On Second Thought, Maybe Google’s Pay Raises Are Just Misunderstood

Someone recently wrote that Google’s recent pay raises and bonuses amounted to showing their cards about the desperate position they are in with regards to retaining talent. And perhaps that someone was me:

I think these moves hint at the desperate position Google is in. They’ve got a lot of top talent that they want to retain, but they can’t promise over-the-top, seven or eight figure stock payouts anymore. So their people are moving elsewhere.

And while the Facebook connection may be overblown (as I’ve heard), it leaves Google in a vulnerable position for any tech company on the upswing. Unfortunately for Google, they’ve showed their cards and it doesn’t look good.

I got some great feedback about the post but I also got word from some current Google employees that suggest that what is public knowledge isn’t the complete story. Could it be that Google’s compensation strategy, at least in regards to the across the board increases, make sense?

Size matters, even for Google

I get it, Silicon Valley is a competitive place. Benefits that are the norm there are unusual everywhere else. And as I noted in the previous story, Google’s workplace is beyond reproach.

And while compensation is extremely important (more on that in a moment), other factors like cool projects, venture backed startups, and entrepreneurial pursuits play a role in employees leaving for alternatives in the area. As the economy continues to improve, we could expect to see more of this too as venture capital money starts flowing more freely as well.

A more concerning matter for Google has to be this point made by Bill Taylor over at the Harvard Business Review Blog:

Of course, there’s a broader question behind the comings and goings at Google: Has the most exciting startup of the last two decades become just another big company, and if that’s the case, how can any big company hope to hold on to its top talent?

While Google has been compared to Microsoft in recent weeks, I think their real similarity at this point is the size issue. Google is big. They are going through growing pains. But looking to Microsoft as a way to deal with (or not deal with) brain drain might be an even bigger mistake. Certainly the world has changed since Microsoft transitioned from a plunky startup to a household name with market dominance.

Compensation challenges still exist

While I’m still a little baffled at the bonuses handed out to top engineers, I’m a little less concerned about the well publicized 10 percent across the board increase after talking to a few Google employees. I asked Google’s PR department for a statement about the pay increases and they replied,”While we don’t typically comment on internal matters, we do believe that competitive compensation plans are important to the future of the company.” Another source who was unwilling to be named because of Google’s policy had this to say:

On top of the 10 percent, those that performed well in the past year will also be getting their annual merit increase. So it’s 10 percent base but then will be variable on top of that based on performance. The current bonus plan has two portions, individual and company, they also took the company portion and added it into base. The company portion was almost always the same amount because Google has performed well fairly consistently. But the individual bonus is still in place and is very heavily tied to performance.

Additionally, I learned that pay has been one of the top three concerns for the last few years and that the response was, at least in my mind, less about competitive pressures but more in response to internal employee concerns. The timing is unfortunate and Google’s policy of not commenting or clarifying stories about internal policies (even as they are being debated openly) didn’t help but it seems like a legitimate reason. Their pay was off across most of the organization and after some feedback from employees, they moved to fix it. That’s how it is supposed to work, right?

One more note

As I was discussing this follow up piece with David Manaster, President of ERE Media and publisher of TLNT, he was dumbfounded by the negative press Google had received due to the across the board increases. He made the point that while people are still getting laid off and pay is being frozen for the federal government, we’re berating a company for giving their employees more money than they probably would have even asked for themselves.

Even if it is a desperate move, it is a generous offer and one I’m sure most employees there are thankful for. Aside from the strange bonuses (which are still odd to me), Google did what we should expect every progressive company to do: respond to their employees.

The initial reaction to it from me was the combination of the across the board increases along with some seven figure payouts for declining to join Facebook. If you separate the two stories though, one is still sensationally interesting (the bonuses) and the other is, upon further review, less interesting than it initially seemed (the 10 percent across the board increases).