How Google Motivates their Employees with Rewards and Perks
How Google Rewards their employees
by Joshua Cook @ www.ThinkingLeaders.com
Contemporary companies are constantly finding new ways and approaches to recruit top talent, retain top talent, and find innovative ways to motivate employees for maximum output. The theory behind how managers can more effectively motivate and reward employees goes back to the turn of the century. New innovative companies are inventing ways to do just that. Google Inc., Cisco Inc., and Wholefoods Inc., are leading the way to restructure management, so employees can streamline creative ideas that produce blockbuster new products. They are rewarding employees with perks like onsite swimming pools, allowing employees to bring their pets to work, providing on site child care, and all the free food employees want. These companies provide relaxed environments where group thinking is elevated and teamwork is central to invent the next product that could change the next generation. These new companies embrace small individual entrepreneur groups and shun the tight micromanaged environment of traditional companies. These companies have scrapped the employee of the month parking space and raised the bar on how organizations can have real results by rewarding employees. The fascinating aspect of these companies are their intrinsic rewards and how it allows employees to operate with freedom and respect, allowing them control of their own time, and empowering them to have a united common goal, which is to invent products and ideas that will change the world for good.
How can leaders create an effective mechanism that promotes a culture of self-empowerment, creative innovation, and self-motivating employees? In today’s corporate setting, it is hard to create change where freedom is promoted within most organizations. However, many mainstream companies still embrace a stagnate form of management where employees are stuck in cubicles, crowded under fluorescent lights, and riddled with old school micromanagement techniques that do not produce the best products. This investigation explores the theory behind how companies can reward employees in order to motivate them to become top-producing organizations that will invent the best ideas and products of the century. Companies like Cisco Inc. and Google Inc. have structured their leadership to provide the best environment to motivate their employees with intrinsic and extrinsic rewards; they have become top-producing companies that develop some of the best products that have shaped our world, have taught us how to find information, and have taught us how to learn and see things differently. Companies that have the ability to become household names that morph into verbs who (like Google) are rooted in the culture and values of employees that create these products. Leaders that want to take their companies to the next level and find new ways of rewarding employees for good work will succeed in this new economy. Leaders must study companies that promote free thinking, empowering employees to work together as autonomous entrepreneur groups, and provide work areas that are comfortable and do not take away employees’ humanity, unique individualism or personal freedom.
Theory of Motivation and Rewards
The Hawthorne studies in the early nineteenth century examined and studied how managers can motivate employees to work more efficiently, with quality work at the maximum rate of return. One of the areas of information derived from the Hawthorne studies was that something more than pay incentives was improving the employees’ output within work groups. Researchers found that there was improvement in the work due to the fact that employees felt important because someone was studying them at work (Matteson, 1996). One of the concepts that leaders can derive from this historic discovery is that leaders must find ways to motivate and reward their employees besides the perceived rewards of being employed and having a pay incentive.
Therefore, leaders must understand that a paradigm shift has occurred in American culture where talented people from top rated schools are seeking employment from organizations that give perks and benefits other than just pay incentives, 401Ks, and health benefits. Leaders must find other intrinsic and extrinsic rewards to attract top talent. Research has uncovered valuable theories that have been vital tools in the area of rewards. The key theories are Abraham Maslow’s hierarchy of needs, Fredrick Herzberg’s two-factory theory, and David’s McClelland's theory of needs.
Maslow’s Hierarchy of Needs.
First, Maslow’s hierarchy of needs assumes that needs are arranged in a system that contain lowest-level needs, which are psychological needs, and the highest needs which are self-actualization needs; therefore, according to Maslow, individuals must move up the hierarchy in order as referenced in figure 1 (Matteson, 1996).
The assumption of Maslow’s theory is that individuals are motivated based on which hierarchy they are in. For example, a homeless person is not motivated by his or her social status, but his or her ability to find food and shelter. Thus, individuals have different levels of needs in each of these areas, and those levels will drive their behavior (Matteson, 1996). Maslow’s application is that employees will not be fully motivated unless their basic needs are met. A practical example is if employees are not allowed to take off time to spend with their family because of continued mandatory overtime, employees will be demoralized because their need for social security is not met; thus, their work will not reach maximum potential. Employers need to understand that they have a responsibility to allow employees to have a life outside of work. Otherwise, they will lose top performers.Herzberg takes a few variables from Maslow’s theories and applies his two-factor theory.
Herzberg’s Two Factor Theory
Herzberg’s theory asks the question, what really motivates someone? Herzberg developed a content theory known as the two-factor theory of motivation. The two are called the dissatisfiers-satisfiers, or the hygiene motivators, or the extrinsic-intrinsic factors. According to the Herzberg’s theory, hygiene factors describe the salary, work conditions, and company policies. Motivation factors are intrinsic, and satisfiers relate to motivation such as achievement rewards, more important responsibility and growth (Matteson, 1996). One can describe hygiene factors as a foundation or platform that one can launch from, but in themselves, they do not motivate. The assumption we can derive from Herzberg’s theory is that managers must provide hygiene factors to avoid employee dissatisfaction, but also must provide factors intrinsic to the work itself in order for employees to be satisfied with their jobs (Matteson, 1996). Managers can prevent low performance, turnover, and low morale by adding both hygiene factors and motivators. McClelland's takes Herzberg’s theory further and believes that leaders must address humans differently because humans are motivated differently.
McClelland's Theory of Motivation
McClelland's proposed a theory of motivation that is closely associated with learning concepts and believes that many needs are acquired from culture (Matteson, 1996). There are three main points to McClelland's theory: the need for achievement, the need for affiliation, and the need for power.
First, the need for achievement is pertinent to one who is driven to excel, to achieve in relation to a set of standards where he or she has the feeling of successful accomplishment. Second, the desire for friendly and close personal relationships is important in most organizations. What others perceive one to be like is a huge factor in one’s needs. Image is everything. Third, the need for power is the need to make others behave in a way that they would not otherwise have behaved. A great example is politicians who spend millions of dollars for a one hundred thousand dollar salary, so they can stand in a place of power in which they can control other’s lives. The assumption of McClelland's theory of needs is that people with different needs are motivated differently. The implication for managers is finding what motivates certain individual groups and assigning them with different rewards. Those with high needs for achievement should be given challenging projects with reachable goals. They should be provided with frequent feedback. Those who seek a need for affiliation should be placed in groups that can work as a team. Those who have a need for power should be given an opportunity to manage others (Long, 2009). McClelland's theory allows for placing individuals to match a person’s emotional needs to certain job design. The main theme of McClelland's theory is that these needs are learned through coping with one’s environment. Managers can learn to see an employee’s strength by placing individuals in certain training programs where they will be motivated to find their niche in certain skills needed in the organization. Today, organizations can put all three theories into practice and provide a culture where employees can be motivated and grow, to provide the companies a pipeline of talented individuals for the future success of their company.
The Google Effect
In today’s corporate environment, the organization’s bottom line is to make the most profit long term by attracting top talent, retaining top talent, and motivating top talent for maximum performance. The way companies can do that is by offering the best rewards in the industry. The company that is highlighted the most for its most elaborate rewards is Google, Inc.
Google, Inc. was ranked by Fortune magazine as the best place in the U.S. to work in 2009, and it has reached another zenith by becoming the most popular Web site. It has even become a verb in the dictionary. Google, Inc. is a technology company focused on providing web search and advertising. The company maintains a large index of websites and other website content, which is freely available through its search engine. The company generates revenue primarily by delivering online advertisements. Its major revenue sources are Google Adwords and Adsense. Google interface is available in more than 120 languages. The company operates in the US, the UK and a large number of other countries. The company offers a brand portfolio of web-based products and services, which are classified into six categories: Google.com, applications, client, Google GEO, Google Mobile and Android, Google Checkout, and Google labs. Google is one of the premier internet brands in the world. The company is ranked among the top brands world wide. Google, Inc.’s brand was valued at one hundred billion, making it the world’s first one hundred billion brand. The company generates 97% of revenue from its advertising (Datamonitor, 2009).
Google, Inc. is a very unique organization from its small beginnings as a start up company in the mid-nineties to its huge corporate presence today because of its founders. Google, Inc.’s corporate culture mirrors the company’s founders Larry Page and Sergey Brin, who did not want the traditional culture of corporations that came out of the “greed is good” mantra of the 1980s. They did not want to create a culture of work place drama, backstabbing, neediness and general discord among employees. Page and Sergey wanted something special, and that is what they created: a Mecca called the Googleplex, where the best and the brightest could congregate like a college campus and brainstorm and collaborate on ideas that will change the world. They created an incubator where ideas grow up to be industry blockbusters. The founders believed that in order to attract the best talent, they had to provide an environment where people would want to come to work, have fun, dream big and get rewarded for hard work.
Google, Inc. has achieved a top-5 ranking by providing innovative benefits, flexibility, and the opportunity to pursue ideas that challenge the status quo and shatter paradigms. Google, Inc.’s CEO, Erin Schmitt, adopts the “fun is good” principle and states that they built a company around the idea that work should be challenging, and the challenge should be fun. They put employees first by providing a unique environment to work around. Schmitt states, “We realize and celebrate that our employees have diverse needs, and that this diversity requires flexible and individually directed support. Our priority is to offer a customizable program that can be tailored to the specific needs of each individual, whether they enjoy ice climbing in Alaska, want to retire by age 40, or plan to adopt 3 children” (Google, 2009).
Google, Inc.’s goal of providing benefits and rewards is to “strip away everything that gets in our employees’ way” (Google, 2009). Google, Inc. provides a standard package of fringe benefits, but on top of that are first-class dining facilities, gyms, laundry rooms, massage rooms, haircuts, carwashes, dry cleaning, commuting buses – just about anything a hardworking employee might want. Schmitt states, “Let’s face it: programmers want to program, they don’t want to do their laundry. So we make it easy for them to do both” (Google, 2009).
Google believes in providing both intrinsic and extrinsic rewards. They understand that many humans are not motivated by pay incentives alone. Google Inc. believes in administering rewards and that good company culture is vital to company success, therefore, Google hired a Culture Czar.
Google, Inc.’s CCO, Chief Culture Czar, Stacy Sullivan, is devoted to one thing—make Googlers happy. One way of maintaining Google, Inc.’s culture and keeping employees happy is administering the best perks and rewards (Culture, 2009). Along with its compensation and traditional extrinsic benefits such as free health and dental benefits, flex spending accounts, 401K plans, insurance, tuition reimbursement, and vacation packages, they also have very unique benefits. These unique benefits include maternity benefits up to 18 weeks off at approximately 100% pay. In addition, new mothers and fathers get Take-Out Benefits to help make things easier. They are provided with expenses up to $500 for take-out meals during the first three months that they are home with their new baby. Additionally, Google, Inc. provides back-up child care and in the Gift Matching Program, Google, Inc. matches contributions of up to $3000 per year from eligible employees to non-profit organizations. With Adoption Assistance, Google, Inc. assists their employees by offering financial assistance in the adoption of a child. Google, Inc. will reimburse employees up to $5000 to use towards legal expenses. Free lunch and dinner from gourmet chefs create a wide variety of healthy and delicious meals every day. Got the munchies? Google, Inc. also offers snacks to help satisfy you in between meals. At Google headquarters in Mountain View, California employees have the convenience of seeing a doctor on-site. Google, Inc. is pleased to provide its Mountain View employees with free shuttles to several San Francisco, East Bay and South Bay locations. At Google headquarters in Mountain View, there is on-site oil change, car wash, dry cleaning, massage therapy, gym, hair stylist, fitness classes and bike repair. Google, Inc. will reimburse an employee for buying a hybrid car, up to $5000. Google, Inc. provides other benefits, too many to list, but one can assume that their full-time culture czar is not finished inventing new ways to reward employees (Google, 2009). More than the extrinsic rewards, people who choose to come to Google, Inc. come for other reasons besides just the outward perks and rewards. They come for freedom.
The key to success at Google, Inc., beyond the incredible perks and the compensation is simple: work process. These are the intrinsic rewards Google offers: no real hierarchy, tiny work groups, and purpose. Google, Inc. does not create monolithic groups or hierarchy. Their structure is flat to maximize creativity. There are no official channels, so ideas can flow within groups. Instead, they focus on multiple smaller workgroups that may have a project manager overseen by committees. They are very independent. The basic concept inspired by the founders is to maintain an entrepreneurial culture. Google, Inc. views small teams as individual start-ups. Google consists of many start-ups within a start-up. They implement what they know works and use the founder’s success as a template to promote an entrepreneur spirit that promotes innovation. One example is that if a Googler wants to work with another team, he or she can switch teams anytime they want without asking permission or having to go through any human resource channels. Another unusual perk is the allowance of time. Google, Inc. allows employees to spend twenty percent of their time to work on their own project, independent of their workgroup. Google, Inc. believes that no one should leave in order to pursue their personal passions. Letting employees do this results in over twenty percent of product launches stemming from these personal projects.
Google, Inc. believes in creating small entrepreneur teams that provide concentrated focus on one problem, ease of collaboration, and the ability to integrate findings quickly into the Google landscape. These small groups are overseen by committees that take the good ideas to market. Google, Inc. states that small groups are effective and birth great ideas. Each of these teams dreams to invent the next breakthrough and come up with the next big thing in cyberspace.
Many talented people work for Google, Inc. because of their unique culture, rewards, and perks. At the Googleplex, employees can show up to work anytime they want, bring their dog, wear pajamas, eat gourmet food for free, enjoy a free fitness center and trainer, see the onsite doctor if they are sick, wash their clothes and partake in free espresso at each corner of their “office.” This relaxed, fun environment has worked well for Google, Inc. because it provides a psychological benefit to encourage employees to be more committed, more creative, and more productive. Google’s method of job design is staying away from monolithic hierarchies that stifle and distract creative ideas. Google sets up small interdependent entrepreneurial teams to come up with creative ideas and innovative products. Google found that with creating small teams, they were able to produce effective ideas with small investments. Google’s job design progressions are small creative teams, high commitment, appropriate compensation, ability to try new things, healthy disregard for the impossible, and that products must grow up. As the products grow up, they become more traditional near the product launch (Google, 2009).
With Google’s tiny work groups comes responsibility. Creativity is encouraged along with a large dose of independent time to initiate the creative process. The fact that the Googler feels the freedom to explore is one of the biggest perks that keeps them excited and on purpose in their work. Google, Inc. believes that they are attracting top talent because they empower employees to change the world. More than the intrinsic rewards and the cool lava lamps, employees believe they have the sense they are changing the world by organizing the world’s information, making people smarter, and teaching people to learn in a different way—they feel they have purpose.
Why does Google, Inc. reward? Rewarding employees, according to Google, Inc., works very effectively. Google, Inc. had $209,624 in profit per employee in 2008, which beat all the other large tech companies, including big hitters like Microsoft, Apple, Intel and IBM. The company recorded revenues of 21,795.6 million during the financial year ended December 2008, an increase of 31.3% over 2007. In financial year 2008, in the US, Google, Inc.’s largest geographical market, accounted for 48.8% of the total revenues. According to Google, Inc., the ability to reward employees by attracting the best and retaining the best pay off substantially—people are the best investment (Datamonitor, 2009).
In conclusion, Google, Inc.’s founders believe that successful organizations thrive by dreaming big and providing people with resources to implement their ideas. Google Inc. is described as a university where employees work in small groups to collaborate, dissent, and debate their ideas and projects. What other employees can show up to work anytime they want, can bring their dog, wear pajamas, eat gourmet food for free, enjoy a free fitness center and trainer, see the onsite doctor if sick, wash their clothes and partake in free espresso at each corner of their “office”? This relaxed, fun environment has worked well for Google, Inc. because it provides a psychological benefit to encourage employees to be more committed, more creative, and more productive. Google Inc.’s method of job design is staying away from monolithic hierarchies that stifle and distract creative ideas. When highly motivated and highly capable people have a common vision, they do not need to be micromanaged. Google, Inc. relies on the feedback from peer to peers, not peer to middle managers. Schmitt states “If employees want complete control then join the Marines.” Google Inc.’s radical decentralized approach to management structure is due to Google, Inc.’s founder’s belief that breakthroughs come from questioning assumptions and smashing paradigms (Hamel, 2007). Their motto is “Do not do something because someone told you to do so.” To question authority is not an anarchist bumper sticker, but an innovator’s imperative. There is no time for middle managers or type “A” personalities (Hamel, 2007). Group interaction is the fuel for Google, Inc.’s ideas. The decision making process is highly consultive not the traditional control and command. Google, Inc. thrives in a “I think I can” culture, not the traditional “no you can’t” bureaucracy.
Just Google It!
Contemporary companies and start up companies can learn from Google Inc. by implementing change to create mechanisms to attract top talent, retain top talent, and motivate top talent for maximum performance. Companies are wise to put front line employees first because without them, there would be no customers—no company. Google, Inc. has changed the landscape and raised the bar on how companies should treat and reward their employees. Many companies talk about treating employees well and creating a culture where employees can grow and thrive; however, Google, Inc. put its money where its mouth is and invests in their most valuable assets—employees. Google, Inc. is unique because it focuses on noble missions and has convinced its employees to believe in their mission to change the world. Their employees believe that they are a part of something big that is a conduit for world peace and an agent of change. More that creating unique perks and extrinsic rewards, leaders must create intrinsic rewards and create vision that employees believe in.
Leaders must understand that a new generation of young entrepreneurs have emerged, ready to conquer the next big challenge and create the next big start-up. Thousands of students are thinking about huge ideas in basements who are going to come out with the next blockbuster product. Google, Inc. is trying to attract those young people. Companies can learn from Google, Inc. by changing their management structure, working environment, and the way they treat employees in order to attract and retain talent and to succeed in the next decade. Talented people do not want to be told what to do; they want to interact in small intimate groups, they want feedback and challenging projects, they want time to work on their creative ideas, they want a genuine effort to promote improved personal life, they want a cool place to work in, and they want food. The Google, Inc. formula is a good glimpse for what employees are looking for in organizations; therefore, leaders must lead in finding the best methods in finding what rewards motivate employees.
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