I came to the Silicon Valley to work for a company in the mid-1980s that was then where Google is now in terms of offering unrivaled benefits. ROLM Telecom, a new telecom company, had a department called “The Great Place to Work” department and the firm was top ranked as the best place to work in the country.
That’s why I went to work for it. My goal was to find a way to eventually run that department, but IBM bought ROLM and before I could even get into the department, it was eliminated under the rationale that it was every manager’s job to make the company a great place to work. The move ended up proving the point that if a job is “everyone’s” then no one actually focuses on it. Under IBM’s watch ROLM went from being a company trying to get to $1 billion in annual revenue to a company that was trying to keep from going under. ROLM no longer exists, which showcases how that turned out.
Today Google is where everyone wants to work. There is a reason why Google can offer its employees benefits that other companies can’t. However, there are some massive hazards to the path that Google is on, which I believe can be avoided but I doubt will be given the nature of the U.S. market drivers. Google will be unable to maintain its employee benefits indefinitely based on my unfortunate ROLM experience.
At the Core of Google’s Nirvana
At the core of Google’s capability to provide a fabulous place to work is a revenue model that is like a money hose. It makes a portion of the revenue generated by most ad placements. These placements occur regardless of much of what Google actually does. Few ads are consumed on phones, few ads are consumed on Google +, and few ads are consumed in Google Apps. If all of these failed tomorrow and Google shut them down, its revenue would likely stay relatively flat and its costs would appear to drop.
The company reminds me of a story about a kid we employed at ROLM who had a massive trust fund. The first time we sent him to New York he stayed in a suite at the Waldorf Astoria hotel and submitted an expense report that brought tears, and not in a good way, to the eyes of our CFO. His rationale was this was that he had always stayed at this hotel and after being told we couldn’t afford such rich tastes he continued to say at the Waldorf in a suite, but rented a second cheap room that he could expense and paid for the expensive room from his trust fund. Most of us couldn’t afford to do that, but because his income was largely decoupled from his job, he could live like a king and do pretty much anything he wanted.
Google’s makeup of decoupled revenue is very similar in that it can spend massive amounts on things that have no relation to income and still meet financial analyst expectations. However they did just miss those expectations and often that causes a company like Google to rethink entitlements.
The Problem with Massive Entitlements
The problem with having a outstanding program like Google has is that employees grow to take it for granted. That means they don’t value it that much over time and assume other companies are similar to Google and so, over time, become more likely to leave. Granted, many will come screaming back when they hit the cold water of the outside world, but many will burn their bridges or simply not want to admit they were wrong.
In addition, when a company does hit hard times and eventually Google will get pressured by competitors or governments to share their windfall, they will cut these entitlements. What both Maslow and Hertzberg found in their studies in the 1960s was that when a company does this, the employees take massive offense and productivity can drop off a cliff. In short the employees grow to feel these entitlements are rights and if the company doesn’t realize this it could crater itself as it tries to cut them back.
For instance a few years ago Microsoft tied to cut free sodas to save money. The employees threatened to strike and the decision was reversed, but the fact that it was considered, which came on top of layoffs, put the company and its employees at odds and that has likely contributed to Microsoft’s slowing over the last decade.
Why Your Company Will Never Be Like Google
There are two reasons why your company will never have the kind of wonderful free-flowing environment that Google enjoys. First, your firm likely doesn’t have a money hose like Google does that decouples revenue from what the firm produces. Second, experienced managers know not to provide entitlements because they have a bigger adverse impact when taken away in hard times than a positive one when they are put in place.
Personally, I think that is a shame and look back to those early times at ROLM as some of the best in my career with amazing managers and amazing opportunities. I’m afraid that the folks working at Google will have the same regrets in a decade or so. I think that a better industry practice would be to create more great places to work, but focus more on assuring productivity.
In the end, I think most of us would love to work in an environment like the one Google provides, but the way the deck is stacked few of us will ever get this opportunity. I hope the Google employees never take this wonderful gift for granted because, if history repeats itself, someday it will be gone and its passing will be painful.
Rob is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance, and Security. Currently, Rob writes on emerging technology, security, and Linux for a wide variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.