by Aditya Bothra, Shankar Tripathi, Rajeev Rewari, Vishal Gandhi, Mike Profeta (Almond Brownie- Fall 2007)
Google Inc., the behemoth behind the internet search engine whose name everyone uses as a verb, began in early 1996 as a research project by Stanford University Ph.D. students Larry Page and Sergey Brin. Throughout the company’s early years, the easy-to-use search engine attracted an ever growing number of loyal users, which ultimately led to an Initial Public Offering valuing Google at 23 billion dollars. After the IPO, Google, under the expert leadership of CEO Eric Schmidt, has grown tremendously and continues to innovate and expand into a myriad of industries, such as communication services, print publication, and web applications. From about 3,000 employees in June 2004, Google has grown to nearly 16,000 employees throughout the world. The high-tech environment in which Google operates is extremely competitive. This competition stems from the fact that employees and their technical knowledge are a company’s greatest asset. Thus, Google makes it a top priority to retain its very valuable employees.
Due to this expansion, Google has an ever-growing list of stakeholders—both primary and secondary. Primary stakeholders, as defined in the article “Strategies for Assessing and Managing Organizational Stakeholders” are “those who have formal, official, or contractual relationships and have a direct and necessary economic impact upon the organization” (Savage 62). Google’s primary stakeholders include stockholders, employees, managers, and its customers—that is, everyone that has ever used the company’s search engine, Gmail, its email service, or Google Earth, a web application. Secondary stakeholders are defined as “those who are not directly engaged in the organization’s economic activities but are able to exert influence or are affected by the organization” (Savage 62). Google’s secondary stakeholders include the government, the media, and competitors such as other search engine services like Yahoo! and Microsoft.
The Fabulous Life of Google Employees
It is often said that a way to a person’s heart is through his stomach and nowhere is it more true than at Google. Google runs 11 free gourmet cafeterias at its Mountain View, Calif., headquarters that serve a variety of international cuisines, in addition to the well stocked snack rooms which contain everything from the quintessential make-your-own cappuccino machine to the health conscious snacks and chocolate bars. This Premium dining and snacking service is available day and night at absolutely no cost to the employees. No wonder its popular company folklore is that an employee is never more than 150 feet away from food source while on campus.
With these over-the-top perks, Google gives a whole new dimension to work. This flexibility allows for the Googler to do laundry, drop off dry cleaning, and even order dinner for the evening all for free while updating the algorithm program on that project you were working on. This peace of mind while at work allows employees to concentrate fully and achieve maximum productivity. In addition, these perks and benefits allow Google to attract top talent; show them that they are valued, retain employees, and create a brand for itself when it comes to employment.
But, if you thought the food was good, then the transportation to and from work is not far behind either; Google operates free, Wi-Fi-enabled coaches from five Bay Area locations. But if you’d rather bring your own car to work, Google has a solution for you too with onsite car washes and oil change on the company account. And if you just decide to save some money on gas by buying a hybrid, guess what? You are given $5000 subsidy for the purchase on behalf of Google.
And the perks continue once you enter the Google compounds and finish off a decadent breakfast with a trip to the free salon or a work out in the gym. You can attend subsidized exercise classes, get a massage, study Mandarin, Japanese, Spanish and French or ask a personal concierge to make plans for the evening. Even having a new baby is made easier by Google, with $500 worth of subsidized take-out food for home.
However, many “Xooglers” or former employees, find the perks to be an infringement by their work lives on to their personal lives. Google wants to create both an appealing environment to attract and retain employees and make people feel they belong. There's an integration of work and non-work activities causing a blurring of family life and professional life for many Google employees. Over time this could lead to decreased employee morale, therefore, Google should emphasize external employee development through programs such as family outings, volunteer programs and part take in other social activities.
In the article “Managing Corporate Culture Through Reward Systems” a reward system is defined as something that “expresses values and norms to which those in an organization must conform, as well as the response individuals can expect to receive as a result of their performance” (Kerr 99). Google, keeping with this definition, employs a combination of hierarchal and performance based rewards system to recognize outstanding contributions to the company. Google’s rewards system is both hierarchal and performance based as performance is defined both quantitatively and qualitatively, formal and informal feedback is extensively used, bonuses are based on a combination of corporate, team and individual performance and there is a complex structure of promotions and distribution of stock options within the organization. In addition, there is a strong clan culture within the organization and relatively flat organizational structure, making the company more a hybrid of the two reward systems.
The founders’ awards are given by Sergey Brin and Larry Page that rewards employees that have worked on exceptional innovation based projects. The awards are usually worth millions of dollars and are given out quarterly as a way of thanking the respective employees for their efforts. In addition to the Founders’ awards, stock options, as well as bonuses, which are both company and individual performance based, are given out each year.
One of Google’s most exciting employee rewards is its ability to offer stock options. Stock options are typically limited to exercising the option and purchasing stock at a given date or not, however Google has decided to take a more innovative approach to its reward. Transferable Stock Options, or TSO, is a compensation program that Google developed for the purpose o. allowing employees to trade or auction their options off to a bidder. In this way, Google not only increases the value of every stock option given to its employees but also enhances its options’ valuations.
But what is Google’s incentive in giving out these perks and rewards? Well, it is becoming increasingly important to attract and keep top talent in an increasingly competitive job market. With competition from technology giants like Microsoft and Yahoo! Google has offers current employees $2000 if they refer a friend to work at Google from a competitor. At the same time, these perks and rewards help differentiate Google from it competitors that have expanded their own benefits program in recent years.
But the two biggest concerns for Google are new startups and retirements. Startups are an issue because they are attractive to recent college graduates who see them as more lucrative opportunities after having missed Google’s IPO bonanza. The founders’ awards, perks and bonuses are meant to help convince these college graduates to innovate under the Google name and at the same time be rewarded generously for their contributions. However, these rewards and perks are also a source of problems for Google as employees that have been with the company for some time tend to go into a state of complacency, where they remain until they can redeem their options and either retire or migrate to a different company. A possible solution to this problem would be a program that allows employees to either leave Google for a period of time to explore other interests or shift to a different division. This would serve to increase employee satisfaction and ultimately productivity.
Despite the seemingly phenomenal environment at Google, we believe the company should reconsider the system of perks to ensure a stable employee base in the future. In the future, an overemphasis on perks may not build sufficient employee commitment, especially if competitors can imitate Google’s programs. Thus, we recommend to Google that they slowly merge the perks with the rewards system. Increasing employee rewards, rather than merely offering interesting perks will in the long run help increase employee productivity and loyalty.
Google uses a system of formal and informal feedback to evaluate its employees. Google’s formal system of evaluation uses a 360 degree review method. DeNisi’s article “Feedback Effectiveness: Can 360-degree appraisals be improved?,” states that employers, “instead of relying on appraisals from a single source, obtain evaluations from a variety of sources” (DeNisi & Kluger 135). At Google, an employee’s manager and individual reports are both part of the review process. In addition, the employee also selects three or more peers to review. These reviews occur biannually and contribute to a performance score that is tied in with an employee’s bonus. However, nothing in these reviews should come as a surprise because regular check-ins part of the informal feedback system are expected and are much more comprehensive than a formal biannual review.
Informal review is prevalent at Google, but it appears that the negative attributes of this outweights the benefits. For example, an article in The Economist talks about how a former executive “started receiving detailed e-mails ‘enforcing’ Google's outward informality by reminding her that high heels and jewelry were inappropriate” (The Economist). As a Noogler, or new Google hire, nobody knew when or where she was supposed to work.
However, there are some benefits of having a highly destabilized form of feedback. The Google shuttle bus exists today because Carrie Spivak, who used to work on the company's book search product. She simply got tired of driving to work and instead scouted out a bus company, then plotted out the routes a shuttle might take. She brought the idea to senior management only after she'd done all the research. Her idea was well-received and accepted, and now the shuttle bus has become yet another service Google provides its employees.
All in all, we feel that Google has room to improve upon its feedback system in terms of making it more stabilized and structured. The informal feedback should come in some sort of format that helps employees more than hurts them, and gives constructive criticism rather than negative and strange feedback. In addition, one-on-one interaction should be encouraged as much as possible.
Google was recently named Fortune Magazine’s #1 place to work at in America for 2007 based on a combination of factors—including its perks and rewards system, as well as its popularity among recent graduates. Google has certainly come a long way from its initial start on Stanford University’s campus. With its rapid expansion into different industries, as well as an employee base nearly quadrupling in three years, Google must continuously update its system of rewards and feedback in order to stay in the forefront of employee satisfaction and productivity.