Google Reining In Expenses As It Matures Into A Complex Business

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The Wall Street Journal has reported that Google is telling employees to reduce hiring and curb spending, which is according to recruiters, venture capitalists and “others familiar with the matter.” Google’s new Chief Financial Officer, Ruth Porat, who has been with the business for a couple of months now is involved in the cost cutting exercise. One of Ruth’s main projects appears to be an internal audit to assess costs, revenue and accounting systems. As it commonplace with all new executives, she appears to be wanting to make her mark on the business. Later this week, on Thursday, Google will update its expenses as part of the second quarter financial results and it’s expected that Ruth will speak to investors during the conference call.

There is obvious evidence of the recruitment slowdown: during the first quarter 2015, Google hired 1,819 employees whereas compared with 2014 the company hired an average of 2,435 employees per quarter. Now, Google executives are selecting the groups able to hire based on the company’s strategic priorities and since 2014, many Google teams have had to submit business plans detailing how additional employees can help towards specific business objectives, such as increased revenue, more users or both. Last year, Google has capped hiring at Google+ whereas the Nest smart home division has been granted leeway to recruit more people. In at least one ad-marketing group, new hires are expected to generate revenue. Ali Behnam, from technology-recruiting firm Riviera Partners, explained to the Wall Street Journal that fewer candidates are receiving offers from Google and the company are involved in fewer competitive hiring situations compared with last year.

Other reports include employees needing to better explain the justification behind travel, supplies and event expenses. The Google workspace remains luxurious compared with many other businesses and the company is a long ay from cutting jobs as the business is still growing. However, the additional scrutiny on expenses is a significant cultural change for a company that has favored expansion over bottom line concerns – as reflects the change in Chief Financial Officer. Carlos Kirjner, an analyst at Bernstein Research, said this on the matter: “Google is taking the foot off the gas. I don’t think the company has fundamentally changed its philosophy or approach. It has just adjusted.” The shift in expenses policies also comes at a time when Google is still evolving from the upstart Internet search provider into the complicated, much-harder-to-manage business: however, expenses were still climbing and growth is slowing. Google as a business is maturing.