How Meta and Google are using recession fears to clean the house

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

But now, as rising inflation, the war in Ukraine, and other macroeconomic factors have caused marketers to cut their advertising budgets, Big Tech’s work culture is changing. In recent months, Google and Meta have drastically slowed down hiring, curtailed perks like employee travel and laundry service, and started reorganizing departments. Employees fear deeper staff cuts are on the way. Some economists say these moves are a sign that we are heading towards a “white-collar recession” or a decline in job growth and security for professional workers, not only in the tech sector but in other highly skilled sectors as well.

There is more to these changes, though. External economic pressures are real, but it’s also a good excuse for giants like Google and Meta to do the cleaning.

As Google’s parent company Alphabet and Meta became corporate giants worth $ 1 trillion and $ 385 billion respectively, they’ve increased their staff to over 150,000 and 80,000. Now, economic circumstances are giving management the opportunity to restore expectations, put pressure on staff to start working harder on lower budgets, and show some workers the door.

“In companies like Facebook and Google, spending was unlimited for a long time,” 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 organizations. It is very healthy to cut that fat. … The party is over.”

It’s not just executives who think some Big Tech companies have gotten too bloated, but some core employees as well. Ahead of the 2020 presidential primary election, Recode reported that Google and Facebook employees have donated more to candidates like Elizabeth Warren and Bernie Sanders who wanted to dissolve Big Tech, arguing that making these companies smaller could get them back soon. be more scarce and productive startup days.

Google and Facebook are still two of the most profitable companies in the world, whose annual turnover rivals that of the entire GDP of some countries. Unlike smaller tech companies, they can afford to pay their paychecks and downturns. But, according to some industry insiders, it could be to the benefit of these companies to cut more than necessary to increase productivity and show shareholders that they are financially responsible. Meta’s stock prices have fallen by around 60% over the past year, and Google’s parent company Alphabet has fallen by around 30% over the same time period.

Both Google and Facebook have candidly warned employees that for those who remain, the company will begin demanding more. Google CEO Sundar Pichai said in an internal note in July, reported by CNBC, that googlers “need to be more entrepreneurial” and work with “more urgency, more focus and more hunger than we have shown on the sunniest days.” Meta CEO Mark Zuckerberg said this more bluntly at a well-rounded company in June, according to the New York Times, saying, “I think some of you may decide this place isn’t for you, and that self-selection is fine with me … Realistically, there are probably a lot of people in the company who shouldn’t be here. “

For employees who experience this executive pressure, the feeling is that overnight the safety of their work is no longer so safe. Even though the cuts in Facebook and Google have only recently begun, many employees are already feeling the change.

A current Google employee told Recode that just a few months ago, employees came to regular meetings at Google, which the company calls TGIF, with regular questions about whether they would receive 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 goes away because people are afraid,” they said.

A Google employee Recode spoke to said that most of his colleagues accept management’s cost-cutting measures.

“People have been really understanding,” they told Recode. “because at the end of the day we still have a lot better than other people.” However, they added that the company’s recent cuts and emphasis on productivity “created a sense of nervousness and uncertainty about what we can expect from the company in the future.”

The nervousness and uncertainty also extend to employees’ future job prospects. Usually, Google employees who are dissatisfied with their jobs could easily search for an offer from Meta, Apple, or other nearby tech giants looking for talent; These days, most tech companies have slowed down new hires.

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

The fact that in just a few months the dynamics of the tech industry have turned upside down and that employees now have less influence over their employers is one of the most significant changes the industry has seen since the dot-com crash of the early 2000s.

Cynically, that Google employee mused, even if management talk about productivity doesn’t equate to greater effective efficiency, is working effectively to get workers to stop pushing for more benefits. And it shows shareholders that Google takes its stock performance seriously.

Google and Meta have both experienced a significant drop in stock over the past couple of years, largely due to rising inflation, the war in Ukraine, changes to Apple’s privacy settings, and growing competition from TikTok.

“When recessions come or when things are softening, I think these companies that are very well run take it as an opportunity to rationalize things internally,” said Keval Desai, a former Google executive from 2003 to 2009 who now runs a venture capital firm he founded, SHAKTI. “I believe that smart companies seize opportunities and make unpopular decisions.”

But unpopular decisions can be difficult to implement. And improving productivity in large companies like Facebook or Google isn’t as easy as simply demanding employees work harder.

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

“There is a fear that people are not working hard enough, but what I see is a lot of people working hard with unclear business priorities,” said a Google employee. “They may not be making the best business decisions, but they don’t know it.”

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

And in March, Google fired 100 Google Cloud employees, giving them 60 days to find a new job within the company, something some employees have petitioned against, asking for more time. The layoffs came despite the fact that Google Cloud, while still an unprofitable division, is increasing its revenue considerably.

Laszlo Bock, co-founder of workplace software company Humu, who led Google’s People Operations teams from 2006 to 2016, said he agrees with the notion that some large tech companies today aren’t as operationally disciplined as they could be, and that it may be time for change.

“I think there is a way for companies to navigate this, however, you need to have a clearly articulated set of principles on how and why you want to change.” Bock said.

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

Google recently made major cuts to its in-house research lab, Area 120, on projects that weren’t directly focused on AI. Meta has also reportedly downsized its new experimental products division to focus solely on Reels again. More broadly, Meta is planning to cut workplace spending by 10 percent, the Wall Street Journal recently reported, partly through staff reductions, and has begun to quietly disband some teams, giving employees 30 days. to find a new job within the company.

Some Meta employees are looking to find new positions in metaverse-related projects, which is what Zuckerberg has given his top priority, said an employee who recently left the company.

“Surely in the last six to nine months there has been a mad rush towards [Reality Labs]and particularly within the Metaverse product group, “said a former Meta employee who recently left the company.” It seems that everything else is less secure in terms of the company’s future. ”

Some employees and industry experts fear that excessive cost reduction could backfire by stifling employee innovation – the very kind of creativity that made these companies great.

“Traditionally, the way productivity is driven is to manage more rigorously, set goals, cut costs. And the way you drive innovation is to give people more freedom, 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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