Last week Google’s CEO, Eric Schmidt announced a 10% across the board raise for all employees. Apparently, worried about the ongoing exodus of employees fleeing to companies like Facebook, Schmidt found it necessary to pull out the company checkbook in hopes of stemming the tide of defecting employees.
Across the board increases are nothing new. This was common practice during the dot com ramp when companies regularly raided each other’s talent pools to obtain the best technical talent available. Yet this tactic seems a bit incongruous in our current economy when so many people are out of work or fearful that they may be.
It is a fallacy to assume that money is the answer to all employee retention issues. Could it be that Google is no longer the intriguing start up it once was? Maybe it’s difficult for some to become smaller fish in a pond that is growing bigger. Google has added 3,500 employees so far this year, expanding its workforce by nearly 20%, bringing the total workforce to around 23,000 employees. Facebook employs around 1,700.
If money is not the main motivation to stay what else is there? Plenty. Top notch management; well orchestrated, nimble work teams; and that ‘to die for’ start up environment, devoid of layers of management and red tape that typify larger, well established companies. On the management side, it is no secret that technology companies often promote their most talented individual contributors into managerial roles, often without the requisite people skills or training, which can lead to high levels of worker dissatisfaction. It’s true that people leave ‘bosses’, not companies. Google must evaluate how well it is performing in these categories as well as in the area of employee compensation.
Let’s take the ‘raise issue’ one step further and see what pitfalls may lurk when a company institutes a companywide salary increase. In Google’s case, Mr. Schmidt framed the raises as a way to reward “the best employees in the world”. In Mr. Schmidt’s perfect world example, all Google employees would be stellar, performing at the same high level. However, given that this is not a realistic scenario, it would make sense that the high performing employees might take issue with their lesser performing counterparts receiving the same monetary benefit. Talk about morale issues. And what happens to the compensation philosophy of ‘pay for performance’, bonuses aside?
So whether or not you are motivated by money or some other factor, the 10% raise may actually have a negative effect. Just as with counter job offers, employees must decide what is more important in the long run. Is it the lure of a fatter paycheck now or the desire to replicate the intrinsic factors that drew them to their current employer in the first place? Only time will tell. Follow me on Twitter