Activist Investor Out for Blood at Google, Wants More LayoffsActivist Investor Out for Blood at Google, Wants More Layoffs
Chris Hohn calls the 12,000 job cuts “a step in the right direction," but "management will need to go further."
January 24, 2023
Tech’s high-flying days are over, and nowhere is that more apparent than at 24-year-old Google, once among the most coveted of places to work. After doubling its headcount in five years, Google now is shedding 12,000 jobs — the largest number in its history. Yet that figure could jump if activist investor Chris Hohn gets his way.
That’s going to raise eyebrows.
“If you’re a Google employee, there’s no one in the world you hate right now more than Chris Hohn,” said Joseph Carlson, host of The Joseph Carlson Show, which provides guidance on stock purchases, on YouTube.
Hohn controls approximately $20 billion in various companies, and between $6 billion and $7 billion of Alphabet, in particular. This gives him “a lot of sway, a lot of power” over Google, Carlson said on Jan. 23.
On Jan. 20, the day Alphabet, parent company of Google, announced its first wave of layoffs, Hohn sent a letter to CEO Sundar Pichai. He called the 12,000 job cuts “a step in the right direction.”
But they are not enough, Hohn said.
“Ultimately management will need to go further,” Hohn wrote.
He wants Alphabet to cut more jobs.
What Is Activist Investor Hohn Thinking?
Defending his position, Hohn noted a couple of key items.
First, he pointed out that Alphabet doubled its employee count in the last five years. Within that window, the company hired 30,000 new people in the first nine months of 2022. Hohn then told Pichai that Alphabet needs to axe more workers, to bring the company to a total headcount of 150,000. That would put Alphabet’s employee rolls close to where they stood at the end of 2021.
Hohn then went after Google’s compensation. He said Alphabet’s median salary comes out to $300,000, with the average falling “much higher.” Carlson agreed, noting that many employees make at least $500,000 and even up to $1 million per year with bonuses and stocks. Forty percent of Google’s free cash flow goes into stock compensation, Carlson pointed out. That’s a huge figure, he said, especially considering that competitor Apple, which has slimmer margins and more device and supply chain considerations, runs more efficiently.
Keep up with our telecom-IT layoff tracker to see which companies are cutting jobs and the ensuing channel impact.
All in all, it seems the tech sector’s unbridled approach to hiring and compensation are coming to a close. Consider the activist investor activity over at Salesforce, where layoffs are happening, as well as the job losses at other tech-centric (though not all channel-centric) firms including Microsoft, Spotify and Meta.
Carlson, for his part, lays the blame for widespread cuts at the feet of over-eager executives.
“I wish these companies took a more disciplined approach to iteratively and slowly and in a measured way hiring employees instead of hiring 30,000 in less than a year,” Carlson said. “It’s a very undisciplined way to grow a company and we’re seeing the pain being felt by peoples’ lives being upended now.”
What’s Happening at Google Cloud?
Some of those layoffs are impacting Google Cloud. While many of the losses are showing in Google’s strategy, recruiting and sales departments, reports are circulating indicating that staff in the cloud division also are affected. Google has viewed its cloud group as a key growth driver, investing heavily in sales, technology and partner programs. (It still remains unprofitable, though.) Yet even as Google Cloud sees some involuntary staff attrition, its CEO, Thomas Kurian, is talking about additions.
Google Cloud’s Thomas Kurian
“We will continue to expand our global Cloud region footprint and invest for growth by expanding our go-to-market organization in both sales and services teams across all our geographies and industries, including public sector,” Kurian wrote in a memo cited by Business Insider. “In addition, our technical infrastructure teams will continue to deliver the critical systems and services that keep Google’s products running smoothly.”
Let’s Examine This ‘Psychological Safety’ Question
One of the most surprising aspects of the Google layoffs is the level of shock employees are expressing. In an all-hands meeting on Jan. 23, one employee asked, “How can we reestablish psychological safety for Googlers after these layoffs?” Another questioned, “How are we supposed to ever feel safe again?” (Both comments come via Business Insider.)
Google’s Philipp Schindler
Philipp Schindler, chief business officer at Google, had this to say, per Business Insider: “If you interpret psychological safety as removing all uncertainty, we can’t do this.”
It may seem cold to point out but investors are not concerned with “psychological safety,” and it’s odd that staff would think otherwise. Corporations exist to make money — and publicly held corporations remain at the mercy of Wall Street and its whims and demands. Fair or not, if a company is not producing as shareholders like or expect, layoffs ensue. Investors do not care one whit about employees’ psychological safety, and looking to a money-hungry entity for assurances in that regard will only result in disappointment.
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