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Employee Retention of Google -
April 12th, 2011
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program. The company was founded by Larry Page and Sergey Brin, often dubbed the "Google Guys", while the two were attending Stanford University as PhD candidates. It was first incorporated as a privately held company on September 4, 1998, and its initial public offering followed on August 19, 2004. At that time Larry Page, Sergey Brin, and Eric Schmidt agreed to work together at Google for twenty years, until the year 2024. The company's mission statement from the outset was "to organize the world's information and make it universally accessible and useful", and the company's unofficial slogan – coined by Google engineer Paul Buchheit – is "Don't be evil". In 2006, the company moved to its current headquarters in Mountain View, California.
Google runs over one million servers in data centers around the world, and processes over one billion search requests and about twenty-four petabytes of user-generated data every day. Google's rapid growth since its incorporation has triggered a chain of products, acquisitions, and partnerships beyond the company's core web search engine. The company offers online productivity software, such as its Gmail email service, and social networking tools, including Orkut and, more recently, Google Buzz. Google's products extend to the desktop as well, with applications such as the web browser Google Chrome, the Picasa photo organization and editing software, and the Google Talk instant messaging application. Notably, Google leads the development of the Android mobile operating system, used on a number of phones such as the Nexus One and Motorola Droid, as well as Google Chrome OS, which is still under heavy development but is best known as the main operating system on the Cr-48. Alexa lists the main U.S.-focused google.com site as the Internet's most visited website, and numerous international Google sites (google.co.in, google.co.uk etc.) are in the top hundred, as are several other Google-owned sites such as YouTube, Blogger, and Orkut. Google is also BrandZ's most powerful brand in the world. The dominant market position of Google's services has led to criticism of the company over issues including privacy, copyright, and censorship.
About a year ago, I explored Google’s investment per employee during their growth phase, noting that the Google’s employee retention might suffer in the long term as a result of simple mathematics. As Google continues to grow its revenue and employee numbers, maintaining the investment rate per employee to pay for its innovation and development would become increasingly more difficult.
As is well-known, Google inherently breeds entrepreneurialism by allowing its employees to spend 20% of their time on self-developed projects. Projects are presented to Google's product councils for further internal funding and support. Once the “true entrepreneurs" (which I am defining in this case as individuals that would actually leave their corporate binds to strike out on their own) learn the skills necessary to develop and incubate a new innovation, it is a natural progression to expect that they will move on to work on their own.
The brightest minds that have been with Google since the early days have little monetary incentive to stay now that their share options have vested. Those that came aboard Google after their successful IPO and subsequent share price growth have even less upside to sticking around in the near term. Why give up self-developed intellectual property to the “mothership” when you can add the Google brand name to your resume, retain ownership of your idea for a few years, and pursue your own interests afterward. This raises an interesting management question – is it possible that current Google employees are sand-bagging? Could they be working on only a part of their own ideas while working with Google, but saving their very best for a planned departure in the near future?
Adam Lashinsky’s article a recent issue of Fortune Magazine – “Where Does Google Go Next?” – examines the departure of key personnel at Google leaving to create their own start-ups. Some of the individuals and examples that Lashinky cites are Paul Buchheit who co-founded of FriendFeed (with three other former Googlers), Yanda Erlich who founded Mogad, and Nathan Stoll who founded Mechanical Zoo (with other ex-Google engineers). Which of these companies (if any) and their core ideas where actually developed during employment at Google?
The natural metamorphosis of many start-ups is to create a product model legitimized through a rapidly growing user base (and sometimes even paying customers!), and then an exit via acquisition to a larger firm seeking new technologies and products not otherwise developed in-house – companies like Yahoo! and, of course, Google.
Following this line of thinking, Google’s growth creates a reduced incentive system for the true entrepreneurs, but the corporate culture formalizes their employees’ entrepreneurship skills and strengthens their ability to develop and build their own businesses. During this employment period, the true entrepreneurs may sandbag on their ideas, then leave to start their own technology companies that conceivably end up as an eventual acquisition target for Google and its competitors.
This presents an interesting moral hazard for Google. While they deliberately strive to hire people with a penchant for entrepreneurialism, they may not know which employees are “true entrepreneurs” and which simply have an entrepreneurial spirit willing to share their best ideas with Google. This places even more emphasis on the recruiting and hiring process to vet out which applicants are entrepreneurial, but are not necessarily true entrepreneurs.
While each of these thoughts require additional analysis and research, Lashinsky’s article and listening to Paul Buchheit at a recent SVASE Panel Speaker event got me thinking about the Google-employee incentive relationship. More to come on this idea
Human capital management is nothing new, but when you hear Google is doing some form of it internally, your ears perk up a little.
Is Google too big to keep the best and brightest feeling satisfied in their Google work? For some, the answer is yes.
Google, concerned with employee retention after a year of seeing notable executives and others leaving the search/advertising giant, has turned to its own technological strength in algorithms for help, according to a Wall Street Journal piece. From the article:
The move is one of a series Google has made to prevent its most promising engineers, designers and sales executives from leaving at a time when its once-powerful draws -- a start-up atmosphere and soaring stock price -- have been diluted by its growing size. The data crunching supplements more traditional measures like employee training and leadership meetings to evaluate talent.
Google's algorithm helps the company "get inside people's heads even before they know they might leave," said Laszlo Bock, who runs human resources for the company. ...
Current and former Googlers said the company is losing talent because some employees feel they can't make the same impact as the company matures. Several said Google provides little formal career planning, and some found the company's human-resources programs too impersonal.
Whatever the reasons, it seems the company, with its 20,123 employees (based on 2008 numbers), has gotten pretty big for a place trying to keep up a startup culture. As the company expands in revenue size, new markets and new products, the startup culture gets more and more difficult to maintain.
You hear about the amazing free food, the Segways that you can use to get from one part of the Googleplex to the other, all the perks of once highly sought after stock benefits. From the outside, Google seems like an amazing place to work--and it probably still is. It just appears to be more difficult for those who were drawn to that startup culture to make the impact they expected.
Google has touted its "Ten Things" philosophy for some time. One of the "Ten Things" that really sticks out to me in light of this retention issue is the following:
"It's best to do one thing really, really well."
They do search amazingly well, but they do a whole lot more than that in the advertising world, content aggregation, online video, online office and collaboration software, mobile operating systems, etc., etc. Calling it all search is a nice door to a very large room--many rooms, really--that can make it tremendously difficult for those who crave career attention and success to stick around when companies like Facebook, Twitter and others are the new hot thing and on the precipice of morphing beyond what they do really, really well.
For those who have left Google, they have to be saying to themselves: I can have more impact somewhere else. And with Google's name on that resume, it may be quite lucrative to try to make that impact now.
I had someone recently tell me that they were seeing more and Google (GOOG) people exiting the company after shorter periods of time. Assuming that's true, and it is anecdotal empiricism, has it gotten that much worse to work at Google, given its size, or is something else going on?
You might blame the mini resurgence in consumer-centric stuff going on in the Bay Area, and that has certainly had an impact. Many ex-Googlers are off starting other companies, while others are cruising the world, or spending their days (ahem) training for triathlons.
But I want to suggest something else. For most of its young life as a public company, Google has been able to wave its rapidly-appreciating stock at employees. That was a great goad to get people motivated and hanging around, but that's now changed. The company's stock has seen the worst trailing six-month performance in its history for the last few months, and trailing one-year numbers aren't pleasant either. With the stock off more than 20% over the last six months, and down 4% over the last year, that has to be making some employees sit up and take notice that free food ain't everything.
1. Getting the right People at The Right Time
It sounds obvious, but in reality, many companies neglect this crucial first step. One way to cut turnover is to hire the right people the first time around. Start with a thorough and realistic analysis of what the different roles in your organization truly require with regard to knowledge, skills and abilities (KSA’s). After completing the job analysis, rigorously assess your prospective employees to find out whether the job, team and corporate culture you are offering are likely to meet their needs and tap into their strengths.
2. Giving attention to every Employee
Recent research in the area of transformational leadership indicates that effective leaders provide their employees with “individualized consideration”, eschewing a “one-size-fits-all” approach to employee motivation and instead providing each employee with unique guidance. Schedule frequent check-ins with each employee, keep the lines of communication open, give plenty of personal feedback, and make sure that their original positions are still energizing them. Behavioral assessments that yield insights into an employee’s natural strengths, needs and drives can be very valuable tools. Top performers are less likely to flee if they feel that they are truly valued as individuals.
3.Training & Coaching - There is a direct link between training and employee retention. Employees involved in ongoing training feel that their employer is interested in them doing a better job, and the employer cares enough about them to make an investment in their development. Training can also be the means for positive change in any organization; however, training is not enough to create lasting change without a vital link that will help your employees transfer what they learned into real-life application. That vital link is a strong coaching program.
Coaching comprises of the following features which needs to be articulated in the best manner in order to get more than 100% from the employees.
4. Frequent Data Analysis - Examine both “internal” and “external” drivers of turnover. Internal drivers refer to characteristics of employees themselves, such as their personality, intelligence, educational background, experience, job performance and promotion history. External drivers refer to conditions that reside outside of the person, such as the job market in a given city or the quality of one’s immediate manager. Mining your company’s data may reveal that what you thought was driving turnover actually isn’t—and that you can quickly intervene in “high-leverage” areas, often without significant financial expenditures.
“A new relationship between employers and employees requires a different approach to employee retention” says Sunil Goel, GlobalHunt. Bring in individuals who will thrive in the environment you offer, check in with them often, work with them individually, and use targeted metrics regularly to evaluate your success.
All of the above methodologies are in place at GlobalHunt and successfully integrated into process so as to maximum from existing manpower.
Retaining talent is essential for companies and as Eric Schmidt confirms–the actions that a leader takes to promote retention must be ones that are meaningful to the employee. The solution of throwing money at people is not a bad problem for employees. But research shows that if pay meets two qualities, it no longer serves as a retention tool:
Pay must be fair. Pay must be fair relative to what others in similar positions in the organization and outside the organization are receiving. If the pay is fair, a higher pay does not tend to be what most people are looking for to be happy at work.
Pay must be adequate. If an employee is able to live as he or she wants to live with the pay received, then an increase in pay will not typically be a meaningful retention tool.
When pay is both fair and adequate, leaders and managers must look to other areas to promote retention. For example:
FIT: Is the organization a fit for the employee? Is the organization’s contribution meaningful to the employee? And are the values of the workplace in harmony with the employee’s values?
TRUST: Does the employee have a trusting workplace that exhibits fairness, respect, integrity and competence?
CARING: Is the work setting a caring workplace where the employee has meaningful relationships, a sense of belonging and camaraderie?
COMMUNICATION: Does the employee feel the workplace is transparent, with open, two-way communication?
DEVELOPMENT: Is the work challenging giving the employee a feeling that he or she is developing skills and building mastery?
OWNERSHIP: Does the employee feel like an owner–involved and participating in decision making and having flexibility and autonomy?
Retaining employees requires more work than handing out an across-the-board pay raise. Pay is just the initial filter–and once pay has passed the test of being fair and adequate, then the solution to retention is much more complicated. Retention requires ensuring that each employee has an engaging workplace–it’s an individual thing that may require new Priorities that impact the culture of the organization.
Tagged as: caring, communication, culture fit, development, employee, Employee Engagement, employee retention, employee turnover, Google, ownership, pay, retention strategies, talent, talent management, trust, ways to retain talent
Last week Google’s CEO, Eric Schmidt announced a 10% across the board raise for all employ*ees. Appar*ently, wor*ried about the ongo*ing exo*dus of employ*ees flee*ing to com*pa*nies like Face*book, Schmidt found it nec*es*sary to pull out the com*pany check*book in hopes of stem*ming the tide of defect*ing employees.
Across the board increases are noth*ing new. This was com*mon prac*tice dur*ing the dot com ramp when com*pa*nies reg*u*larly raided each other’s tal*ent pools to obtain the best tech*ni*cal tal*ent avail*able. Yet this tac*tic seems a bit incon*gru*ous in our cur*rent econ*omy when so many peo*ple are out of work or fear*ful that they may be.
It is a fal*lacy to assume that money is the answer to all employee reten*tion issues. Could it be that Google is no longer the intrigu*ing start up it once was? Maybe it’s dif*fi*cult for some to become smaller fish in a pond that is grow*ing big*ger. Google has added 3,500 employ*ees so far this year, expand*ing its work*force by nearly 20%, bring*ing the total work*force to around 23,000 employ*ees. Face*book employs around 1,700.
If money is not the main moti*va*tion to stay what else is there? Plenty. Top notch man*age*ment; well orches*trated, nim*ble work teams; and that ‘to die for’ start up envi*ron*ment, devoid of lay*ers of man*age*ment and red tape that typ*ify larger, well estab*lished com*pa*nies. On the man*age*ment side, it is no secret that tech*nol*ogy com*pa*nies often pro*mote their most tal*ented indi*vid*ual con*trib*u*tors into man*age*r*ial roles, often with*out the req*ui*site peo*ple skills or train*ing, which can lead to high lev*els of worker dis*sat*is*fac*tion. It’s true that peo*ple leave ‘bosses’, not com*pa*nies. Google must eval*u*ate how well it is per*form*ing in these cat*e*gories as well as in the area of employee compensation.
Let’s take the ‘raise issue’ one step fur*ther and see what pit*falls may lurk when a com*pany insti*tutes a com*pa*ny*wide salary increase. In Google’s case, Mr. Schmidt framed the raises as a way to reward “the best employ*ees in the world”. In Mr. Schmidt’s per*fect world exam*ple, all Google employ*ees would be stel*lar, per*form*ing at the same high level. How*ever, given that this is not a real*is*tic sce*nario, it would make sense that the high per*form*ing employ*ees might take issue with their lesser per*form*ing coun*ter*parts receiv*ing the same mon*e*tary ben*e*fit. Talk about morale issues. And what hap*pens to the com*pen*sa*tion phi*los*o*phy of ‘pay for per*for*mance’, bonuses aside?
So whether or not you are moti*vated by money or some other fac*tor, the 10% raise may actu*ally have a neg*a*tive effect. Just as with counter job offers, employ*ees must decide what is more impor*tant in the long run. Is it the lure of a fat*ter pay*check now or the desire to repli*cate the intrin*sic fac*tors that drew them to their cur*rent employer in the first place? Only time will tell.
Now that google has gone public, they have a lot of very wealthy employees. Estimates are that 60% of google employees have stock options worth $1 million or more and 400 to 500 have options worth $5 million or more.
Will these employees continue to work for google? Will they retire or will they go off and start their own company? A lot of new companies are founded by wealthy ex-employees and that spin-off effect benefits us all, but the challenge for google is to keep enough of their staff engaged and motivated with their current position.
Google has more perks than most companies, but employees that are wealthy enough to do whatever they want to do will need to know that working at google is exactly what they want to do. One of the more unconventional perks aimed at keeping employees interested in their work is google's policy of allowing their staff to work 10% or more of their time on non-google or fun things. This is where some of their new products like gmail and orkut came from. Employees exploring new ideas at their own initiative.
If google is as successful at retaining their employees as they are in the marketplace, watch to see company policies change to emulate the google retention philosophy.