Google CEO defends job cuts in animated town hall as employees demand clarity on process
Sundar Pichai, CEO, Alphabet
Lluis Gene | AFP | Getty Images
Days after Google announced the largest round of layoffs in the company’s 25-year history, executives defended the job cuts and took questions from a concerned workforce during a town hall meeting Monday.
Google CEO Sundar Pichai led the companywide meeting and told employees executives will see their bonuses cut. He pleaded with staffers to remain motivated as Google faces heightened competition in areas like artificial intelligence, while also trying to explain why employees who lost their jobs were removed from the internal system without warning.
“I understand you are worried about what comes next for your work,” Pichai said. “Also very sad for the loss of some really good colleagues across the company. For those of you outside the U.S., the delay in being able to make and communicate decisions about roles in your region is undoubtedly causing anxiety.”
CNBC listened to audio of the meeting, which followed the company’s announcement Friday that it’s eliminating 12,000 jobs, or roughly 6% of the full-time workforce. While employees had been bracing for a potential layoff, they wanted answers regarding the criteria that was used to determine who would stay and who would go. Some of the laid-off staffers had long tenures and were recently promoted.
Pichai opened Monday’s town hall meeting acknowledging the Lunar New Year mass shooting in Southern California on Saturday night that killed 11 people and injured at least nine others.
“Many of us are still grappling with the violence in LA over the weekend and the tragic loss in life,” he said. “I know more details are yet to come out, but it’s definitely hit our Asian American community in a deep way, especially during the moment of Lunar New Year and we’re all thinking of them.”
‘We have over 30,000 managers’
After moving the conversation to job cuts, Pichai offered some explanation for how he and the executive team made their decisions.
Pichai said he consulted with the founders and controlling shareholders, Sergey Brin and Larry Page, as well as the board of directors.
Pichai said 2021 marked “one of the strongest years we’ve ever had in the history of the company,” with 41% revenue growth. Google increased head count to match that expansion, and Pichai said the company was assuming growth would persist.
“In that context, we made a set of decisions that might have been right if the trends continued,” he said. “You have to remember if the trend had continued and we had not hired to keep pace, we would fall behind in many areas as a company.”
Google and Alphabet finance chief Ruth Porat responded to a couple employee questions in Monday’s town hall that addressed its recent layoff.
Executives said 750 senior leaders were involved in the process, adding it took a few weeks to determine who would be laid off.
“We have over 30,000 managers at Google and to consult with all of them would have made this an open process where it would have taken additional weeks or even months to come to a decision,” said Fiona Cicconi, Google’s chief people officer, at the meeting. “We wanted to get certainty sooner.”
Regarding the criteria for cuts, Cicconi said execs looked at areas where the work was necessary, but the company had too many people as well as places where the work itself wasn’t critical. Cicconi said the company considered “skill set, time in role where experience or relationships are relevant and matter, productivity indicators like sales quotas and performance history.”
Pichai indicated there would be executive compensation cuts but provided limited details. He said all senior vice presidents “will see a very significant reduction in their annual bonus” this year.
“The more senior you are, the more your compensation is tied to performance,” he said. “You can reduce your equity grants if performance is not great.”
Before the job cuts, Google had made the decision to pay out 80% of bonuses this month with the rest expected in March or April. In prior years, the full bonus was paid in January.
Thomas Kurian, CEO of Google Cloud, offered some perspective on the areas that saw cuts. Google’s cloud unit has been one of the fastest-growing areas for head count expansion as the company tries to catch Amazon and Microsoft.
“Our engineering hiring is being much more targeted in areas where we need to fill out a product portfolio,” Kurian said. “We are adding sales and customer engineers in very specific countries and industries.”
Kurian said that starting in July, the cloud unit’s aim was to focus hiring “in response to generative AI across our portfolio.”
Like with other all-hands meetings, Google executives took questions from the company’s internal forum called Dory. Employees can post questions there, and they bubble up to the top when their co-workers give them an upvote.
For Monday’s meeting, some of the top-rated questions had to do with the process and communication around the layoffs. One comment said that employees are “playing a game of ping-and-hope-to-hear-back to figure out who lost their job. Can you speak to the communication strategy?”
Rick Osterloh, senior vice president of devices and services, said the company “deliberately didn’t share out of respect for people’s privacy.”
“We know this can be frustrating for people who are still here,” Osterloh said. “But losing your job without any choice in it is very difficult and it’s very personal and many people don’t want their names to be on a list that’s distributed to everyone.”
Looking ahead to A.I.
Another commenter on Dory wrote, “We severed access for 12k employees without the chance to perform knowledge transfers or even let them say goodbye to their colleagues. This is what we do to people who get fired.”
Then came the question: “What’s the message for those of us who are left?”
Royal Hansen, vice president of security at Google, chimed in to describe “an unusual set of risks that frankly we’re not that well practiced at managing.” He said there were “trade-offs.”
“When you think about our users and how critical they’ve become in people’s lives — all the products and services, the sensitive data they’ve trusted us with — even though it might have been a very low likelihood, we had to plan for the possibility that something could go terribly wrong,” Hansen said. “The best option was to close corporate access the way you described,” he said, referring to the abrupt shutdown.
In response to a question asking how employees who had been with the company for 15-plus years were targeted for cuts, Brian Glaser, vice president and chief talent and learning officer said, “we all know that no one is immune to change in our careers.”
Pichai reminded staffers that the company has important work ahead, in particular with respect to rapid progress in AI. Last month, Google employees asked executives at an all-hands meeting whether the AI chatbot ChatGPT represents a “missed opportunity” for Google.”
Pichai said Monday that “it will be an important year given the rapid advancements in AI,” which will have an impact across the company.
“There’s a paradigm shift with AI and I think, with the concentration of talent we have and work we will do here, will be a big draw and I hope it will continue to be,” Pichai added. “We have to keep earning it.”
He closed the town hall by bringing the discussion back to the topic at hand.
It’s evident, Pichai said, “how much you all care about your colleagues and the company.” He added, “I know it will take a lot more time to process this moment and what you heard today as well.”
WATCH: Google becoming leaner
Technology
Microsoft’s gutting of discounts for some clients likely baked into guidance, analyst says
Microsoft CEO Satya Nadella speaks at Axel Springer Neubau in Berlin on Oct. 17, 2023
Ben Kriemann | Getty Images
Microsoft said last week that it plans to stop providing discounts on enterprise purchases of its Microsoft 365 productivity software subscriptions and other cloud applications.
Since the announcement, analysts have published estimates on how much more customers will end up paying. But for investors trying to figure out what it all means to Microsoft’s financials, analysts at UBS said the change is already factored into guidance.
“In our view, it is safe to assume that the impact of the pricing change” was included in Microsoft’s forecast, the analysts wrote in a report late Tuesday. They have a buy rating on the stock.
Microsoft’s disclosure, on Aug. 12, came two weeks after the software company, it its fiscal fourth-quarter earnings report, issued a forecast that included double-digit year-over-year revenue growth for the new fiscal year. The shares rose 4% after the report.
Microsoft said in its blog post announcing the pricing change that, “This update builds on the consistent pricing model already in place for services like Azure and reflects our ongoing commitment to greater transparency and alignment across all purchasing channels.”
The change applies to companies with enough employees to get them into price levels known as A, B, C and D. It goes into effect when organizations sign up for new services or renew existing agreements, beginning on Nov. 1.
“This action allows us to deliver more consistent and transparent pricing and better enable clear, informed decision making for customers and partners,” a Microsoft spokesperson told CNBC in an email.
Jay Cuthrell, product chief at Microsoft partner NexusTek, said customers will see price hikes of 6% to 12%. Partners are estimating an impact as low as as 3% and as high as 14%, UBS analysts wrote.
Microsoft 365 commercial seat growth, a measurement of the number of licenses that clients buy for their workers, has been under 10% since 2023. Microsoft is aiming to generate more revenue per seat by selling Copilot add-ons and moving some users to more expensive plans.
Expanding that part of the business is crucial. Most of Microsoft’s $128.5 billion in fiscal 2025 operating profit came from the Productivity and Business Processes unit, and about 73% of the revenue in that segment was from Microsoft 365 commercial products and cloud services.
Some customers could agree to pay Microsoft more to keep using the applications rather than moving to alternative services, said Adam Mansfield, practice lead at advisory firm UpperEdge. They may also lower their commitments to Microsoft in other areas, such as Azure cloud infrastructure, Mansfield said.
One way companies could potentially pay lower prices with the disappearance of discounts is by buying through cloud resellers instead of going direct, said Nathan Taylor, a senior vice president at Sourcepass, an IT service provider that caters to small businesses.
Sourcepass hasn’t gotten many leads as a result of Microsoft’s change yet, Taylor said.
“It takes a while for that information to disseminate to the industry at large,” he said.
Microsoft shares are up 20% this year, while the Nasdaq has gained about 10%.
WATCH: Microsoft’s software business has a tailwind in AI, says Melius’ Ben Reitzes
Alibaba’s global headquarters in Hangzhou, Zhejiang Province, China, on May 9, 2024.
Nurphoto | Nurphoto | Getty Images
Alibaba-backed Banma, a provider of technology for smart cars, is planning to list shares on the Hong Kong Stock Exchange, according to a filing.
In a filing dated Aug. 21, Alibaba said it currently owns about 45% of Banma and will continue to control over 30% of the company’s stock after the listing. Banma said in a filing that the announcement does not guarantee a listing will take place.
Banma, founded in 2015 and based in Shanghai, is “principally engaged in the development of smart cockpit solutions,” Alibaba’s filing says. In March, Alibaba announced that it was deepening its partnership with BMW in China, building an artificial intelligence engine for cars with a solution built by Banma, “Alibaba’s intelligent cockpit solution provider.”
In addition to Alibaba, Banma is backed by investors including China’s SAIC Motor, SDIC Investment Management and Yunfeng Capital, a Chinese investment firm started by Alibaba co-founder Jack Ma.
Alibaba in the past referred to Banma as a joint venture “between us and SAIC Motor.”
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