Google: The risks of giving everyone a raise
Finally, someone is handing out raises. And big ones, at that. Despite a huge pool of unemployed talent looking for work, Internet search giant Google is giving all 23,000 of its employees 10 percent salary increases--no 2 percent cost of living blips here--according to The Wall Street Journal. The move comes amid recent defections from Google's staff to Facebook and other Silicon Valley companies.
Sounds nice, right? On the surface, a hefty raise appears to be a great way to boost morale and retain people. Indeed, some 86 percent of Wall Street Journal readers think it's a good move, according to this online poll.
But I'd argue that giving a 10 percent salary increase to every single Google employee probably won't do enough to retain the company's best and brightest. And in fact, it could backfire. The company's hardest-working, most irreplaceable people could think all that extra effort is for nothing if their less talented colleagues see the same uptick in pay they do. And that could have them running for the door even faster.
Yes, Googlers are a special breed--getting hired by the company is well known to be a notoriously difficult proposition. The company may argue that C players at Google would be A players somewhere else. But even Mountainview is no Lake Wobegon. Inevitably, the tech company has stars it can't imagine losing, steady performers who keep the place ticking along; and no matter how good it is at finding the very best, a few folks it could surely do without.
That Google is including everyone in its beneficence is particularly surprising given news reported in the same Journal story. Google has apparently begun testing a mathematical formula to try to predict who is most likely to leave the company, by looking at things like performance reviews. What good is that formula if it can't also help them decide who needs a 10 percent raise--and who needs a 5 or 20 percent pay increase instead?
Surely, like every other major global corporation, Google also has some kind of less-mathematical performance review system in place that helps it decide who deserves more money and who doesn't. When those annual reviews happen in the future, I have to wonder how much impact the corresponding rewards will actually have after good and middling performers alike have been handed the same extra dough. In a meritocracy, consistency matters.
Presumably, the company is still doling out special bonuses and extra equity to the very best coders and tech geeks around the Googleplex. That's where the real money is, after all, and where retention tools like vesting schedules make money really start to have an impact on keeping people around. The Journal reports that after company surveys found that salaries are most important to employees, it is "moving part of employees' bonuses into their base salaries, so they would receive some of it in every paycheck." As a result, some real differentiation is still likely to occur.
Still, I cringe every time I see "across-the-board," whether it comes before the word "cuts" or before the word "raises." Leaders have to make tough decisions when it's time to trim staff or slash budgets--cutting under-performing units while protecting, if not investing in, things that are doing well. The same goes for raises. To keep the best people feeling like they're rewarded for working smarter or harder than the rest, tough calls need to be made about who truly deserves more money, too. When leaders don't make them, their efforts to raise morale could raise the risk of defections.
November 10, 2010; 12:48 PM ET |
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