Google Staff Question Layoffs After Record Earnings

The workforce tensions at Alphabet’ Google reportedly came out into the open at an all-hands meeting with senior management last week.

CNBC reported that at the meeting, staff questioned CEO Sundar Pichai and CFO Ruth Porat about cost cuts, layoffs and “morale” issues at Google following the company’s better-than-expected first-quarter earnings report.

Indeed, last month Alphabet had reported that first quarter profits had risen 57 percent year-on-year to $23.7bn, while Q1 revenues had risen 15 percent to $80.5bn from $69.8bn.

Disgruntled staff?

Those Q1 earnings had beaten Wall Street expectations, and this coupled with Google issuing its first-ever cash dividend for investors, pushed the market value of Alphabet above the $2 trillion mark.

This strong financial performance on the back of Google enjoying its fastest growth rate in two years, led some staff to direct some hard questions at Pichai and other senior management at Google.

According to the CNBC report, staff at the meeting were more focused on why that strong fiscal performance isn’t translating into higher pay, and how long the company’s cost-cutting measures are going to remain in place.

“We’ve noticed a significant decline in morale, increased distrust and a disconnect between leadership and the workforce,” a comment posted on an internal forum ahead of the meeting reportedly read. “How does leadership plan to address these concerns and regain the trust, morale and cohesion that have been foundational to our company’s success?”

“Despite the company’s stellar performance and record earnings, many Googlers have not received meaningful compensation increases” a top-rated employee question reportedly read. “When will employee compensation fairly reflect the company’s success and is there a conscious decision to keep wages lower due to a cooling employment market?”

Another highly-rated comment reportedly centred around the company’s priorities, including its hefty investments in artificial intelligence.

“To many people, there’s a clear disconnect between spending billions on stock buybacks and dividends and re-investing in AI and retraining critical Googlers,” the post reportedly said.

Employees also reportedly complained about a lack of trust, and demands that they work on tighter deadlines with fewer resources and diminished opportunities for internal advancement.

Morale, headcount numbers

“Our priority is to invest in growth,” Porat was quoted by CNBC as saying, as she took the microphone to respond to questions. “Revenue should be growing faster than expenses.”

She also took the rare step of admitting to leadership’s mistakes in its prior handling of investments.

Pichai also addressed the decline in morale following the workforce reductions. “Leadership has a lot of responsibility here,” he reportedly said, adding “it’s an iterative process.”

Pichai said the company staffed up too much during the Covid pandemic.

“We hired a lot of employees and from there, we have had course correction,” Pichai reportedly said.

Alphabet’s full-time headcount had climbed to over 190,000 at the end of 2022, up almost 22 percent from 2021, and 40 percent higher than at the close of 2020.

“Given the recent headcount and positive earnings, what is the company’s headcount strategy?” one question reportedly read. Another question asked, “Given the strong results, are we done with cost-cutting?”

Pichai said the company is “working through a long period of transition as a company” which includes cutting expenses and “driving efficiencies.” Regarding the latter point, he said, “We want to do this forever.”

“To be clear, we’re growing our expenses as a company this year, but we’re moderating our pace of growth” Pichai said. “We see opportunities where we can re-allocate people and get things done.”

A Google spokesperson reiterated to CNBC that the company is investing in its biggest priorities and will continue to hire in those areas.

The spokesperson also said most employees will receive a pay raise this year, including an increased salary, equity grants and a bonus.

Outsourcing jobs

Another comment floated ahead of the meeting was tied to “growing concerns about jobs moving from the US to lower-cost locations.”

It comes after Google last week laid off at least 200 employees from its “Core” organisation, which includes key teams and engineering talent, with some of the roles reportedly being outsourced to Mexico and India.

CNBC reported that Google executives were also asked about the ongoing layoffs, despite the strong earnings report, and “when can we expect an end to the uncertainty and disruption that layoffs create?”

Pichai reportedly said the company will have worked through the majority of layoffs in the first half of 2024.

“Assuming current conditions, the second half of the year will be much smaller in scale,” Pichai said, referring to job cuts. He said it will continue to be “very, very disciplined about managing headcount growth throughout the year.”