couldn’t the CEO who brags about how a “healthy disregard for the impossible is core to our culture” come up with a better solution?

Maybe give employees who underperform a warning first? How about an overall pay cut across the board of say, 5%? (The median salary at Google is about $300,000.) That would have resulted in similar payroll savings and all employees could have kept their jobs

Hedge fund managers may be thrilled by the cost cutting at Google, but the destruction of trust it entailed could backfire. Googlers (as well as Amzonians, Metamates, etc.) will realize that no one really cares about them. They might work a bit harder for fear of being next on the chopping block, but their hearts are already elsewhere.

And when the time is right, they will be opportunistic themselves and walk out the door.