Alphabet's Layoffs Aren’t Very Googley

The company’s founders pioneered putting employees first and said they’d never bow down to Wall Street. How things have changed.

In 2004, Google cofounders Larry Page and Sergey Brin engaged in a comically passive-aggressive IPO road show. They eschewed business suits for casual garb, refused to answer many questions from finance bigwigs, and warned investors that instead of focusing on profits, the newly public company might apply its resources “to ameliorate a number of the world’s problems.” Both founders dreaded the restrictions of a public company and vowed that Google would never sing to Wall Street’s tune. To ensure they could do this, the founders structured the company so that they controlled the majority of voting shares. Instead of kicking back money to shareholders, Google would pamper the talent that drove its innovations, providing perks like in-house massages, free food, and lavish compensation. For instance, at the end of 2010, Page and Brin blew their workers’ minds by announcing an across-the-board 10 percent raise, a doubling of the generous annual bonus, and a $1,000 Christmas present, just for the hell of it. The beneficiaries already had top-of-market salaries augmented by lucrative equity shares. But the founders’ largesse made clear that they meant it when they said employees were the heart of the company.

Brin and Page haven't been deeply involved for years, but in the company’s 25-year history, a lot of that convention-defying legacy has remained. At least until this month, when Google’s parent company Alphabet laid off 12,000 employees, about 6 percent of its workforce, including many senior leaders and some people who had worked there since its early days. For a company renowned for coddling its workers, the layoffs were a psychic shock. Especially since some of the victims were dispatched coldly, with their email access cut off before they could even say goodbye to long-term colleagues.

Alphabet isn’t the only company dismissing workers. Top executives at Meta, Microsoft, Salesforce, Amazon, and others are doing the same thing—dealing with what they suddenly perceive as excessive headcount by lopping off heads. Current CEO Sundar Pichai’s memo was so similar to other corporate dispatches that it seems that all of them fed the same prompts into ChatGPT: Hey sorry I was too optimistic in hiring when we were raking in dough during the pandemic, so some of you will have to go. But this is just a blip in our trajectory. I’m really excited about the future that not all of you will be part of! 

Yet, the bloodletting at Alphabet is different. Aside from letting go a few hundred sales employees in 2009, the company had never experienced a major layoff. And along with it are signals that the age of limitless perks is gone. (Among those rolfed by the cuts were 27 of the company’s in-house massage therapists.) And it’s not like the company is in financial peril. Though growth has slowed and the stock is down—like at every other tech company lately—Alphabet is still pulling in plenty of money. In the most recent quarter it reported, the company managed to eke out $14 billion in profits. It also has $116 billion sitting around in its vaults. And in the past few years it has spent over $100 billion to buy back its own stock, something Wall Street loves but that does nothing for the business itself.

Pichai does have a case to make for the layoffs and a cutback in perks. With 187,000 employees, there were undeniably thousands whose jobs were not integral to the company—likely not only the massage therapists but also hundreds of middle managers performing nonessential projects. (Brin and Page always felt that middle managers slowed down innovation.) As you might expect, those working in the hotly competitive area of AI, including the Google Brain research group, were spared from the layoffs. In fact, Pichai argued that the cuts were performed so Google could spend more resources on AI.

But in some ways the layoffs represent what seems like a gradual shift in philosophy. For years, Alphabet has funded projects—and created entire divisions—devoted to producing novel forms of technology. One of those was an in-house incubator called Area 120 that was basically shut down by this month’s cutbacks. There were also some trimming in Alphabet’s X division that works on “moonshots.” Wall Street has griped for years about the unprofitability of the company’s aspirational “other bets,” and now the company seems more focused on its more concrete businesses.

It’s certainly true that Alphabet has set fire to billions of dollars in its quest for the Next Big Thing. But they call those moonshots for a reason—one success can cancel out a hundred failures. And you can argue it’s already happened. Google Brain began at X and is now not only integrated into Google but is a key component in almost all the company’s software, and a pivotal advantage in the coming wars over generative AI.  

What’s more, investing in new in-house businesses is even more important now that the US government and the EU frown on acquisitions by Big Tech. Google’s most successful move since search itself was buying YouTube for $1.6. billion in 2006—a purchase that Federal Trade Commission head Lina Khan would squash like a dung beetle if it happened today.

It’s also disheartening that Alphabet seems more inclined to count pennies on employee perks. It’s easy to mock the grandiose goodies that Google bestows on its employees, especially when you see them laid out as lurid entitlements on TikTok videos. It’s also true that not many companies can generate the profit that pays for all that. But Brin and Page had a core belief that treating workers like royalty was good business. What a concept! A disruptive innovation in its own right, it became the template for nearly all of Silicon Valley’s contenders—not just tech giants but also well-funded startups competed for top-notch chefs as fiercely as they did for machine learning adepts. It was a grand experiment that flew in the face of Wall Street’s belief that the best workforces are ones that are brutally deprived and pitilessly culled. That experiment isn’t looking as great now, and that’s to the detriment of workers everywhere as well as those of us hungry to see some crazy idea become the next big thing. (Guess that will now be more likely to come from a startup.)

Coincidentally—or maybe not—Alphabet’s moves come as one of the company’s biggest shareholders, hedge fund mogul Christopher Hohn, has been communicating with Pichai. He has been publicly complaining that the company should drastically cut its workforce—the current layoffs of 6 percent were only “a step in the right direction” he wrote, arguing for a 20 percent evisceration. He also griped about high salaries and too much money spent on Other Bets. The whole point of Brin and Page maintaining a majority of voting shares, of course, was so they wouldn’t have to listen to hedge fund multibillionaires arguing to fire workers or cut their salaries.

While the remaining Googlers are still well paid and well fed, this episode may well lead some of them to explore other options. Though Pichai and his team attempted in a company town hall this week to provide some rationale for who was let go, people I spoke to still often had little idea why person X was cut and person Y remained. But here’s what is clear: Person Y, and everyone else in the company (except maybe its AI wizards), are now a little less certain about their status. “It feels like a shift in the company,” says one long-time software engineer who can’t figure out why he got the pink slip. “I definitely get the sense that even long-term high-performing employees who are left will now be looking over their shoulders.”

In his memo, Pichai promised that Google will continue its “healthy regard for the impossible that’s been core to our culture from the beginning.” Unfortunately, it has proved impossible to do that without firing people, freaking out the survivors, and calling into question the company’s unique values.

Alphabet's Layoffs Aren’t Very Googley

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