Alphabet, Google’s parent company, will soon join the layoff season in the United States Silicon Valley as it plans to lay off up to 10,000 or six per cent of the company’s “poor-performing” employees, said a report by The Information. The report also claims that the company will use performance as a parameter to fire employees by using a ranking system.
Earlier this month, the company had also announced a freeze on hiring citing macroeconomic trends, which followed a major spike in bringing in new employees in the past quarter. According to reports, Alphabet currently employs around 1,87,000 people making it one of the biggest employers in the tech industry.
The Information reported, that while Google has not begun job cuts so far in the layoff season, “As outside pressure builds on the company to improve the productivity of its workers, a new performance management system could help managers push out thousands of underperforming employees starting early next year.”
Reportedly, the team managers have been asked to evaluate the staff based on a new “ranking and performance improvement plan” out of which the lowest-performing employees will be fired. On the other hand, the new system could also use the ratings to avoid paying bonuses and stock grants to the workers said the report.
The performance ranking will take place for nearly six per cent of the workforce which is much higher than the previous two per cent of the employees that the team managers are usually asked to place in the bucket, said the report citing the people with knowledge of the system. Google, which is often known as the “employee-friendly” company, may begin the layoffs in early 2023 which is only a few weeks away.
Reports also suggest that Alphabet is also facing pressure from investors including the United Kingdom’s billionaire activist investor and TCI Fund Management’s managing editor, Christopher Hohn, who recently wrote a letter to express his concerns to Alphabet’s CEO, Sundar Pichai. The letter said that the average salary of an Alphabet employee is much higher and called on the company to lower its number of employees adjusting to the slower economic growth witnessed recently.
Alphabet reported a net profit of $13.9 billion in the third quarter which is 27 per cent lower when compared to last year in the same quarter. According to Hohn, the company’s headcount is “excessive” when compared to the hiring trends otherwise. The investor who has a stake of over $6 billion dollars in Alphabet also said that the company has some of the highest salaries in Silicon Valley.
He added that they have also increased the headcount by 20 per cent every year in the last five years and have more than doubled since the “company has too many employees and the cost per employee is too high,” and while cost discipline was not a priority during the period of growth witnessed between 2017 and 2021 it is now, said the letter. This comes amid mass layoffs announced by big tech companies including Meta, Twitter, Amazon, Snap, and so on, which has left thousands unemployed.