Wave of Layoffs Portends Changes to the Way Big Techs Work

The quest for efficiency and cuts at giants such as Google are threatening the model that has become famous for its benefits inside offices, from ice cream to a gaming room

Layoffs like the one announced this Friday (20) by Google herald a new era for work at big techs
January 20, 2023 | 09:55 AM

Bloomberg Línea — Working in a big tech company has in recent years become the career dream of many professionals, symbolized by generous benefits far beyond what other sectors usually offer. But the recent wave of layoffs threatens to transform the work model that has become established.

While Alphabet (GOOG), Google’s holding company, which announced this Friday morning the cut of 12,000 employees, equivalent to 6% of its global force, maintains its position among the best companies to work for in 2023 in the list of the specialized website Glassdoor, Meta (META), owner of Facebook, has left the list of the top 10 companies in the United States preferred by employees.

In a response to Bloomberg Línea earlier this week, Google said that, as CEO Sundar Pichai announced in July 2022, the company is “scaling back hiring and sharpening our focus as a company” but that it remained focused on hiring engineers, technicians, and other critical roles.

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“We continue to look for ways to increase our productivity and ensure we are focused on our long-term priorities,” the big tech company said, via a statement.

One of the priorities is engineering. In June 2022, Google announced the second engineering hub in Brazil, with a planned investment of $1.2 billion for Latin America.

The company has 1,800 employees in Brazil, divided between the São Paulo office, the Engineering Center in Belo Horizonte, and remotes - there is still no information on cuts in the country.

The layoffs are the most recent and visible symptom of changes that have occurred in recent years, according to experts and professionals who have passed through the Mountain View company.

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“Until 2016 Google was still an extremely agile, fast company, it could do a lot without ‘ten thousand approvals’. Nowadays it’s all parallel approvals, it takes much longer,” said a professional familiar with Google’s operations who spoke to Bloomberg Line on condition of anonymity.

2022 was especially tough on tech companies, but 2023 started no differently. Before Google on Friday, Salesforce (CRM) had announced 8,000 job cuts in the first week of the year, while Meta, Amazon (AMZN), Twitter, and Snap (SNAP) added more than 30,000 layoffs. On Wednesday (18), Microsoft (MSFT) also said it will cut 10,000 employees.

Apple (AAPL), with offices and a huge footprint all over the Americas, is one of the few big techs that has not yet implemented massive cuts.

Mass layoffs had already been adopted by Google’s main competitors in online advertising, an area that has particularly affected the margins of 2022 technology companies.

Advertising has long been a major driver of Google’s business, with results seen as “phenomenal” and double-digit quarter-on-quarter growth until a few years ago. In the US market, this has been put on notice with the slowdown of the economy and the imminence of a recession, which has led companies from different sectors to reduce investments.

At least in Latin America, the scenario for Google may be a little better, since, according to market research firm Emarketer, the growth of digital advertising in the region should outpace global growth by 2023.

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What is happening now with technology companies - read layoffs and prioritization of investments - is the result of what happened in the last three years, said Junior Bornelli, CEO and co-founder of StartSe, a business school of the so-called new economy.

“There was a moment when, in the pandemic, there were what I call mirages. Facebook, which laid off 11,000 people, or 13% of its workforce, believed in a mirage called Metaverse, which seemed to work while we were locked inside. Only that mirage lasted until the moment we started to leave home”, he said citing this case as an example.

For Bornelli, the market works in the medium and long term as a pendulum, and, during the pandemic, the thesis that everyone would only buy through e-commerce prevailed. “When physical retail came back strongly, that pendulum that had gone to the extreme of e-commerce adjusted itself. So the layoffs at Amazon have to do with the expected demand for e-commerce that didn’t exist.”

Bornelli said he believes the adjustments that were made last year to tech valuations already bring these companies back to 2019 levels, correcting distortions from the pandemic.

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“Google also saw its revenue fall, also had the last quarter worse than expected and that it has for the first time a big competitor. Not a big search engine, but it has TikTok, it has Instagram, and people are starting to search differently,” he said.

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Another threat to Mountain View’s big tech, according to experts, is ChatGPT, an Artificial Intelligence bot capable of producing text and images from human requests with unprecedented precision and which could transform the tech industry on many fronts, including search.

Goodbye, video game room?

The waves of layoffs at big techs -- also known as FAANG, an acronym for Facebook, Amazon, Apple, Netflix, and Google -- and the shift from the key to the pursuit of efficiency threaten to transform what has become a stereotype of what it means to work at one of these companies, which even inspired a Hollywood movie - 2013′s The Internship, starring Owen Wilson and Vince Vaughn.

The generous benefits go beyond meal allowances and a trip to Silicon Valley, no matter the worker’s base. For many years, the ultimate representation of working at a major tech company was reflected in tables with free snacks, leisure options like video games and pool tables, and “decompression rooms” for relaxation at any time.

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For Gianpiero Sperati, CHRO (Chief Human Resources Officer) of HR startup Gupy, an eventual change in the big techs will also come to meet the new demands of professionals. “We are moving towards a more customized and flexible model in HR, where people want benefits that meet their particularities, which can be less commuting, a better health plan, flexible hours, and others that vary according to their profile.”

Lucas Fernandes, CHRO of the flexible benefits platform Caju, has a similar assessment. He told Bloomberg Línea that before employees identified flexibility in companies the way offices were built, with spaces for interaction and moments of distraction, today this concept is related to the productivity of remote work.

“People from Generation Z have 77% higher engagement with publications and vacancies that mention flexibility in work models and benefits, according to a study published by LinkedIn,” said Fernandes.

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This apparent transformation that reconciles the new momentum of technology companies with the new demands of Generation Z workers can leave behind the stereotypes that have been built based on hundreds or thousands of real day-to-day office cases.

“For a lot of years, people who worked at companies like Google waited for this: they wanted the relaxation rooms, the pool, the free Chokito,” said a professional who worked at the company and who spoke to Bloomberg Line on condition of anonymity. According to this person, the corporate culture was also, for a time, based on what he describes as confrontation.

In São Paulo, being in the same building as law firms and banks like BTG Pactual, where bankers went to work in suits, Google promoted a “pajama day” in which googlers made a point of arriving in the morning to “shock” the financial market.

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“Benefits like ping-pong tables and pool tables in offices, which were once a trend in startups, are now fun elements that are no longer as important and decisive when it comes to choosing which company to work for,” said Sperati.

Remote work, which became vital for business during the first two years of the pandemic, is something that has been gradually reduced by big techs, which occupy floors in some of the most expensive corporate buildings with rents in São Paulo, in the Faria Lima region.

“Professionals are valuing much more a flexibility of how to work and where to work than effectively the methodology of the work and often the remuneration itself,” said Angela Brasil, director of people and culture at Open Co, one of the largest startups in the country.

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“Much more than networking, games, and video games, the office has to be planned to promote moments of collaboration between people, since they will no longer be in the place every day,” she said.

The difference is that changes in culture and HR policies are more complex to promote in large technology companies than in startups given the dimensions, where the scale of the number of employees and offices in different countries is much larger.

Competition for talent takes on a different shape

For Bornelli, StartSe professors who are executives at Silicon Valley companies have seen a trend towards a return to the office, done gradually.

“Those office perks should diminish. Google has a lot of perks that, in a competitive landscape for hiring talent, made sense: if Apple offered them, and they didn’t, they lost employees,” said StartSe’s CEO.

“But at the moment when everyone has to tighten their accounts and no one else is offering it, it’s easy to cut those kinds of benefits because people won’t have anywhere else to find them.”

In this scenario, the purpose is much more valued by Generation Z professionals, born between 1995 and 2010 -- that is, aged 27 to 28 at the latest.

Ana Carolina Lafuente, people and culture leader at Axenya, a startup focused on healthcare management, said she realizes the importance of flexibility in the employee experience.

“Being a corporate health consultancy, for us, it is very clear the importance of flexibility in decision-making to stay with the company. It’s not just offering a decompression room to work on mental health, it goes way beyond: what we can offer in health and benefit,” he said.

For Bornelli, regardless of the changes in the policies of attraction and retention of talent, the big techs will present, above all, a capacity for reinvention.

“All of them had some moment when they faced crisis and almost broke, but they managed to reinvent themselves mainly by the culture that was created in Silicon Valley to find a solution, work with technology, seek new products,” he said, citing that Amazon has been losing profitability at the same time that intensifies investments in robotics and reduces employees.

“In these moments of crisis, big techs find ways to reinvent themselves and create technologies and innovations that will then spread around the world and to all companies.”

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