In 2023, Nvidia's sudden rise also created an unusual problem: some senior employees who owned a large number of company stocks began to "lay down" and stopped doing their part. This problem is serious enough to attract the attention of Nvidia CEO Jensen Huang, making him feel the need to personally solve it. People familiar with the matter said that at the company's internal all-employee meeting held last month, Huang Renxun singled out one question from a pile of questions submitted by employees in advance. This question was:How to deal with older employees who seem to be in a "semi-retired" state.
Huang Renxun replied that working at Nvidia is like a "voluntary sport", so every employee should act as a "CEO" who manages his or her own time. He acknowledged that some employees had been at Nvidia for a long time and jokingly named some of them. Work intensity is a judgment call for adults to make, he added. People familiar with the matter said the overall message Huang conveyed was that how hard one works should be determined by each person, but that it should be done responsibly.
Over the past five years, Nvidia's stock price has risen by approximately 1,200%, making many Nvidia employees extremely wealthy. But this success had an unexpected side effect: Tensions grew among employees. Some employees feel that older employees have not fulfilled their job responsibilities at all.
NVIDIA stock price trend
Nvidia employees firmly support Huang as CEO, who founded the company in 1993. Even so, they criticized Huang for creating an overly employee-centric culture and a relatively hands-off management style. Coupled with Nvidia's recent near-dominance of the cutting-edge AI chip market, employees have relaxed their demands on themselves.Some newly minted millionaires with large holdings of Nvidia stock are no longer working as hard as they once were.
As Nvidia faces increasing regulatory pressure and competition from chip designer AMD, Intel and other big technology companies such as Amazon and Microsoft, the "employee discord" simmering within the company may one day become a more serious risk.
"Huang Renxun conveyed his message seriously, that is, do your job well." A person familiar with the matter said. As of press time, a Nvidia spokesperson had not yet commented.
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To some extent, nearly every technology company faces similar issues. Those old employees who are familiar with the company are not productive at work. Silicon Valley has a word to describe this situation:"Restandvest" refers to employees who can get their salary without working hard and wait for their stocks to vest.As of January this year, Nvidia had 26,000 employees.
But at Nvidia, the company's famous culture of treating its employees well may further exacerbate this behavior. For example,Nvidia has no history of laying off employees during turbulent times.During the early stages of the COVID-19 epidemic in 2020 and the cryptocurrency crash in 2022, Nvidia's stock price fluctuated significantly, but Huang Renxun repeatedly assured the company's employees that there would be no layoffs.Nvidia's last official layoffs occurred 15 years ago in 2008, at the height of the financial crisis.
It's common practice at Nvidia to have top managers take pay cuts during turbulent times to reduce the impact on rank-and-file employees.One employee said they received additional stock awards in 2022 to make up for reduced revenue due to Nvidia's falling stock price.
NVIDIA employee headcount trends
Unlike competitors like Amazon, Nvidia employees are rarely included in performance improvement plans. If someone underperforms, the company tries to find them a new team instead of quickly moving them to a promotion program or firing them, employees said. As we all know,Huang would tell employees in all-hands meetings that he didn't want to fire anyone.
While this corporate culture can foster deep employee loyalty, it can also be exploited by some. "At Nvidia, it's harder to fire someone than it is to hire someone."A source familiar with the matter said.
Right now, employees have no reason to leave the company. Jim Herd, CEO of headhunting firm HerdFreedHartz, said that based on his experience,Nvidia's turnover rate is lower than other technology companies.He noted that Nvidia has built a "very strong culture" that leaves employees more satisfied and less motivated to pursue other opportunities.
"Nvidia's turnover rate should continue to be lower than its peers. Nvidia's current momentum is too strong and the financial benefits are too great for employees to leave now." Hurd said.
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The popularity of generative AI has created explosive demand for Nvidia's advanced chips, which will only increase the complacency of Nvidia employees. Nvidia's GPU chips have become one of the most popular products in tech this year as they power many generative AI services like ChatGPT.
The buzz has made some Nvidia employees' jobs easy. Nvidia now has more influence over customers than ever before as cloud service providers and AI companies rush to get its hands on its GPU chips, a person familiar with the matter said. Potential customers are eager to answer their calls, and existing customers are willing to spend more on Nvidia's technology. Even compared to last year, this is a world of difference.
NVIDIA's latest financial report reflects this change. In the third fiscal quarter (August to October 2023), Nvidia generated revenue of US$18.1 billion, a 207% increase from US$5.9 billion in the same period last year. This is almost organic growth for Nvidia, as the company's operating expenses such as R&D and marketing are $3 billion this year, which is only a 15% increase from last year's $2.6 billion.
Nvidia revenue surges
Even as more companies roll out their own chips, Nvidia employees say they haven't felt the pressure of competition yet. For example, both Amazon and Microsoft have recently introduced new chips that compete directly with Nvidia's own products, but three Nvidia employees said those chips were never mentioned in customer conversations because they viewed Nvidia's chips as having superior performance.
"We have no competitors, but we are slowly inflating ourselves. Some people do nothing."A NVIDIA employee said.
Huang also seems worried that Nvidia employees will be paralyzed by the advantages the company has achieved. At other recent all-hands meetings, he told employees that the stock market is ruthless. As a $1 trillion company, people expect Nvidia to continue to deliver strong results.
The myth of wealth creation
Nvidia's relatively hands-off management style may be another factor contributing to employee layoffs. In April of this year, Huang shared his thoughts during a podcast interview.
He said he currently has more than 40 direct reports. For any CEO, this number is quite high. This is because Huang has reduced unnecessary middle layers, resulting in more subordinates reporting directly to him. Huang said that his direct reports all have "excellent business acumen" and "excellent vision," so they don't need his guidance or any career guidance from him.
Nvidia also allows employees to work remotely full-time and provides unlimited time off, including two days of "paid time off" for all employees every quarter.
The new wealth at their fingertips may also disincentivize Nvidia employees. Some estimate that even mid-level managers now receive total compensation of more than $1 million a year due to skyrocketing stock awards. Like many technology companies, Nvidia pays employees part of their compensation in the form of company stock, which has risen about 230% this year.
"The stock price will rise and we can make more money in the future. Everyone is proud of NVIDIA." Another NVIDIA employee said.
However, Nvidia employees are not letting wealth go to their heads. Unlike the Bitcoin millionaires who went on a spree of luxury cars and mansions during the cryptocurrency boom, the Nvidia employees interviewed all adhered to a relatively frugal lifestyle, using their earnings to pay off mortgages and student loans rather than buy a new Lamborghini.
"We're a bunch of nerds, not the upstarts of the Internet cryptocurrency era," one Nvidia employee said.
All of this has given Huang Jen-Hsun unparalleled support and made his position extremely stable. Every Nvidia employee interviewed said they have complete trust in Huang's leadership and appreciate the way Huang puts "employee values" at the center of the company's culture. Huang still makes time to keep tabs on a weekly list of five things employees are doing, which is presented to leaders, they said. According to data from job search website Glassdoor,Nvidia employees’ support rate for Jensen Huang as CEO is as high as 98%, much higher than other peers such as Alphabet (81%), Amazon (69%) and Meta (54%).
Although Nvidia has been so successful so far, Huang Jenxun seems to be the most worried about the future. He once said outright that he had to be vigilant because the company might one day go bankrupt. At last month's DealBook Summit, Huang said he had experienced "real adversity" while running Nvidia, leaving him "a little desperate and a little hungry" for uncertainty.
“I don’t wake up proud and confident, I wake up worried.”he said.