Google’s employee Compensation strategy
Companies could be defined as entities that struggle to make profit, and these entities comprise of several different components including shareholders as the owners, directors as the managers, and the third most integral part; their employees who are basically responsible for the transition of inputs into outputs. Another term that is important to grasp before we proceed is a company’s compensation strategy. For a company to run at maximum possible efficiency, it is very important that the employees are highly motivated and loyal to their work and their company, and in order to achieve this aspiration, companies often formulate payment and salary plans that drive the employees towards high quality output. The example of Google is no different. After being elected as the CEO of Google in 2011, Larry Page tied 25% of the bonus of the company’s employees to the success or failure of the social strategy of the company. Page introduced this policy so that the employees could encourage their family and friends to try the Google products, and this definitely was an elegant move on his part. But Google seems to be a very popular and a profitable company ever since we can recall. Why then is it making such vigorous attempts at maximizing employee efficiency? Well, it turns out that there seems to be a bit of trouble in paradise. Ever since the advent of websites like Facebook, twitter, and Amazon, people seem to be using these very popular sites for shopping and searching for products and their attention doesn’t deviate to Google as often anymore.
Section A: Company’s compensation objectives
The compensation strategy of Google is built around a few essential objectives one of the most important of which is employee retention. Google does not believe in high employee turnover and, therefore, the salaries of the employees are structured in such a way so as to prevent them from leaving. Also, Google affords independence to its employees and grants great room for innovation and creativity. This could be the result of a management structure that is rather flat with a diminutive number of hierarchical ladders to climb. Also, the compensation programs at Google that the company members refer to as ‘pay for performance’ encourages the members of the organization a culture of exemplary performance and encourages the employees to overcome weaknesses and work that is of substandard quality. Another strategy that comes to light when studying its compensation strategy indicates that they have no tolerance for low performance in employees and they are therefore known for managing their employees in position where they cannot perform up to the mark. The prove could be seen in the claim made by the company itself according to which, of all the employees who are put on to performance plans, 25 percent show improvement, 50 percent of them are moved to a part in the organization where they start giving quality output, and 25 percent of these employees leave the company, mostly on their own.
The employee compensation strategy implemented by Google gives rise to efficiency by improving the performance of the company’s employees, and as the bonus of these employees is also linked to their quality of work, the output also becomes better in quality. This, of course, covers the aspect of customer orientation. All of the policies put together by the company also encourage retention of employees which increases the future benefit that could be derived from these employees. The compensation policies in terms of salaries may yet be lacking in fairness at Google, but they make up for the monetary deficiencies in terms of other benefits available at the company and that is the chief reason why jobs at Google are highly in demand. The creative environment at the company provides its employees with working conditions that are friendly and stress-free. Google gives its employees free access to rental cars for routine tasks and also gives access to a gym and day-care. The free gourmet food and unlimited access to snacks is also an added bonus, and so is the free transportation facility. Suffice it to say that employees at Google are well-taken care of in terms of fairness as the company caters for most of their basic needs and even a few recreational ones.
Section B: Policies that should be changed in order to improve Google’s compensation strategy?
The entire system of a company’s functioning and the quality of output is hugely dependent upon the performance of the employees and for us to ensure staff motivation, it is essential that we take into consideration the opinions and the policies that the employees might respond to more readily. According to a survey conducted by a few of the employees at the company, the general preference of the workforce was towards basic salary rather than a salary that varied with the employees’ performance. Changing that policy might not however prove very constructive to the functioning of the company because the variation in the salary is a factor that most contributes to the performance of the workforce. We could however bring a change at a certain level to satisfy the labor force at the company. This could be done by maintaining two types of salaries; one that remains fixed and that the workers could rely upon for their expenses, and there should be certain amount above that scale which encourages creativity and quality output.
There were however a few problems that resulted in dissatisfied employees at Google and a handful of them even quit their jobs because of those problems. A number of the employees who had worked at a few other tech companies including Microsoft were found complaining about the non-competitive salaries and the unavailability of insurance at Google. Stepehen was one of these employees who after working with Microsoft Company found the salary package at Google quite gloomy and the lack of insurance weren’t helping either. And so, Stephen left the company in search of a more competitive salary package. The company could do a great deal for the motivation of employees by providing greater monetary benefits rather than other facilities that the employees may or may not benefit from.
Circuit City, a concerned managed under the Google company, had to lay off 3400 of its overpaid workers to bring in their stead cheaper ones. This course of action isn’t unheard of when it comes down to the proper management of the company, and that was hardly the root of the problem. The actual problem in the entire scenario was this; while these employees whose wage add up to $11 an hour are being replaced, the executives of the company are being given hefty rewards. During the year 2006, the CEO of the company made $4,514,975 and an additional sum of $5,459,409 in stock options. The case of the company’s Chief Executive was hardly any different. The policy might be able to cut down the company’s losses but could contribute little to help with employee motivation. The obvious solution to the problem would be to determine a basis of reward that is fair to all of the employees juniors and seniors alike, and the company should also make sure that not employee suffers at the cost of the other. It is however important to note here that the replacing of older employees with newer, less expensive ones is a move that is quite frequent when it comes to the corporate sector of the United States and the company Wal-Mart comes forth as the most obvious example of the implementation of this procedure where the wages of the workers are frozen at a fixed rate.
Since employees are an integral part of an organization, the use of their well being as an effective business strategy is the idea that could assist at a number of platforms. The compensation strategy for the remuneration of employees could pave the way of a company’s success and therefore should be given utmost importance and should be strategized properly. This plan helps a business by increasing the loyalty of the employees to their company and due to that factor, they tend to quit less often, and the employee turnover of the company remains minimal. It also focuses each employee on the maximization of the company’s revenue because the company’s income if often tied to their own profits. A good reward strategy could also elevate the job security of the employees, and they feel and work with more secure feeling and are not in constant search of better work opportunities. These policies also eradicate the gap between different departments and urge them to work towards common goals and objectives as one.
Google is a company that has a loyal employee base, and the compensation strategies of the company is the main motivating factor. Even though the rewards are not big in monetary terms, but the remaining benefits create a work environment for the employees that encourages great work ethic and optimal results. There are however still a few loopholes that could be worked on, and by doing so, the company may no longer have to lose its share to the competitors including twitter and Facebook. And the wishes and opinions of the employees should be kept at the forefront while finalizing these plans and strategies so that their work quality becomes even more enhanced. And with all of the benefits, it is also quite imperative to ensure that the reward offered to these employees is designed on a basis that is fair and equally rewarding to all and no discriminations should be made in these strategies.
References
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