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Google: Rekindling that start-up mojo

There are many ways to interpret the surprise announcement Thursday that Google CEO Eric Schmidt will be stepping aside April 4, becoming executive chairman as co-founder Larry Page retakes the CEO reins. There may have been tension between Schmidt and Page, as The Wall Street Journal reported (but the company denied). Alternatively, Schmidt, who has reportedly said he would like to go into public service, might just be ready to move on after 10 years at the helm.

But when a founder returns to the helm, one thing is usually behind it: The company has become too big or too bureaucratic, and it's looking to rekindle some of that start-up magic. Google has said as much. In its announcement, Schmidt said the company was looking to make its management more nimble, a hallmark of entrepreneurial cultures. "We've been talking about how best to simplify our management structure and speed up decision making for a long time," Schmidt said in Thursday's announcement, which came as part of the company's fourth quarter earnings release.

Founders who retake the CEO reins are a common species in Corporate America. Starbucks Chairman Howard Schultz grabbed back the chief executive crown from former CEO Jim Donald after traffic in the coffee chain's stores began falling and its stock price plummeted nearly 50 percent over the year prior. Schultz wanted to re-instill Starbucks' customer experience after the company grew so large. And Michael Dell returned to the helm of his namesake firm in 2007, after the company lost market share and became subject to an SEC investigation over accounting improprieties.

Google's situation is different, of course. Larry Page never left the company, nor did he sit out the intervening years in some musty chairman's office. By all accounts he, Brin and Schmidt ran the company as a triumvirate, and each remained intimately involved in day-to-day product, strategy and business decisions. In addition, Google is hardly in the same sort of trouble as were the companies above. Today's management change overshadowed the release of Google's impressive fourth quarter earnings, which shot up 29 percent from the same period the year before, while revenues jumped 26 percent.

But there is a sense that the company has lost some of its start-up feel. Facebook has been successful in poaching Google talent in recent years--the Wall Street Journal reports that roughly 10 percent of Facebook employees are Google veterans. The company has made expensive efforts in recent months to boost morale and retain staff, handing out across-the-board raises. While Google is still by far the dominant player in Internet search, more competition for advertising dollars is likely to come from Facebook. As one Google observer put it, "as spending was curbed and order restored over the last few years, some of that Google magic was lost." Page told The New York Times Thursday he hoped to get back some of that "nimbleness and soul and passion and speed of a start-up."

This is not a drastic change--Schmidt doesn't appear to be going anywhere, at least right away, and Page is hardly new on the scene. The change is probably needed to help the company streamline management from its interesting three-way experiment.
But this is about more than just faster decision-making. If, along the way, Page also helps to rekindle some of the agile start-up mindset, and reinforces the entrepreneurial culture that helped Google establish its roots, I'm sure Google's triumvirate--not to mention its employees and shareholders--won't mind one bit.

By Jena McGregor

 |  January 21, 2011; 10:16 AM ET |  Category:  CEO watch , Change management , Technology Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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