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November 12, 2010

HR Fact Friday: Google Invests in Existing Staff

Filed under: Compensation,Salaries & Pay — Tags: , , , 8:28 am

Google is known to hire the best and the brightest Silicon Valley has to offer, but hanging onto that talent can be a struggle. Google’s bold move to boost morale — a 10% across-the-board pay raise — has already cost it one worker: The employee who leaked the news.

Google CEO Eric Schmidt announced the salary hike in a memo late Tuesday, a copy of which was obtained by Fortune. The memo was also leaked to Business Insider, which broke the news. Within hours, Google notified its staff that it had terminated the leaker, several sources told CNNMoney. A Google spokesman declined to comment on the issue, or on the memo.

“While we don’t typically comment on internal matters, we do believe that competitive compensation plans are important to the future of the company,” Google’s spokesman said in a prepared statement.

In the past few weeks, Google has lost top minds such as YouTube co-founder and CEO Chad Hurley, AdMob co-founder Omar Hamoui, and Google Maps and Wave creator Lars Rasmussen.  So, facing both internal and external pressures, Google made an unprecedented move to keep its employees happy and in place. Companies have been more likely in recent years to cut salaries for their entire staff than to raise them.

The problem of keeping talent is hardly Google’s alone to bear. Microsoft and Yahoo have also had heavy defections to Facebook, according to LinkedIn data. And Google has been on the beneficiary side as well, picking up a large number of former Microsoft, IBM and Yahoo employees. Analysts say Google is facing what all Silicon Valley companies struggle with when they graduate from startup status and into the realm of Big Tech.

Every large company faces such challenges, though their solutions can take radically different forms. Google has been working to reorganize its structure, creating smaller teams that aim to give employees more autonomy. That’s one reason why so many of Google’s products are in beta. Not everything needs approval from top bosses like co-founders Larry Page and Sergei Brin.

Like many of Silicon Valley’s Goliaths, Google is sitting on a mountain of cash — more than $33 billion as of Sept. 30. Right now, cash earns next to nothing when it’s parked in conservative investments, so companies are looking for other ways to generate returns. Some are doing share buybacks, others are upping or creating dividends, and many are hunting for acquisitions.  Google likes to snap up startups, but its salary bump sends an intriguing message: The company thinks the best place to invest its cash is in its existing staff.

Source:, David Goldman, 11/10/2010


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