What image pops into your head when you picture a Google employee? Maybe someone stopping for a snack and drink from a food kiosk between rounds of Foosball? Or maybe someone huddled over a computer, headphones on, late in the evening, writing code? Judging from the sheer breadth of Google’s products, services, and initiatives, it seems clear that the second image is more prevalent. So, what is it that motivates “Googlers” to put forth so much effort on the job? Certainly the work they do is an important factor. Employees are given the freedom to spend part of their week on projects that interest them. Moreover, the company’s mission—to organize the world’s information and make it accessible to all—provides a sense of purpose for the rank-and-file.
That said, Google’s People Operations group does a number of things to keep employees motivated. Employees are given specific, measurable, and ambitious goals each quarter—termed “OKR’s” (for Objectives and Key Results). Those OKR’s are shown on the company’s internal website, right next to an employee’s phone and office number. Successfully meeting OKR’s then feeds into Google’s performance evaluation process, which occurs twice a year. Employees are rated by their managers on a five-point scale where 1 = needs improvement, 2 = consistently meets expectations, 3 = exceeds expectations, 4 = strongly exceeds expectations, and 5 = superb. To ensure that higher ratings really do go to higher performers, managers engage in a process called “calibration.” In groups of five to ten, managers project their employees on a wall and have a group discussion to ensure that no “grade inflation” (or “grade deflation”) occurs. The ratings then feed into two separate conversations: one about skill development and one about changes to compensation.
Motivational strategies go beyond evaluation and compensation, however. Google’s awards program stresses experiential rewards, like sending teams to Hawaii, providing trips to health resorts, or splurging for lavish dinners. Studies within the company have shown that the memory of such rewards lingers longer than cash, making them more satisfying. And employees can even give each other rewards themselves. The gThanks (“gee-thanks”) software system allows employees to send public thank you’s to reward good work. The system even allows employees to give peers a $175 cash award—with no managerial approval needed.
One motivational issue that Google pays particular attention to concerns its star performers. Most organizations treat performance evaluation ratings—and accompanying compensation differences—much like grades in a college course. Just as a distribution of grades might have a few A’s, more A–’s, B+’s, B’s, and B–’s, and a few C’s, so too do performance evaluations wind up with a few 5’s, more 4’s, 3’s, and 2’s, and a few 1’s. Thus, scores and rewards have a “bell curve” distribution, with fewer people in the tails and more in the middle. Moreover, just as an A is only a bit more rewarding than an A–, so too does a 5 get just a bit more than a 4.
Although there’s a logic to that view of evaluation and compensation, it misses an important insight from scientific work on performance. That work suggests that the top 1 percent of performers contribute 10 percent of the firm’s productivity all by themselves. Similarly, the top 5 percent of performers contribute 25 percent of the productivity all by themselves. Put differently, stars aren’t just a little bit better than typical employees—they’re worlds better. This is especially true in white collar jobs where there are no equipment or process constraints on what employees can do. As Bill Gates once argued, “A great lathe operator commands several times the wage of an average lathe operator, but a great writer of software code is worth 10,000 times the price of an average software writer.”
Laszlo Bock, the former head of Google’s People Operations group, followed such advice when rewarding star performers. He argues, “Internal pay systems don’t move quickly enough or offer enough pay flexibility to pay the best people what they are actually worth. The rational thing for you to do, as an exceptional performer, is to quit.” Thus, Google practices what he calls “paying unfairly”—where “unfairly” means a rejection of the notion that 5’s should only get a little more than 4’s or 3’s. “If the best performer is generating ten times as much impact as an average performer, they shouldn’t necessarily get ten times the reward,” Bock notes, “but I’d wager they should get at least five times the reward.” He continues, “The only way to stay within budget is to give smaller rewards to the poorer performers, or even the average ones. That won’t feel good initially, but take comfort in knowing that you’ve now given your best people a reason to stay with you, and everyone else a reason to aim higher.”
6.1 Do you agree with Bock that star performers should get a lot more—not just a little more—than average performers? If someone earning a 3 on Google’s evaluation system gets a 2 percent raise, what should employees earning 4’s and 5’s get?
6.2 Given the budget issues created by giving star performers more, should someone earning a 3 get a 2 percent raise—or should they get less? What are the arguments for and against a 2 percent raise level for average performers?
6.3 Consider all the things Google’s People Operations group does to motivate its employees. Which motivation theories do they seem to be leveraging, and how?
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