Google Layoffs: A Sign of the Times

We knew the recession was hitting pretty bad, but we didn’t think it would be this bad. Layoffs at Google are almost unheard of, but they’re happening. What does this mean for the company’s future? Keep reading to find out.

Google’s Success

Everybody with a computer has heard of the Internet giant, Google. Google has made its success in Silicon Valley as a search engine-based company. The vast majority of their revenues are derived through the advertisements that they host on their widely popular search engine.

Google was incorporated in 1998, and in just 6 years, by 2004, made its IPO at $1.67 billion, making it worth $23 billion. At the time, many people thought that Google’s stock was artificially high and there was just a lot of hype surrounding the company. However, these people were proven quite wrong as the stock price doubled, tripled, and eventually settled at a value over six times higher than its initial offering.

Over the years, Google has released a full suite of products and services to complement its search engine. It owns the most successful map service on the Internet, the first major online document management suite, and even a new operating system for a phone to combat the iPhone.

In short, Google is doing absolutely everything it can to ensure that it is on the top of the Internet world. It has done quite well, as it forced Microsoft to make a desperate, albeit ill-advised, attempt to take over Yahoo to compete with Google. Google has become renowned for its stellar products that provide novel functionality with none of the defects that have traditionally plagued new technologies over the past twenty years.

Part of Google’s mystique has been its reputation for how it treats its employees. They are rumored to ride around lush campuses on scooters, take advantage of free drinks from vending machines and free gourmet lunches from numerous cafeterias. In fact, most of these rumors are true: Google does offer a great number of perks to its employees. In addition to compensating them well, the Internet giant believes in treating them well with lots of perks and bonuses.

Unfortunately for Google, the economy has just not been agreeable over the past two years. Although it has performed admirably in comparison with many other companies, the times are finally catching up and, for the first time in history, Google is having to cut back.

In November of 2008, an Internet news media website claimed that it had an inside source that had given a tip-off that Google was preparing to layoff 10,000 of its employees. Reportedly, they were able to achieve this behind a closed door by using lawyers looking for loopholes. The idea was that they would hire employees as “temporary workers,” not give them benefits, and move them around the company so that they could not be considered employees.

The news claimed that these employees were “off the books” and did not contribute to the 20,000 full-time employees that Google claimed. The extra 10,000 brought Google’s numbers up to 30,000, but as far as Wall Street was concerned, the work of 30,000 was being done by 20,000. Google did not have to declare these layoffs since they were not considered full-time employees.

Naturally, there was a great shock as this news sunk in to the Internet community. Google had never had a layoff before, so it was shocking that they would suddenly lay off a third of a workforce that nobody had even known existed. Equally naturally, some people were skeptical. It did not help that the news article had attacked Google for using underhanded tactics and employing hundreds of lawyers in a search for loopholes.

As it turned out, the article was not entirely accurate. Regardless of any rumors, Google made no effort to hide the fact that it employed 10,000 employees who were not full-time. This included interns, part-time workers, and contractors. Contractors are a popular group in the IT world, and are essentially self-employed. As such, they willingly enter into temporary agreements with companies that may not include any benefits other than hourly wages. It is also typical for contractors to be the first ones cut from their jobs when a company is seeking to reduce costs.

Despite Google closing an office in Phoenix in September, the overall reaction to the news was that there was no need for alarm. Yes, the times were hard and Google might have to cut back, but there was no real worry that they would actually throw away a third of their workforce.

As December rolled around and fourth quarter reports came in, Google lovers around the world were faced with a stark reality: Google had been hit hard by the economy. Although the company did manage to hit its figures for the quarter, there was also a great deal of news of changing times.

Around the corporation, benefits were being dropped or cut back for employees. Cafeterias no longer served as much food or even started charging for it. All kinds of benefits were being frozen or taken away entirely. Year end bonuses dropped from an expected $1000 to approximately $400. Basically, things were still great at Google, but there was a bit of an air of disenchantment.

The worst news that came out of December for Google was their report of 4,300 temporary workers. You will recall that just in November, the common thought was that Google had 10,000 temporary employees. Google co-founder Sergey Brin had provided this number for the world in October. What happened to nearly 6,000 temporary employees?

The truth is that the rumors from November had been correct. Despite the reactionist tone of the website releasing the news, it had been correct. Google really had slashed the majority of its temporary workforce. Of course, due to the nature of an employer’s relationship with contractors, this is not technically any kind of corporate evil. But the sad fact is that many contractors do expect to retain their jobs for quite a while, especially with such a solid Internet power as Google.

The cuts also could not have come at a worse time. The job market is weak everywhere, and contractors do not typically benefit from the same kinds of compensation as normal employees. They do not qualify for any severance or pay after employment; they are forced to live on what they managed to save up during better times. This is no fault of Google’s, it is simply the nature of contractors.

Still, it is a bad sign that Google was forced to cut 6,000 employees. Although this was not technically a layoff, as the employees were not full-time, it is quite telling. Google was finally showing signs that it was not as impervious to all disasters as previously thought. The tough economy was what it was: tough. Even Google was forced to take measures to keep its figures solid and its stockholders happy.

Come January, 2009, Google was finally forced to do the ultimate evil: its first layoff. Fortunately, Google’s cut of 6,000 contractors left it in good standing to make minimal cuts to its full-time work force. Due to the economy, Google had made a policy shift to cut back on its recruiting and hiring. Although it was still hiring (better than many companies), it was just going to slow the rate.

Unfortunately for Google’s recruiters, fewer hires meant less of a need for people to do the hiring. On January 14, 2009, Google announced that it would be laying off 100 full-time recruiters in addition to closing down three engineering offices around the world. The engineers from those offices would be offered jobs elsewhere in Google and were not being laid off, simply asked to move.

Google had started by terminating contracts with external recruiters, but the measures had simply not been enough. They were forced to cut about a quarter of their full-time recruiters. The individuals laid off were hoping for another position at Google, and the company was helping out by putting them in the system for internal hiring. It is likely that the majority of them will stay on with Google, but the fact remains that their jobs were cut originally.

Throughout the economic downturn, Google had managed relatively well. However, a sign that it was having trouble staying afloat was its decreasing stock prices. In November, the stock price fell below $300 for the first time in three years. It has struggled to rise since then. Although it has seen a recent gain to $338, this is a far cry from its high of $714.87.

The result of all of this is that there has been a general disillusionment regarding Google. It really is a normal company like all others, and it is subject to the tides of the economy. As a young company, it was inevitable that it would face a trial like this. So far, it has done well with the trial and minimized the damages appropriately. What will be telling is what happens in the future. Will Google come out of the economic recession with its engineers still cranking out profit-generating applications, or will it see a complete overhaul that could completely change its corporate image? Only time will tell.

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