A Managerial Perspective Business Analysis of Google
Just how good is Google?
I have taken on the project of analyzing Google, based on the tenants of planning, organizing, leading, and controlling. Google was founded in 1998 by Larry Page and Sergey Brin. It was incorporated in 2003. Since then Google has become “the most dominant search tool on the web”. Google provides numerous services to its users such as the Google search engine, Google Chrome, Google Translators, Google Books, and Google Earth. Yesterday’s closing price for a share of Google’s stock was worth $593.94. Google is ranked the top internet search engine provider by the American Customer Satisfaction Index. Google has also been ranked the number one employer for the past two years by Forbes magazine. Google has had fairly steady growth since its conception. The main reason for Google’s success is its dedication to innovation. Innovation doesn’t simply occur “on the way by”, it is designed into everything that Google does (Farber).
In business, a company can’t just go through, year after year, and just have things happen when they happen. A company has to have a planning system. Companies have to plan for the future. The future can be five minutes from now, a year from now, or five years from now. However, Google understands that in the time it takes to develop a five-year plan their business environment will have already changed since technology advances so rapidly. Google’s planning system is unlike any other company in the world. Google is always looking into the future for their business. Yet, Google’s strategy is one of innovation. Every day, they want to have new ideas for the company so that they can grow. They also are planning ahead to make sure that the company survives the current economic crisis.
Google’s strategy is “deemed emergent as it is created in the implementation process by trial and error” says Joseph D’Cruz, a specialist in strategic management. D’cruz explains that an emergent strategy is one based upon a shared vision that comes from the top and is empowering not only for the company’s leaders, but its employees as well. This empowerment allows for experimentation. According to D’Cruz, Google “learns by doing and learns by making mistakes” (Jensen). For example, a senior software engineer at Google presented a bold idea to Google’s CEO, Eric Schmidt. Schmidt didn’t care if the engineer’s project failed. Schmidt stated, “He’s smart, and he’d learn from it” (Baker).
One way Google provides for experimentation is through providing Googlers with new Google products or services to try out before they are open to the public. They have them try it out so that the employees can give feedback on the product. The feedback is priceless information on a test run for their product. It helps them plan for the problems that they will have to deal with when the product is public. A tool that helps them communicate their opinions about those products, along with other planning is their blog system. “Google has an in-house blogging tool that allows employees to start their own blogs. Employees can use these blogs to communicate personal stories, to provide work updates, or to share notes”.
Google also experiments through utilizing user-based experiences with new programs to ascertain if a new product is viable. Google Experimental Search is a program that allows users to actively join one of Google’s experiments so that users can rate how useful a new service may be. This allows Google’s consumers to actively participate in a service for free to see if it suits their needs. One of Google’s current experiments is My Preferred Sites. Users are able to inform Google of their favorite websites. Then whenever a user uses the Google search engine their favorite sites are always indicated on the search results page. This is just one example of the several experiments that Google is currently working on.
A major part of the planning system is the Google employees. It is extremely hard to become an employee at Google, and for good reason. Google makes sure the people hired are the best at what they do, because they put so much trust in them. One major part that employees take part in the planning system is the “Whiteboard”. Google realized that some people might not speak up with ideas if you have to do it publicly. This philosophy is basically a way to have the employees give opinions or ideas without having to get up in front of bunch of people just to give an idea. They give the workers a chance to write a new idea down that might help the company. They also can add on to others’ ideas to help products that are already available to the public, or just how to improve life at Google. These different ideas are all looked and maybe one will be the starting plans of a new product or service for the company. These huge whiteboards can be found all over Google.
It is often said that Google is run “chaotically”. This is true to a certain extent. Google does not have a specific formal plan for how to get a job done. Google’s leaders set objectives. Then they turn teams of Googlers lose on projects. Google allows its Googlers to use their own creativity to achieve company goals (Caplan). That’s where the chaos ends. Google exerts great care into being thorough in its financial plans. The financials for cash flow and such are modeled. When it comes to financial planning Google looks three years into the future. Google’s strategic plan looks ahead by one year considering which new markets Google wishes to enter (Caplan).
Google is always planning for the future and trying to grow into different markets. They are never happy with just where they are in the business world, even though they are on top. They are thinking and planning on new things every day. In the search engine market there is not much more room for Google to grow. They have to really expand into different sections. There are three big plans for Google in the next year to help grow as a company. In the first half of 2010 Google has announced that they will be starting their own eBooks store called “Google Edition”. “Google Edition” is different from the Google book search that they have now. There still will be the ability to preview up to 20% of the book. But “Google Edition” is going to be almost exactly the same setup as the popular Amazon.com (making them a direct competitor). They are also planning on putting out their own Smartphone like the iPhone. In fact, Google’s phone, Android, is starting to be called the “iPhone killer”. Again this gives Google another direct competitor. Lastly, Google has been investing in satellites since 2005. They understand that “traffic on Google websites depends on internet infrastructure development and availability”. Through infrastructure investments, Google reinforces its traffic providers and increases access to its services”. All three are great examples of how Google is planning for the future and working to expand.
Google has also made plans for dealing with the recession. The recession has taken a toll on a lot of companies in the United States. Google didn’t want to be a company that would be a part of that trend. They had to plan and find a way to get through it, which they did. In Google’s plan to survive the recession they decided to eliminate about 1% of their workforce. To attempt to keep revenues up Google had a new idea. “Since around November 2008, Google started experimenting with their AdWords listings by placing them across Google Image Search, Google Finance and Youtube.com. Now they’ve taken this experiment one step further by placing ads across Google News as well. In a move to secure their advertising revenue in tough economic times, Google have introduced AdWords ads across another web property, Google News. While Google earns most of its revenue from search advertising, placing ads across additional sites helps to boost revenue from other areas which may be falling in the current economic climate.” Overall, Google has not been affected by the recession like most companies.
Google is an extremely unique company in general, and their planning system is just as unique. Some companies are comfortable with staying in the same market that they started in and not wanting to grow. Some companies only want to think about what is going on with them now and not on the future. Google is different than these companies and it is not a coincidence that they are successful. Google cares about their employees’ plans on how to improve the company more than any other company I know of. A lot of companies didn’t plan what to do with this recession, but Google made sure that their success will continue even after the economic crisis. The best part about the planning system that Google shows is the non-stop care about the future. Always asking, “What’s next?”. Always wanting to expand and improve. They plan and find ways to find new sections where they can achieve those goals. People always said that Google might take over the world someday and who knows, that just might be in their plans.
Google operates as a learning organization. Google’s organization has developed the “capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues” (Robbins 148). Google’s employees are always touching on new horizons and learning as they go. There are several factors involved in Google’s design as a learning organization. These include Google’s organizational design, information sharing, leadership, and organizational culture.
Google’s organizational design is boundaryless. The hierarchy within Google is flattened. “The tech ladder is far more valued than the management ladder”, according to Douglas Merrill, the former senior director of information technology at Google. Google gives more value to “geek talent”, and is more dependent upon multidisciplinary work teams than inter-organizational barriers like managers (Farber). The flat or horizontal design of Google’s organization is also evident in the “approachability of its senior employees” (Perle). At Google, there is no fear of upper management, everyone is happy to share ideas. On top of this, Google does not separate employees with physical boundaries like cubicles. Instead, Google offices are decorated with arrangements of couches and white boards, and desks arranged in “cubes” (Perle).
Google utilizes a Project Database which is like a reporting system for Google employees. It allows Googlers to keep track of what they and their co-workers are working on through email postings. Merrill explains, “It creates public data, for all to see and come up to speed on projects, and maximize [sic] the opportunity for accidental cross-organizational pollination”. Google’s Project Database helps allow for Google’s boundaryless design by allowing for information sharing, and team communication.
Google’s leadership provides Googlers with a shared vision of “organizing the world’s information and making it universally accessible and useful”. Google’s leaders also impart the Google philosophies of speed, accuracy, democracy, and excellence. Through the facilitation of Project Database, Google’s leaders are able to “support and encourage the collaborative environment that’s critical to learning” (Robbins 148). Google thrives on innovation and the free-flow of ideas, and Google’s leaders are always open to and encouraging of creativity from employees.
Finally, Google’s organizational culture provides a backdrop for its learning organization. Google works to build strong mutual relationships between Googlers. Google sponsors annual parties for employees to get to know each other better and have fun, as well as a summer picnic for Googlers and their families to mingle and converse. Google is concerned about its employees and wants them to have a shared sense of community within Google. Google demonstrates how much it cares for its employees through the numerous perks which it provides for its Googlers. The aforementioned have aided Google in building a basis of trust with employees. Many Googlers have developed such loyalty for Google that they consider the Google management and their fellow Googlers as family (Hernandez).
As part of the organization, Google’s human resources or “People Operations” are left with the duty of selecting candidates for hire. Google has wined and dined university students, and sponsored technology lectures, programming contests, and “hack days” to find new recruits (Helft). Laszlo Bock, Vice President of People Operations, maintains a deadline for human resource staff to interview candidates and submit comments (Bock). Also, Google has created its own algorithm based on questionnaire data received from potential hires to rate from 0-100 how good a fit a candidate is for Google (Bock). On top of that, Google utilizes an application tracking system which coordinates interview information and comments from employees. A committee of people will assess all the information and decide on the new-hires, not the hiring manager (Farber).
Google strives to find employees who are a good fit for its culture. At the same time, Google endeavors to keep it employees, maintaining a minimal employee turn-over rate. Google does not release salary information. However, Google supplements base salaries with stock options, vacation days, flexible hours, and exceptional health care. Employee performance is based on a 360-degree appraisal. Team members provide feedback on each other through an open and transparent forum as a mode of performance management. Ultimately, Googlers are more concerned with what their co-workers think of them and managers are devalued (Farber).
Google’s environment is one of constant change and innovation. Google likes to keep its Googlers challenged. Google achieves this by moving people from project to project to keep their think tanks operating. An average project at Google lasts about three months and then employees are moved to different projects with different team members. To help Googlers deal with the continuous change there is Project Database (Farber). Also, if Googlers become stressed, Google offers onsite massage therapy, a gymnasium, hair stylists, and fitness classes to help employees unwind and relax (Google.com).
According to the textbook Fundamentals of management, leading includes “motivating employees, directing the activities of others, selecting the most effective communication channel, and resolving conflicts”. Bill George professor of management at Harvard business school claims meaning is about “internal development and introspection”. In this paper I will illustrate the different ways Google tries to embody all these principles of leadership.
According to Michael Lee Stallard, a consultant on leadership and management, the single factor that predicts the rise and fall of an organization is “the force of connection”. Michael claims that “connection is like gravity, in the absence of gravity objects float apart. With connection they pull together. They’re more aligned with each other and the organizations goal” Connection has four elements; vision, voice, value, and meaning. These elements are all crucial for leaders to instill into their employees in order to ensure the success of a company. The first aspect of connections I will talk about is vision.
According to Stallard, vision exists when "everyone in an organization is motivated by the mission, united by the values, and proud of the reputation. The question one might ask when deciding a company’s vision is what are the company’s core principles that help motivate and inspire employees? When employees can relate to and connect with the vision it helps motivate employees by allowing them to be pound members of their company. Google’s “don’t be evil” motto is just one aspect of Google’s overall principled vision. According to Google, the phrase “don’t be evil” is intended to be “built around the recognition that everything we do in connection with our work at Google will be, and should be, measured against the highest possible standards of ethical business conduct. We set the bar that high for practical as well as aspirational reasons: Our commitment to the highest standards helps us hire great people, who then build great products, which in turn attract loyal users.” This vision helps reinforce in the employees that they are working for an ethical, principled organization. The employees can be proud of what they do, and when they are proud of what they do they are happy to work for the organization. Not only that, but customers can be proud to use a product from an organization with principle. This is why it is important for leaders to instill a principled vision for an organization.
The second aspect of connection is value. Value occurs when a company understands the needs of the average person. It means the company strives to help people reach their full potential and that they appreciate their positive contributions. On Google Jobs, Google lists reasons to work for them. Reason number three has to do with appreciation. Google goes on to say. “Appreciation is the best motivation, so we’ve created a fun and inspiring workspace you’ll be glad to be a part of, including on-site doctor and dentist; massage and yoga; professional development opportunities; shoreline running trails; and plenty of snacks to get you through the day.” Essentially value means meeting needs beyond work. Google leaders accomplish this by providing employees with running trailers, massages, yoga, doctors, and dentists. When employees understand that a company cares about more than just their performance as an employee, an employee can feel attached to the company in a positive way. They will not so much see work as just work but as an extension of their everyday life. When leaders instill value in their customers their employees’ morale and happiness goes up, thus employee morale and performance improves.
The third element of connection is voice. Essentially voice is when everyone in an organization is able to exchange healthy ideas and opinions with others in an organization. Think about it this way, would you be more invested in a company that implemented your ideas and concerns into their company policy or one that had no desire to hear out the opinions of the company’s workers. When an employee has a voice in a company, they can feel truly a part of a company. When they feel a part of a company they can feel like what they do matters, and thus, have motivation for what they do. They work through the company and the company works through them. Furthermore when an employee has an adequate voice, a company can gather valuable insight into what needs to be done in a company. Sometimes the employees have the best insights into how to improve efficiency, employee morale, and other things. This is why it is important for leaders to ensure their employees have an adequate voice.
The last aspect of connection is the need for meaning. A person is more likely to thrive and put more effort into their job when they feel what they are doing is meaningful to them. In a way meaning encapsulates many of the previous concepts. I mentioned before that when an employee has a voice an employee can feel connected to the company in a meaningful way. When employees know that their views matter, they feel a part of the company, and when they feel a part of a company they know that what they do matters, when what they do matters they care about their company.
Stallard even justifies connections importance in leadership from a biochemical perspective, “The importance of connection in leadership can be summed up by making an employee feel genuinely connected to a company, almost like an extension of their family. When a company successfully this employee morale and thus employee performance goes up. From neuroscience, we learned that these feelings of connection boost hormones in our bloodstream that make us feel more energetic, more confident and more trusting others. Connection also reduces the levels of stress hormones in our bodies so we are more likely to be rational rather than rash when we are under stress”. In the end, when leaders motivate and inspire their employees by using the four tenants of connection; vision, value, voice, and meaning, leaders can establish a successful company.
As defined by the Merriam Webster dictionary, control means “to exercise restraining or directing influence over: regulate b: to have power over: rule c: to reduce the incidence or severity of especially to innocuous levels”. In business however, there must be a balance between the dictionary definition of control and letting employees be able to make their own decisions. Google has an excellent way of governing their employees while still allowing them to be free to come up with the ideas that make Google what it is as a company.
The Google Code of Conduct is something that every employee at Google is required to abide by - from the newest entry level intern, the employees in its overseas offices, all the way up to its CEOs, and even the members of their Board of Directors. It was last updated in April 2009 and begins with the simple phrase - “Don’t be evil,” then has seven sections which seem like they would be common sense to the average person: (I) Serve Our Users, (II) Respect Each Other, (III) Avoid Conflicts of Interest, (IV) Preserve Confidentiality, (V) Protect Google’s Assets, (VI) Ensure Financial Integrity and Responsibility, (VII) Obey the Law; and concludes with who to contact if they have questions about the Code and who to contact if they see someone breaking the Code. Unlike many companies where a code of conduct might be written in difficult to understand legalese, the Google Code of Conduct is written in plain English. Each section has detailed guidelines and gives the employees direction not only on what to do in a situation, but also which departments or which people to contact if they need approval for something, or if something is unclear.
Because of the way Google is set up as a team effort, as opposed to the traditional “do as I say, not as I do” type of leadership, Google has been able to retain many of its employees, especially in the executive levels. One example is David Drummond. Drummond was first introduced to the company in 1998 when he worked with Page & Brin to initially incorporate the company as Google’s original outside legal counsel through the law firm Wilson Sonsini Goodrich and Rosati. In 2002 he was offered and accepted a position as the VP of Corporate Development with the company. Since then he has been promoted to his current position of Senior VP of Corporate Development, and also serves as Google’s Chief Legal Officer.
“Control” in a business setting can also refer to their earnings. A company which has stable earnings and growth can almost always be considered to be in control. As of the end of the third quarter of 2009, Google has increased their revenues by 8% since the first quarter of 2008, according to a graph in their quarterly earnings summary for the third quarter. According to the financial data on the graph, in the first quarter of 2008 the company earned $3.4 million from Google.com, $1.7 million from their network, and $5.2 million from licensing and other ways of income. During the third quarter of 2009, Google was able to increase earnings to $3.9 million from Google.com, $1.8 million from the network, and $5.9 million from licensing and other sources of income.
Earnings are expected to increase even more in 2010 due to the release of their internet browser, Google Chrome and their new web-based operating system also named Google Chrome. Another factor which may assist in the increase of Google’s earnings is the mobile phone operating system, Android, which is currently available on several different carriers through several different mobile phone manufacturers. The most well-known and heavily advertised of these is the Motorola Droid, available through Verizon Wireless, and the HTC my-Touch which is available through T-Mobile.
When looking at a company for a good example of control in a business sense, Google is in the top tier. Google allows their employees the ability to work and develop ideas freely, while maintaining control through the Google Code of Conduct, and made that so anyone could understand it. They not only have a culture that inspires people to want to come work for the company, but also make it so once people are there, they don’t want to leave for whatever reasons, whether it’s because of the “everyone is equal” culture or the benefits provided by the company and discussed elsewhere. Google also exhibits control through their earnings which are continuing to do well, despite a weakened economy. They are able to do this through three ways, with the most income coming from licensing of the Google name and development of things people can and ultimately use every day.
Google is an innovative company from the products and services it provides to the planning strategies it utilizes, from its organizational structure to its unique organizational culture, from its shared vision in leadership to its growth and control. It is no wonder that Google is number one in the eyes of its consumers and its employees. Google’s innovation and creativity have helped Google continuously grow in value. It will be interesting to see how Google continues to adapt to the ever changing business-world, and as Google continues to grow if it will be forced to take on a less “chaotic” format.
This analysis is now somewhat dated. I shall be undertaking a new analysis soon which will compare this analysis to Google's current business conditions in the market.
Baker, Stephen. “Google and the Wisdom of Clouds”. Business Week.com (2007).
Bock, Wally. “Google Is As Google does”. Wally Bock’s Three-Star Leadership Blog. (2007).
Caplan, Jerry. “Google’s Chief Looks Ahead”. Time. (2006).
Farber, Dan. “A View into Google’s Inner Workings”. ZDNet. (2005).
Helft, Miguel. “In Fierce Competition, Google Finds Novel Ways to Feed Hiring Machine”. New York Times. (2007). http://www.nytimes.com/2007/05/28/technology/28recruit.html?pagewanted=1&_r=2
Hummer, Brent. “Google Strategic Plan”. Daily Speculations. (2006).
Jensen, Camille. “Forget Long-term Planning, Adopt Google’s Approach to Strategy, Says Expert”. Axiom News. (2009).
Perle, Elizabeth. “There’s Something About Google”. The McGill Tribune. (2007).
Robbins, S., DeCenzo, D. Fundamentals of Management. Upper Saddle River, New Jersey: Pearson Prentice Hall, 2008. Print.
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