Google, Facebook, and Microsoft want to be scrappy startups again

When Meta’s head of people, Lori Goler, posted a memo to the company’s internal employee message board last summer asking employees to work with “increased intensity,” many workers pushed back.

In internal comments Recode reviewed, some employees took issue with the idea that they weren’t working hard enough already. Others felt the problems weren’t with the rank and file, but with management and the company’s massive size and bureaucratic structure, which some said made it hard to move quickly on daily work or to give feedback to leadership. Another complaint was simply that some Meta employees didn’t want to do more work for the same amount of money. Because many Meta employees are paid in company stock, which has declined precipitously in the past year, the workers would actually be doing more for less.

The real topic at hand was whether a tech giant can or should try to behave like a startup.

Massive technology companies like Meta used to be startups, of course. But that was decades ago when they were much smaller and more agile, and when they were making products that had infinite possibilities for profit. Now these companies are asking their employees to work with “increased intensity” without any near-term payoff — in other words, to act like eager and ambitious startup workers — but in a vastly different scenario. Meta, Alphabet, and Amazon are huge and highly profitable companies, however, contending with antitrust regulators for being too big and powerful, rather than too small and scrappy. Their employees are being asked to work harder or face layoffs not because their companies aren’t making any money, but because they’re not making it fast enough.

This kind of messaging is emerging as America’s biggest tech companies are starting to show their age. Meta, formerly known as Facebook, is old enough to vote. Alphabet, formerly Google, is in its mid-20s, and Amazon will soon enter its fourth decade of operations. At the same time, the rapid growth that has historically defined these companies has slowed. Wall Street has taken notice: The combined market caps of Meta, Google, and Amazon have declined $1.5 trillion in the last year.

As one Googler put it in an interview, “There was a time when Google was young and hungry. But we haven’t been young or hungry for quite some time.”

Leadership at these three companies is now doing its best to conjure the good old days — the scrappy days. Sundar Pichai, CEO of both Alphabet and Google, is trying to remind people that Google was once “small and scrappy,” telling workers that working hard and having fun “shouldn’t always equate to money.” The company laid off 12,000 people at the end of January. At Meta, which let 11,000 employees go in November, CEO Mark Zuckerberg has said he wants workers to “return to a scrappier culture.” Meanwhile, Amazon CEO Andy Jassy told Amazon employees this month to be “inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles,” following massive corporate layoffs at the end of last year, with more to come.

“Any company that wants to have a lasting impact must practice disciplined prioritization and work with a high level of intensity to reach goals,” Meta told Recode in a response to requests for comment for this article. “The reports about these efforts are consistent with this focus and what we’ve already shared publicly about our operating style.”

Google and Amazon did not respond to requests for comment for this story.

The survival of these companies isn’t in question. What’s unclear is which changes they’ll need to make in order to grow and create world-changing products, as they have done in years past. Inevitably, the moves these companies make as they try to shift their businesses and culture will have huge ramifications that extend far beyond the technology industry, as tech companies tend to influence the behavior of corporate America in general.

For now, layoffs look like the biggest course correction in Silicon Valley. On one hand, getting rid of thousands of employees is a form of “right-sizing” for these companies, in which they are making amends for overhiring during the pandemic. On the other, asking remaining employees to get more done with fewer resources can be demoralizing and could drive away some of the best employees.

“I don’t think remaining a very large company and then saying, ‘We’re going into startup mode,’ is going to work,” tech historian and University of Washington professor Margaret O’Mara said. “You’re just going to have unhappy workers because they’re working really hard and they’re not seeing the upside.”

It probably doesn’t help that many tech companies are also scaling back on their most over-the-top perks. Google is cutting down on travel and recently laid off nearly 30 in-house massage therapists. Meta axed its complimentary laundry service. Across the board, there’s less free food to go around.

But Drew Pascarella, senior finance lecturer at Cornell Business School, thinks the startup messaging could ultimately have a useful effect in helping to break the negative news cycle around layoffs and creating a more positive atmosphere for remaining employees.

“They’re using this to positively evoke the yesteryear of when it was fun and cool to work for tech in the Valley,” Pascarella said. He added that the message isn’t without merit, in that these companies still are innovative to an extent. They also have subdivisions that are still designed to behave like startups.

That said, tech giants are cutting back on moonshots, those ambitious R&D projects that typically don’t make much money. Google axed a neural network effort that modeled the brains of flies, made cuts to its innovation unit, and even laid off some workers in AI, which the company has said is still a “key” investment area. Amazon is scaling back development of Alexa, which captured our collective imagination by making talking to machines mainstream but was also losing gobs of cash. Meta is perhaps the odd one out since it’s doubling down on its biggest moonshot, the metaverse, but the company has axed other major projects, like its Portal video chat hardware.

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All these cuts and layoffs allow companies to save money in the short term, and the stock markets have responded positively. But too many cuts could potentially jeopardize their growth in the future. They don’t know if a money-losing line item today might be the next Google Ads or Instagram. These changes also mark a distinct change from the companies’ startup roots, where potential growth was prioritized over profitability.

We talked to half a dozen employees at Google, Meta, and Amazon, whom we granted anonymity so as not to jeopardize their employment, as well as tech industry experts about how these companies are trying to right their ships and whether it can work. What happens next depends on how the companies execute these changes as well as how employees and investors respond — not to mention how innovative these companies can be when this is all over.

Growing pains

To some extent, tech workers have accepted certain kinds of cuts as reasonable by workers. Opulent holiday celebrations, rampant swag, and omnipresent food were always considered a bit over the top even compared to some of the more indulgent startups. (As one Google employee put it, “Coming in from smaller shops, I thought, ‘Man, these Google people are really spoiled.”) So it was no surprise when Google restricted employee travel, including to social events or in-person events with virtual options. Few were shocked when Meta limited the number of free restaurants it offers at its main campus in Menlo Park.

There’s also no doubt that the rampant hiring during the pandemic left a bit of headcount bloat that these companies could afford to lose. Amazon nearly doubled its employee numbers to 1.5 million in the third quarter of 2022, up from 800,000 in 2019. Meta also nearly doubled its employees from 45,000 in 2019 to 87,000 in that time. Google had grown its headcount more than 50 percent since the end of 2019 to 187,000 in September 2022.

The problem, though, is that layoffs don’t necessarily save money. In conjunction with asking workers to work harder, they can also have unintended negative consequences.

“I think people are afraid in a way that I have not experienced in the tech industry in a very long time,” another Google employee said. While that can motivate people to work harder and to prove their projects are worthwhile to the company’s bottom line, the employee said it can also drive unwanted behaviors, like workers fighting “turf wars” over high-priority projects. The employee added that, in the past, teams might share code or combine feature requests when they found overlap in their work. That’s no longer the case. Instead, one team won’t wait for another or share code. They might, however, start talking about the deficiencies of the other team.

There’s also the distinct possibility that asking remaining workers to work harder and be more efficient won’t work but instead just demoralize them.

That’s how things have panned out at Google so far. For a while, the fact that the company had avoided major layoffs had been a point of pride for its workers, one that suggested they were valued employees at a well-run company. Over the holidays, workers posted memes on the company’s internal communications thanking Pichai for not laying off workers and, by extension, not being like seemingly every other tech company.

Last week’s layoffs changed things. Google employees struggled to find a consistent rationale for layoffs, as they seemed to span teams, tenures, and high performers.

“No one knows what’s stable now,” a Google software engineer told Recode after the layoffs. “Morale is low.” While layoffs might cause some people to work harder, he speculated that many others might feel demotivated and look for other work, given the breadth of the layoffs. “Their view of it is, ‘I don’t know if working hard means I keep my job. I don’t understand why the layoffs happened the way they did. My colleague over here was amazing. And they’re gone.’”

Layoffs at Meta also seemed to have had a negative impact on employees, some of whom resent the idea that they are expected to now work harder.

“There’s no way I’m staying at Meta if I’m told to work startup hours,” one Meta employee told Recode.

David Yoffie, Harvard Business School professor and longtime tech board member at companies including Intel and HTC, says that the language around working harder partly stems from Elon Musk’s high-profile push for his Twitter employees to be “extremely hardcore” and a general feeling in Silicon Valley that the “intensity which characterized the early days is gone.” It amounts to little more than rhetoric, he said.

“These companies are too big for these kinds of short-term rants to have a big impact,” Yoffie explained. “Preaching you need to work harder to 70,000 people does not work.” Even worse, such cuts can cause some of the best talent to leave, ultimately harming the company’s prospects. “Whenever companies start to go down this route, the very best employees, who are going to get hired even in a bad environment, end up moving, and that weakens the company as a whole,” he added.

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But some Silicon Valley executives are energized by the cuts. For too long during tech’s boom cycle, the thinking goes, big companies hired endlessly. Now that the tech economy has tightened, it’s a good time for executives to “cut that fat,” as one former Meta manager told Recode in September. That feeling might be shared by leaders at Google, too.

“Google — like any large company — has parts where people work incredibly hard, but there’s large parts of the company where it’s just a very comfortable place to be,” said Laszlo Bock, Google’s former head of HR and co-founder of the HR tech company Humu. With the economic downturn, Bock said, there’s an opportunity for management to get rid of longtime employees who are highly paid and perceived to be a little too comfortable.

Employees and experts are more ambivalent about how these companies are now cutting moonshots. That’s largely because it can be hard to tell in the early stages of development what will be the next big thing and what’s just a waste of time and money. A former Amazon employee told Recode that there has been less discipline around cutting products that don’t actually meet customer needs, referring to how the company quickly ceased production on its Fire Phone. Another said that since Jassy became CEO in 2021, the company has been reticent to invest in or even consider moonshot ideas.

Several Google employees said that the company has long kept unprofitable projects going beyond their usefulness, and that getting rid of some of them might be for the best. Google is famous for trying unexpected new things. Some of these efforts have turned into profitable products, like Gmail, while others have helped prop up Google’s reputation for innovation. The fear is that by getting rid of these risky side projects, the company might miss the next big thing. There is also a fear that something has changed at the company, since few of these projects have panned out in recent years.

“Why isn’t it working? What is the special sauce that we used to have when we were doing Maps, and Google Docs, and Sheets and Cloud even?” one Google employee asked.

The path forward

It’s tough to figure out what’s next for Big Tech companies, since their scale makes it difficult to draw historical comparisons. Do they become Microsoft and go into something like cloud computing? Or do they fade from glory like Xerox or RCA, companies that made some of the biggest technological innovations of their time but failed to shepherd that innovative spirit into the next era?

To stay on the cutting edge, tech giants are leaning into their own visions of the future. Meta is going all in on the metaverse. Google is focusing its efforts on AI, even calling in Google’s founders to help with the mission. And Amazon’s Jassy says he’s doubling down on Amazon’s ethos of “Invent and Simplify,” but he’s also moved the goalposts on what it means to innovate to include more basic improvements.

So far, Wall Street has been receptive to these approaches, but that reception has been muted: Daniel Keum, an associate professor of management at Columbia Business School, called the reaction “not crazy but significant.” Still, Meta, Alphabet, and Amazon have a long way to go, with their stock prices roughly 50 percent down from their peak in 2021.

The experts Recode spoke to offered a variety of suggestions for how these companies could solve their problems. Many of those ideas seem abstract and hard to actually accomplish, however. Yoffie, for example, said that these tech giants focus on “reinvigorating small teams that have the flexibility to do creative and new innovations.” But that would require allowing more autonomy in these giant, bureaucratic institutions, not to mention more funding.

“You can help them get back to growth, if and only if they are able to maintain a level of innovation that would enable them to grow new businesses and to expand,” he said. Deciding where to put that money while making necessary cuts comes down to good leadership — something not easily defined.

The advice from Pascarella, the Cornell lecturer, is more quotidian. He says it’s important for companies to “stay true to core products and successes and to not relinquish market position” — something it seems they’re already doing.

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University of Washington’s O’Mara emphasized the need for visionary leadership at these companies. “That isn’t necessarily being like, ‘We’re gonna go back to startup days,” she said. “It’s more executive leadership that is providing a clear, exciting vision that is mobilizing and motivating people.”

Keum offered a slightly different perspective. He said that regulatory headwinds and slowing growth mean that these companies should invest in new startups — but not acquire them in their early stages — with the hope that they might lead to big growth. Microsoft’s latest investment in ChatGPT is a good example of how this could work for tech giants, he said.

That’s not exactly the same thing as Meta, Alphabet, and Amazon trying to be more like startups, of course. It might be impossible for these tech companies, which are now massive corporations, to reignite that spirit, according to Bock, the former Google HR head.

“Even with free food, even with the beanbags and lava lamps, we still felt like things could fall apart at any minute,” said Bock, who started at the company in 2006. That existential crisis, and the drive that comes with it, just doesn’t exist anymore, as the company rakes in huge profits despite the latest downturn.

In Bock’s words: “It’s hard to recreate that fear now.”

Jason Del Rey contributed reporting.