"The Party's Over": How Meta and Google are using recession fears to clean house

“The Party’s Over”: How Meta and Google are using recession fears to clean house

For nearly two decades, top tech companies like Google and Facebook (now Meta) were known for their quick hires, luxurious perks, and corporate cultures of abundance.

But now, as rising inflation, the war in Ukraine, and other macro factors have caused marketers to cut advertising budgets, Big Tech’s work culture is changing. Over the past few months, Google and Meta have dramatically slowed hiring, cut benefits like employee travel and laundry service, and started to revamp departments. Employees fear that greater staff reductions are coming. Some economists say these moves are a sign we’re headed for a “white-collar recession,” or declining growth and job security for professional workers, not just in tech, but also in other highly skilled industries.

There’s more to these changes, however. The external economic pressures are real, but it’s also a good excuse for behemoths like Google and Meta to clean up.

As Google’s parent companies Alphabet and Meta grew into giant corporations worth $1 trillion and $385 billion respectively, they grew their workforces to over 150,000 and 80,000. today, economic circumstances give management an opportunity to revise their expectations, pressure staff to start working harder with smaller budgets, and show some workers the door.

“At companies like Facebook and Google, for a very long time, spending was unlimited,” said a Meta executive who recently left the company and spoke on condition of anonymity for fear of professional repercussions. “There was a lot of fat in the organizations. It is very healthy to reduce this fat. … The party is over.”

It’s not just executives who think some Big Tech companies have become too bloated, but some rank-and-file employees as well. Ahead of the 2020 presidential primary, Recode reported that Google and Facebook employees donated the most to candidates like Elizabeth Warren and Bernie Sanders who wanted to break Big Tech, arguing that making these companies smaller could bring them back. at their earliest and most productive. start days.

Google and Facebook are still two of the most profitable companies in the world, whose annual revenues rival the entire GDP of some countries. Unlike smaller tech companies, they can afford to do payroll and weather economic downturns. But, according to some industry insiders, these companies could benefit from cutting more than necessary to boost productivity and demonstrate to shareholders that they are financially responsible. Meta’s stock price has fallen about 60% over the past year, and Google’s parent company, Alphabet, has fallen about 30% over the same period.

Google and Facebook have bluntly warned employees that for those who stay, the company will start demanding more. Google CEO Sundar Pichai said in an internal memo in July, reported by CNBC, that Googlers “need to be more enterprising” and work with “greater urgency, sharper focus, and more hunger than we know of.” ‘showed the sunnier days’. Meta CEO Mark Zuckerberg put it more bluntly in a do-it-all business in June, according to The New York Times, saying, “I think some of you might decide this place is not for you, and that self-selection is okay with me… Realistically, there’s probably a bunch of people in the business who shouldn’t be here.

For employees who experience this pressure from management, the feeling is that overnight their job security is no longer so secure. Even though the cuts at Facebook and Google only started recently, many employees are already feeling the change.

A current Google employee told Recode that just a few months ago, employees came to Google’s regular meetings, which the company calls TGIFs, with regular questions about whether they would get raises that matched inflation. Now, the employee said, a more common question among employees is whether there will be layoffs.

“All the talk about compensation disappears because people are scared,” they said.

A Google employee Recode spoke to said most of his colleagues were on board with management’s cost-cutting measures.

“People have been really understanding,” they told Recode. “Because at the end of the day, we always have it so much better than the others.” Still, they added that the company’s recent cuts and focus on productivity “has created a sense of nervousness and uncertainty about what we can expect from the company going forward.”

This nervousness and uncertainty also extends to the future employment prospects of employees. Usually, Google employees unhappy with their jobs could easily ask for an offer from Meta, Apple, or other nearby tech giants looking for talent; these days, most tech companies have slowed new hires.

“There’s definitely a feeling of ‘wait, there might not be a chair at another tech company if the music stops here,'” a Google employee said.

The fact that in just a few months the momentum of the tech industry has reversed and that employees now have less influence over their employers represents one of the most significant changes the sector has seen since the start of the industry. dot-com meltdown of the early 2000s.

Cynically, this Google employee thinks, even if management talk about productivity doesn’t equate to more real efficiency, it does is work effectively to get workers to stop demanding more benefits. And it shows shareholders that Google is serious about its stock performance.

Both Google and Meta have seen significant stock declines over the past two years, largely due to rising inflation, the war in Ukraine, changes to Apple’s privacy settings, and the growing competition from TikTok.

“When recessions come or when things get softer, I think these companies that are very well managed take the opportunity to streamline things internally,” said Keval Desai, a former Google executive from 2003 to 2009 who now runs a venture capital company. he founded, SHAKTI. “I believe smart companies seize opportunities and make unpopular decisions.”

But unpopular decisions can be difficult to implement. And improving productivity at big companies like Facebook or Google isn’t as simple as just getting demanding employees to work harder.

Some Google employees Recode spoke to said they believe that to be more productive, leaders should focus on giving teams clearer direction.

“There’s this fear that people aren’t working hard enough, but what I see is a lot of people working hard with unclear business priorities,” a Google employee said. “Maybe they’re not making the best business decisions, but they don’t know that.”

An example: Google seems unsure how much it wants to prioritize its hardware lineup. The company appeared to be moving forward with development of its next Pixelbook laptop product until it canceled the last planned release and disbanded the team working on it earlier this month, The Verge reported. .

And in March, Google laid off 100 Google Cloud employees, giving them 60 days to find new jobs with the company — something some employees filed a petition against, asking for more time. The layoffs came despite Google Cloud, while still an unprofitable division, significantly increasing its revenue.

Laszlo Bock, co-founder of workplace software company Humu, who led Google’s People Operations teams from 2006 to 2016, said he agreed with the idea that some big tech companies don’t are not as operationally disciplined today as they could be, and it might be time for change.

“I think there’s a way for companies to navigate it, which is you need to have a clearly articulated set of principles about how and why you want to change.” Bock said.

At Google, the company is increasingly focusing its search efforts on AI, and at Meta, the company is prioritizing VR/AR work to support its metaverse plans, as well as its TikTok competitor, Reels.

Google recently made significant cuts to its in-house research lab, Area 120, on projects that weren’t directly focused on AI. Meta has also reportedly cut its new Experimental Products division to focus exclusively on Reels. More broadly, Meta plans to cut workplace spending by 10%, the Wall Street Journal recently reported, in part through staff cuts — and has begun quietly disbanding some teams, giving employees 30 days to find new jobs within the company.

Some Meta employees are trying to find new positions on Metaverse-related projects, which Zuckerberg has made his top priority, said an employee who recently left the company.

“Obviously over the last six to nine months there has been a mad rush to [Reality Labs], and especially within the metaverse product group,” said a former Meta employee who recently left the company. “It feels like everything else is less certain in terms of the future of the business.”

Some employees and industry experts worry that too much cost-cutting will backfire by stifling employee innovation: the very kind of creativity that has made these companies great.

“Traditionally, the way you drive productivity is by managing more tightly, setting goals and cutting costs. And the way you drive innovation is by giving people more freedom and a certain flexibility and room to experiment and fail,” Bock said. “So I don’t know how you increase productivity and increase innovation at the same time.

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