Module/course Name
Executive Summary
This paper identifies that Google Incorporation has not only focused upon the pay and financial rewards but also the extrinsic factors. Some researchers have supported the idea of rewarding employees financially and paid them higher while others have emphasized upon intrinsic factors such as recognition, appreciation and tangible benefits.
Introduction
The market today is highly competitive due to rapid globalization. Organizations, as a result, are more inclined towards making long term profits by attracting and retaining the best talent available. The main focus of the organizations today is towards motivation of its human resources so that maximum performance can be enjoyed (Latham, 2007). The company, as a result, finds it important to design an attractive total rewards compensation benefits program for its employees so that it can attract and retain the best people at work. Organizations can enjoy great success when they realize that employees play a vital role in enabling business to improve its organizational performance (Latham, 2007). Google Incorporation is a US based Multinational Corporation that specializes on internet based products and services (Google, 2014). The company’s offerings include cloud computing, social networking service, online advertising technologies, search engine and software (Google, 2014). Employees are considered as one of the most important stakeholders at Google Inc. Google Incorporation is globally known for its attractive employee benefits programs and has been ranked several times as the one of the best places to work by Fortune Magazine (Datamonitor, 2009). This paper will critique the total rewards compensation-benefits program of Google Incorporation by linking it with the theory and literature.
Discussion
Google has a higher pay scale, and it provides attractive financial package to its employees in order to attract the best candidates and retain them (Pay Scale, 2014). It pays its employees 11% above the market rate whereas similar employers only pay 8% above market to their employees (Pay Scale, 2014). At Google, majority of its employees believes that the company pays them fairly and provides them with additional unique benefits (Google, 2014). In literature, many scholars have emphasized on financial rewards as an important and effective way of motivating staff. Taylor’s theory of economic man recognizes money as a sole motivator and his theory is based on the belief that employees work for money and rewarding them financially based on their work/output is the only way to motivate them (Akintoye, 2000). In line with the beliefs of the theory of economic man, Sinclair et al. (2005) also said that money serves as a significant incentive for employees as it helps them satisfy their needs. Google follows the same school of thought and offers the employees the best salary packages as compared to other leading joints in the industry. However, on a contradictory note, Herzberg (2003) believes that monetary incentive or rewards provided to the employees only helps in booting up their motivational level in a short term. His two-factor theory classifies the money as a hygiene factor and not a motivator. Herzberg (2003) believes that money can only make a person do the job that he called as movement instead of motivation. He explained that a motivation is when an employee has the willingness to execute the job in the most effective way. His theory contradicts with the beliefs of the Taylor’s theory of economic man (Akintoye, 2000). Additionally, Oshagbemi (2000) says that no evidences have been found in different studies that monetary incentives aid in sustaining the motivational level of the employees. Furthermore, Trott (2002) also emphasizes that employees are not solely motivated by financial incentives.
Furthermore, the company also offers its employees a transferable stock option program. The program of transferrable stock options was initiated in 2006 by Google Incorporation which not only enabled its employees to exercise their stock options but will also allow them to sell their options to the financial investors or institutions (Google, 2006). The company provides an innovative program to compensate its employees. The novel concept behind this program is not the ability to buy and sell options but this program will enable the employees planning to sell the options to use an internal online application which will help them to sell the options to the financial institution with the highest bidding (Google, 2006). The financial institution will buy the options and hold them till maturity and later settle with the company (Google, 2006). The linkage between the expected rewards (also known as incentives) and behaviors lead to motivational forces of employees for given tasks and responsibilities is said to be the expectancy theory. As per the aforementioned theory, expectancy and valence are the two factors that determine the behavior of the employees based on the motivational aspects. Expectancy is referred as a link based on perception between performance and effort whereas valence is defined as expected outcomes or values of incentives received on the achievement of goals (Hellriegel & Slocum, 2011). The expectancy theory emphasizes on the fact that those rewards or incentives given to a particular employee which are directly dependent upon the efforts put together by the employee results in high motivation and improved performance. Lunenburg (2011) believes that dependence of efforts on receiving such incentives increases the motivation level of the employees significantly. However, Tang et al. (2004) criticizes this scheme and emphasizes on the motivational factors to be solely dependent upon the mind-set of the employee and the financial rewards offered with no interference of the efforts. On the other hand, schemes such as profit and gain sharing caters to environment where employees are not controlling the incentives directly and the monetary rewards provided are dependent upon the overall performance of the company (Herzberg, 2003). Relating the assumptions of expectancy theory with the stock options incentives offered by Google Incorporation it can be said that stock option generates a reduced level of performance and motivation for the employees than merit compensation (Lunenburg, 2011). Lunenburg (2011) suggests that this is mainly because of the systematically driven values by the market forces instead solely by the performance of the company. These practices largely affect the employees as they are left with only partial influence on the company’s financial posture. Kraizberg, Tziner and Weisberg (2002) advocate that the aforementioned negative effect can be moderated as the stock options represent non-monetary psychosomatic element which is a sense of control and ownership within the company. Therefore, as per the Expectancy Theory, reduction in the motivational level may diminish by the psychological satisfaction of the employees’ growth needs. However, Lunenburg (2011) also states that stock option is an effective way of motivating employees who are looking for some sense of control and ownership within the organization they work. He suggests that if stock options are provided to the employees in line with their contribution or performance, it will result in higher motivation.
Google Inc. provides its employee with flexible and attractive benefits along with the opportunities to work with broad boundaries (Mills, 2007). The employees at Google are encouraged to take initiatives and implement new ideas without the fear of failing. At Google it is believed that the work of the employees must be challenging in order to keep them motivated (Mills, 2007). Hence, the employees of the company are provided with a unique, challenging environment to work in. The human resource management practices at Google are based on Theory Y. As explained in a literature, Theory Y assumes that employees like to work, and they look forward to responsibilities and freedom when performing tasks. On the contrary, Theory X states that employees do not like work and responsibility, and they must be strictly supervised and made to work. Google provides complete freedom to its employees in performing their jobs. However, Taylor’s approach was based on Theory X and Taylor suggested that employees must be supervised closely and forced to work (Akintoye, 2000). The practice being observed at Google is endorsed by Horwitz, Heng and Quazi (2003) as he suggests that the motivation level of the employees increases by inculcating an environment involving challenging tasks couple with higher management’s support. Google Inc. is a place where employees are highly competitive and are willing to work with complete determination and efficiency, hence in situations like these; challenging tasks work as the best motivation factor for the employees. Furthermore, Herzberg (2003) two-factor theory recognizes the importance of intrinsic factors in motivating staff. Intrinsic rewards as identified by Herzberg (2003) are also known as motivational factors and comprises of challenging or creative work, responsibility, accountability and development opportunities. Herzberg (2003) has also identified the importance of creating a challenging work environment. His theory suggests that a work itself is a motivator. When work is interesting and challenging, employees will be motivated and are likely to give high performance. Google Inc. has also made significant efforts to ensure that its employees take work as a challenge and challenge as fun.
Along with high pay, employees at Google are also rewarded with bonuses and performance related pay. The company gives high importance over retaining its employees and ensures that it keeps its employees happy. According to Blodget (2010), the company paid all of its employees, $1000 cash as a holiday bonus and gave them a raise of at least 10%. The $1000 cash was the go home money as the company agreed on paying the taxes on the cash bonuses being paid to its employees (Blodget, 2010). The company further announced that the employees will be given further merit increases, and it will be based on their individual performance. Google believes in recognizing the efforts and hard work of its employees. There has been increasing importance seen of linking pay to the performance of employees. According to Booth and Frank (1999), linking pay with the employees’ performance results in higher efforts and ability of workers. The literature has greatly focused upon the performance related pay and its effectiveness. Marsden (2004) believes that it is an effective incentive system and encourages employees to put in greater effort and work out of the way to achieve goals. Perry, Engbers and Jun (2009) supports the idea of performance based pay and bonuses and relate and reinforce it with the expectancy theory. According to Perry, Mesch, and Paarlberg, (2006) expectancy theory is based on the belief that employees will only exert effort if they expect that it will result in a valuable outcome. Extending this belief Perry, Mesch, and Paarlberg, (2006) states that performance based pay results in workers putting greater effort and harder if they value financial rewards. They emphasized on a direct relationship between pay related to performance and efforts of the employees and suggested that it enables the organization to create consequences for the expected desired behaviors including high performance.
However, many scholars have criticized the idea of motivating employees by giving them performance related pay and bonuses. According to Silverman (2004), a business needs to clearly differentiate between recognition and reward to understand the impact of incentives. He suggested that performance related pay may affect the intrinsic motivation adversely. Latham (2007) also stated that organizations that pay their employees according to their performance make them feel threatened and disoriented towards goals. They will only put in sufficient efforts to achieve the goals. Such rewards as suggested by Latham (2007) do not encourage them to put in extraordinary efforts to make an organization improve its performance in an exemplary way. Silverman (2004) also argued that money does not have any symbolic value, and organizations must not only focus on the financial rewards and compensation. Instead according to Silverman (2004) and Trott (2002), organizations must focus on incentives that can be remembered by its employees. It includes appreciating them, giving gifts, holidays, etc. Google also provides with such incentives as it has remained committed to keeping its employees happy. To achieve its objective, the company provides its employees with extrinsic benefits too. This includes free dental and health benefits, insurance, vacation packages, tuition reimbursement, etc. The company also offers maternity benefits for up to 18 weeks at 100% pay (Google, 2014). Furthermore, the new fathers and mothers are offered with Take-Out Benefits to help them settle in quickly. Additionally, Google gives financial assistance to its employees. For instance with the Adoption Assistance, Google employees can take financial help in adopting a child. The company offers its employees free lunch and dinner every day. Employees also have an on-site doctor available. Besides they have free car wash, dry cleaning, gym, massage therapy, fitness centre and hair stylist (Google, 2014). All these benefits make Google the best place to work and keep its employees happy. However, Pink (2009) suggests that such incentives diminish the impact of intrinsic motivators and may affect performance negatively.
Conclusion
Overall it can be said that Google has made significant efforts to attract the best talent available and retain it. The company has provided its employees with an integrated package of total rewards compensation program. The company has not only focused upon the financial incentives but has also provided them with a challenging working environment with endless growth opportunities. Besides the company also offers its employees a wide range of perks making it better than the competitors and the best place to work identified globally. Different authors have emphasized upon different rewards and argued upon its effectiveness. Some authors have highlighted the importance of financial rewards when motivating and retaining staff while others have suggested the inclusion of intrinsic motivators rather than money. From the discussion above, it can be deduced that an organization to successfully motivate and retain its staff must focus upon a combination of financial and non-financial rewards. The total rewards program of the company must be carefully designed and be in line with the expectations of the employees to meet their needs well. Google has been successful in motivating its employees as it provides with a well-integrated compensation program to its employees that make it a better employer than others in the market.
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