Recession Hits Google

The U.S. is officially in a recession and the lean times are even hitting high-flying Google. The Wall St. Journal reports that Google has realized its "torrid growth" can't go on forever and is implementing a series of belt-tightening moves aimed at helping it weather the current economic downturn. These include cutting back on engineers' less promising "pet" projects (so much for that vaunted 20% time), while focusing more on probable profit-generators such as display ads and mobile phone advertising. While the moves are disappointing -- especially for the engineers that Google lured in with promises of a blank checkbook -- they aren't surprising in this economic climate. But Google's success has always been predicated on its engineer-run culture. Keep aiding the customer's Internet experience and the revenue will follow. As Google cut costs, it has to make sure it also doesn't cut opportunities.

Google's new mindset is captured in remarks from CEO Eric Schmidt:

Google's initiatives can be taken two ways. Either the company is finally growing up and its newfound bean-counter mentality is just part of the process, or it's actually given up on a core part of its company culture. Some key steps it is reportedly taking:

  • New hires go to revenue-generating groups first.

  • Ad-sales reps now have to meet quotas.

  • More employees now find their pay tied to performance.

  • Standard procurement, and price paid, across departments.

  • Hiring only when needed, not just when talent is available.

  • Earmarking funds for only the most promising projects.

  • Building data centers only when capacity needs require them.

At first blush, the moves make huge economic sense. Doesn't every smart company operate this way? But Google's always been a little different. By nurturing engineers and their dreams, they tended to hit on profitable projects that wouldn't have even come to the fore in a different company with a more traditional culture. At best, the culture changes will only be temporary, as Schmidt says, and funding will free up once the economy gets rolling again. But by then, it may be too late. And that genius engineer may have moved on to greener pastures, taking the next blockbuster technology or service along with her.

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