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Google layoffs: Big tech continues to shrink

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main learning points

  • A report from a tech-focused news site Information Suggests layoffs at Google could exceed 6% or 10,000 employees by early 2023
  • The report comes amid ongoing macroeconomic challenges, falling tech stock prices and a letter from an activist investor
  • As Google commits to downsizing, it’s following Big Tech peers like Meta and Amazon, who have already cut headcount this year.

Since the global financial situation depends on wallets and wallets, big names like Meta, Twitter and Amazon have started to lay off in 2022. More than 45,000 heads were laid off in November alone, with the largest companies cutting the fat off more than 10,000 heads.

But Google has so far managed to stay away from talk of massive downsizing.

This is according to a report from the tech news site Information, Google parent Alphabet is now feeling the pressure. Profit margins and share prices continue to decline due to adverse market conditions. The company is facing calls from at least one wealthy activist investor to cut its “excessive” headcount and cost per employee.

And with the help of a new “performance improvement plan,” layoffs at Google could total 6% of the workforce (about 10,000 employees) by early 2023.

Here’s what else you need to know.

Google fired for poor performance evaluation

According to InformationGoogle has asked team managers to evaluate employees using a new “Ranking and Performance Improvement Plan.”

Under previous systems, managers were typically expected to cut about 2% of a company’s total workforce to weed out the worst-performing employees. But the new plan requires nearly three times as many workers — about 10,000 — to be released.

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Broadly speaking, the system allows management to rate employees based on performance and their impact on the business. The updated guidelines limit the number of employees who can receive the highest rating. Roughly speaking, the bottom 6% can be completely eliminated from the business.

Information goes on to say that “Managers can also use ratings to avoid paying [employees] Bonuses and stock exchanges” to further reduce costs.

Will the layoffs at Google really be complete?

Google, like many others in big tech, has seen a significant increase in hiring — and hires — during and after the pandemic. The spike was led by companies looking to find (or snatch) top talent wherever possible to guard against the “major layoffs” along with the use of increasing technologies.

But with inflation and interest rates rising, advertisers cutting back and pundits shrieking about a possible recession, many companies are realizing that they Way More hired. Many have no choice but to choose between deflated profits or deflated workforces.

So far, Google itself has not (yet) confirmed any layoffs. But its hiring and development patterns mimic many of the broader tech industry trends of the past two years. The company recently banned all new hires from “shaping or directing” certain teams if they don’t meet the new expectations.

CEO Sundar Pichai has also hinted at changes to come. Specifically, Pichai said Google could be 20% more efficient, pointing to job cuts and productivity improvements. While Google continues to make long-term investments, the company’s view is that “[be] Smart, [be] frugal, [be] nonsense, [be] more efficient.”

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influences external pressure

As if macroeconomic pressures weren’t enough, Google is also facing calls from at least one notable activist investor to make big changes.

Recently, hedge fund billionaire Christopher Hahn argued in a letter to Alphabet from TCI Fund Management that Google’s staff costs are getting out of hand. The letter said that Alphabet’s management must “take aggressive action” to reduce costs and improve profit margins.

It’s a reminder that executives have said Google “should be 20% more efficient”. TCI Fund Management argues that the doubling of Google’s workforce since 2017 is “excessive” and should be scaled down to match the current business climate. (Currently, Alphabet employs about 187,000 people.)

In addition, TCI Fund Management believes that Google’s cost per employee is too high. Hahn points out that the average Google salary in 2021 is $295,884, which is “67% higher than Microsoft’s”.
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and 153% higher than the 20 largest publicly traded technology companies in the US”

TCI Fund Management believes these inflated numbers, along with a drop in ad spending, contributed to Google’s third-quarter earnings decline of 27%.

On the one hand, TCI has a point: Google’s profits are down year-over-year (although it still brings in about $14 billion). While TCI’s letter may have been an encouragement, it’s unlikely that the hedge fund was solely responsible for Google’s new firing practices. Simply put, the $6 billion stake in the fund is just a drop in Google’s $1.27 trillion bucket.

An argument could also be made that part of the reason for Google’s massive success is that it retains top talent. By paying above market rates, the internet giant can collect and preserve the best, avoid costly losses and maintain production and creativity.

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What the Google layoffs mean for investors

Of course, Google is far from the only major tech company to make layoffs this year.

Meta has already started cutting the first of 11,000 employees.

Amazon is considering cuts of about the same amount.

And Twitter is being sued after cutting its workforce in half. More than several hundred employees reportedly walked out after the controversial takeover of commercial company Elon Musk.

With so many layoffs in the works and on the horizon, it’s only natural to worry about your portfolio. Over the past decade, investors large and small have counted on high-growth technology companies to propel their profits to greater heights. With the bottom line (and stock prices) slowing down, it may be time to reevaluate your strategy.

And what better way to do that than by letting the power of artificial intelligence increase your investment potential?

With a portfolio filled with specially crafted AI-assisted investment kits, you can diversify your capital across sectors, concepts and innovations.

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Whatever your needs, Q.ai has the tools to help you build long-term wealth. All you have to do is open an account and make your choices.

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