Google’s Compensation Strategy

Google is a multinational technology company that is based in California, USA. It
provides a wide range of internet-related products and services. These products and services
include search engine, online advertising technologies, software and hardware, and cloud
computing. Since its founding in 1998 the company has enjoyed tremendous growth. It is
currently one of the biggest and most recognizable companies in the world. It has more than a
hundred thousand employees and is ranked as one of the most valuable publicly traded
companies in the world (Duhigg, 2016).
Overview of Google’s compensation strategy
Compensation represents all forms of financial returns and benefits as well as tangible
services that employers provide their employees (Milkovich, Newman & Gerhart, 2016). It is a
key component of employer-employee relationship. Employers use compensation to motivate its
employees to work harder, innovate more, be more productive, and remain loyal to the company
(Milkovich et al., 2016). Google is no different. Part of the reason for the company’s success
over the past two decades can be attributed to its ability to attract and retain top talent. It is its
talented employees that have innovated most of its products that bring it a lot of revenues and
make it the great company that it is. Many of the company’s best product launches were done by
highly talented employees working alone or in groups. These products include AdSense, Google
News, and Gmail (Duhigg, 2016).
The company’s compensation strategy is, therefore, geared towards making the company
one of the best employers not just in the US but in the whole world. To achieve this goal, it
employs a compensation strategy that combine the industry’s best practices with its own bold

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and innovative practices. These practices have been so successful that Google is routinely ranked
by Fortune magazine and Glassdoor among the top five best places to work for in the world
(Butler et al., 2016). In fact, it has been ranked as the best place to work at for many years.
Google’s success is a result of its innovative compensation strategy that combines great
financial returns and benefits with workplace services that make employees as happy and as
comfortable as possible. The company pays some of the best salaries in the technology industry.
In addition to salaries, it provides employees with annual bonuses. These bonuses are dependent
on the profits that the company makes each year (Manjoo, 2013). The more the profits that the
company makes the more the bonuses. Apart from bonuses, the company also gives employees
stock options. The stocks can only be sold or exchanged after a certain period of time, often five
years. Employees who leave early do not benefit from the stock options. The practice of giving
employees stock options is common in many technology firms. The goal of such mode of reward
is to make employees feel like they are owners of the company and, therefore, commit more to
its success (Milkovich et al., 2016). Google heavily relies on this method to get highly talented
and motivated employees to stay at the company for long.
The company also has one of the best death benefits among technology companies. When
an employee dies, their spouse or partner receives half of what the employee would have earned
in ten years (Butler et al., 2016). The company, therefore, tries as much as possible to meet the
overall interests of its employees. For employees who may want to advance their studies, Google
has Global Education Leave Program which allows employees to further their education by
taking a leave of absence (Butler et al., 2016). The financing of whichever education program
that the employee may partake in is done by the Google. The company, therefore, fully supports
professional development of its employees.

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Apart from financial rewards Google also offers excellent workplace services and perks
as a means of attracting and retaining top talent at the organization. The company believes that
happy employees are highly productive. Some of the perks include free lunch and free snacks
that are available to employees at all times they are at work (Manjoo, 2013). Additionally, the
company provides its employees with free transport to meetings. The company has a fleet of
electric cars and bicycles which it uses to transport the employees. For young mothers, the
company offers free daycare services (Manjoo, 2013). Thanks to presence of such facilities,
mothers can rest assured that even as they work, their children are taken care of well by their
employer.
Google’s main compensation strategy to attract and retain talented employees
All these compensation strategies that have been discussed help Google to attract and
retain talented workers. However, the one that the company relies on the most is high salaries.
Google operates in a highly competitive business environment. It is in intense competition with
some of the biggest technology companies in the world such as Apple, Facebook, and Microsoft
for talent. It also faces a lot of competition from many start-up firms that have financial
resources from venture capital companies. Google knows that if it loses top talent to its rival
companies it may not be able to innovate and stay competitive. It, therefore, risks ending up as
an average technology company in future. To make sure that it remains a competitive technology
company, Google seeks to attract top talent through the use of high salaries that are above the
industry’s average.
Google regularly carries out surveys to find out what other top technology companies pay
their employees (Manjoo, 2013). Based on its study of external competitiveness, it sets a salary
that is higher than what its top rivals such as Facebook, Apple, and Microsoft offer to their

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employees. Previously, the company used to set its salary at the ninetieth percentile (Duhigg,
2016). However, it has recently sought to become the market leader as far as employee salaries
are concerned. It is currently the best paying companies among the big technology companies in
the US.
Granted, Google understands that money alone is not the only thing that motivates
employees. That is why it provides many other non-financial benefits for its employees. The
company, however, appreciates the fact that most employees compare themselves to others based
on how much money that they make (Duhigg, 2016). Salaries, therefore, remain the main tool
that technology companies use to attract and retain talented employees. Google knows that if it
does not pay its talented employees competitively, they may easily leave for other top
technology companies or even start their own technology companies.
Apart from competition from established technology companies, Google also faces stiff
competition from start-ups. On the surface, it may appear that Google, having superior financial
resources, cannot compete with start-ups for top talent. The reality, however, is that many start-
up companies have a work environment that talented and motivated employees, especially young
ones, look for. They offer opportunities to create something new, they provide them with very
challenging work, and to use their talents to the maximum. They also allow them to work with a
lot of independence. Start-ups, therefore, provide talented young people with significant
relational returns. Google, being an established company, may not be able to offer such as an
environment. It, therefore, risks failing to attract young talented employees. To compensate for
this handicap, it offers employees a salary package that they find hard to resist. Thus, whether it
is competing with established technology companies such as Facebook or start-up companies,
Google has learnt to make use of its large financial resources to attract and retain top talent

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(Duhigg, 2016). Its belief in offering the best pay for all job levels is such that it keeps raising
salaries on an on-going basis. In this way it ensures that its best employees remain the best paid
in the industry at all times. Such pay keeps the employees at the company because any time they
think of leaving they are almost certain to take a pay cut.
Conclusion
It is no accident that Google has grown to become one of the biggest and most successful
technology companies in the world in just over twenty years. At the heart of the company’s
success is its heavy investment of its massive financial resources in attracting and retaining some
of the most talented people in the technology industry. While the company appreciates that there
are other incentives that can be used to attract and retain talented employees, it has made good
pay the cornerstone of its talent acquisition and retention strategy. In this way, the company’s
compensation strategy is largely influenced by external competitiveness. It makes sure that its
employees receive the best monetary compensation among its peers and, therefore, make it hard
for them to leave the company.

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References

Butler, T. D., Armstrong, C., Ellinger, A., & Franke, G. (2016). Employer trustworthiness,
worker pride, and camaraderie as a source of competitive advantage: evidence from great
places to work. Journal of Strategy and Management, 9(3), 322-343.
Duhigg, C. (2016). What Google learned from its quest to build the perfect team. The New York
Times Magazine, 26, 2016.
Manjoo, F. (2013). The Happiness Machine: How Google became such a great place to work.
Slate.
Milkovich, G. T., Newman, J. M., & Gerhart, B. (2016). Compensation. McGraw-Hill Higher
Education.