Thursday, September 28, 2023

How Meta and Google use recession fear to clean the house

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For nearly two decades, top tech companies like Google and Facebook (now Meta) were known for their rapid recruiting, luxury benefits, and corporate cultures of abundance.

But now, as rising inflation, the war in Ukraine and other macroeconomic factors have prompted marketers to cut their advertising budgets, Big Tech’s work culture is changing. In recent months, Google and Meta the hiring of staff drastically slowed downcut back on perks like employee travel and laundry serviceand started reorganization of departments. Employees fear that even bigger staff cuts are on the way. Some economists say these moves are a sign that we are moving towards a… “white-collar recession”, or a decline in job growth and security for professional workers, not only in technology, but also in other highly skilled sectors.

However, there is more to these shifts. The external economic pressure is real, but it’s also a good excuse for giants like Google and Meta to clean their houses.

Now that Google’s parent company, Alphabet and Meta, have grown into major companies worth $1 trillion and $385 billion, respectively, they have expanded their workforces to more than 150,000 and 80,000. Now, economic conditions offer management an opportunity to adjust expectations, pressure staff to work harder on smaller budgets, and dismiss some employees.

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

It’s not just executives who think that some Big Tech companies are too bloated, but also some regular employees. Ahead of the 2020 presidential election, Recode reported that Google and Facebook employees were donating most of the money to candidates like Elizabeth Warren and Bernie Sanders who wanted to break up Big Tech, arguing that making these companies smaller could return them to their more sleazy and productive early start-up days.

Google and Facebook are still some of the most profitable companies in the world, whose annual revenues rival that of the entire GDP of some countries. Unlike smaller tech companies, they can afford to make payroll and weather in times of economic downturn. But, some industry insiders said, it could benefit these companies to cut more than necessary to increase productivity and show shareholders that they are financially responsible. Meta’s stock prices have fallen about 60 percent in the past year, and Google’s parent company, Alphabet, has fallen about 30 percent over the same period.

Both Google and Facebook have candidly warned employees that the company will start demanding more from those who remain. Google CEO Sundar Pichai said in an internal memo in July reported by CNBC that Googlers should “be more entrepreneurial” and operate with “greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days.” Meta’s CEO Mark Zuckerberg said it more bluntly in a holding all hands in Juneaccording to the New York Times, saying, “I think some of you might decide that this place isn’t for you, and self-selection is okay with me… Realistically, there are probably some people at the company who should be not here.”

For workers on the receiving end of this executive pressure, the feeling is that their job security is no longer so secure overnight. Although the cutbacks at Facebook and Google only started recently, many employees are already feeling the change.

A current Google employee told Recode that a few months ago, employees came to Google’s regular all-hands meetings, which the company calls TGIFs, with regular questions about whether they would get pay increases to match 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 afraid,” they said.

A Google employee who spoke to Recode said most of their colleagues are accepting management’s cost-cutting measures.

“People really got it,” they told Recode. “Because in the end we still have it so much better than other people.” Still, they added that the company’s recent budget cuts and emphasis on productivity “have created a sense of nervousness and uncertainty about what to expect from the company in the future.”

That nervousness and uncertainty also extends to employees’ future job prospects. Usually, Google employees dissatisfied with their jobs can easily get an offer from Meta, Apple or other nearby tech giants looking for talent; today, most tech companies have slowed down new hires.

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

The fact that, in just a few months, the tech industry’s dynamics have been turned upside down, with workers now having less influence over their employers, is one of the most significant shifts the industry has seen since the dotcom crisis of the United States. early 2000s.

In a cynical way, that Google employee mused, even if productivity management doesn’t amount to more actual efficiency, it is work effectively to get employees to stop striving for more benefits. And it shows shareholders that Google takes its stock performance seriously.

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

“When recessions come or things slow down, I think these well-governed companies see that as an opportunity to streamline things internally,” said Keval Desai, a former Google executive from 2003 to 2009 who now runs a venture capital firm. he founded, SHAKTI. “I truly believe that 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 simply requiring employees to work harder.

Some Google employees Recode spoke to said they think to be more productive, executives should focus on giving teams clear directions.

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

An example: Google seems to be unclear about the extent to which it wants to prioritize its hardware line. The company appeared to be moving forward with the development of its next Pixelbook laptop product until it canceled its last planned release and completely disbanded the team working on it earlier this month. That reports The Verge.

And in March Google laid off 100 Google Cloud employeesgiving them 60 days to find new jobs within the company – which some employees filed a petition against, asks for more time. The layoffs came despite Google Cloud, while still an unprofitable division, is growing its revenues significantly.

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

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

At Google, the company is increasingly focusing its research 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 major cutbacks implemented to his own research lab, Area 120, on projects not directly focused on AI. Meta also has reportedly scaled back its new experimental product division to focus exclusively on Reels. More broadly, Meta intends to reduce workplace spending by 10 percentThe Wall Street Journal recently reported, partly due to staff reductions — and has quietly begun to disband some teams, giving employees 30 days to find new jobs within the company.

Some Meta employees are trying to find new positions in metaverse-related projects, and that’s what has made Zuckerberg his top priority, said an employee who recently left the company.

“Certainly in the past six to nine months there has been an insane sprint towards” [Reality Labs], and especially within the metaverse product group,” says a former Meta employee who recently left the company. “It feels like everything else is less secure in terms of the company’s future.”

Some workers and industry experts worry that too much cost cutting could backfire by stifling employee innovation—the kind of creativity that has made these companies great.

“Traditionally, the way you drive productivity is through tighter management, goal setting and cost savings. And the way you stimulate innovation is that you give people more freedom and some flexibility and room to experiment and fail,” said Bock. “So I’m not sure how to increase productivity and increase innovation at the same time.”

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