Why the Google layoffs are about personal ambition and poor leadership

🌈 Abstract

The article discusses the recent layoffs at Google, analyzing the underlying reasons behind the company's wasteful practices and the role of leadership in driving these issues. It examines the tension between Google's founding vision and the pressures of public ownership, as well as the impact of personal ambition and short-term thinking among senior executives.

🙋 Q&A

[01] The Fiduciary Duty of Public Companies

1. What is the fiduciary duty of publicly listed companies, and how does it impact their priorities?

• Publicly listed companies have a fiduciary duty to act in the best interests of their shareholders, as established by the Dodge vs Ford Motor Company case in 1919.
• This fiduciary duty often leads companies to prioritize short-term profits over longer-term thinking, as shareholders can take legal action if they feel the company is not maximizing shareholder value.
• This dynamic can create pressure on companies to make decisions that benefit shareholders in the short term, even if they may not be the best for the company's long-term vision and sustainability.

2. How did Google's founders try to address this issue when the company went public?

• When Google went public, Larry Page and Sergey Brin were aware of the risks posed by public ownership and tried to maintain control over the company's long-term focus.
• In their Founders' Letter to investors, they expressed their intention to continue concentrating on the long term, even as a public company, to avoid being tempted by outside pressures to sacrifice long-term opportunities.

[02] Google's Wasteful Practices

1. What are some of the factors that have contributed to Google's wasteful practices?

• The intense competition for talent in the tech industry has led to spiraling compensation packages, with Google adding $6.6 billion in salary overheads in 2022 alone.
• Google's leadership has been focused on personal ambition and vanity metrics rather than running the company as a sustainable business, leading to the creation of unnecessary projects and bloated organizational structures.
• The company's complacency due to the profitability of its advertising business has allowed senior leaders to prioritize their own agendas over the long-term health of the company.

2. How has Google's approach to the recent layoffs been problematic?

• The mass firing of 12,000 employees in a sudden and impersonal manner, with some employees finding out they lost their jobs by being unable to log in, has been criticized as a callous and damaging approach.
• The layoffs are seen as a "blunt tool" that does not address the root causes of Google's wasteful practices, such as the bloated layers of senior management and the personal ambition of executives.
• The article suggests that the people responsible for the company's issues are not the ones being affected by the layoffs, and that the layoffs are more about appeasing investors than improving the company's long-term performance.

[03] Alternatives and Lessons

1. What alternative approach did the article suggest Google could have taken?

• The article cites the example of Nintendo, whose CEO in 2013 said the company would not fire anyone to please shareholders. Over the following years, Nintendo launched the successful Switch console and saw its stock increase by nearly 5 times.
• The article suggests that Google missed an opportunity to make better use of its 12,000 highly talented employees, rather than letting them go in the name of keeping some rich people happy.

2. What are the key lessons the article draws from Google's situation?

• The article suggests that the root causes of Google's wastefulness, such as the personal ambition of senior executives and the company's complacency, have not been addressed by the layoffs.
• The article argues that the way Google has handled the layoffs has damaged trust in the company's leadership and will likely stifle creativity and hurt business performance in the long run.
• The article concludes that the cycle of layoffs and appeasing shareholders is likely to continue, with the rich getting richer and the affected employees left behind, unless Google fundamentally addresses the underlying issues in its leadership and organizational culture.