Why Google pays its employees ‘unfairly’

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April 21, 2015

New Delhi: Considered one of the world's best companies to work for, why is it that search giant Google doesn't pay its employees fairly even as it continues to grow impressively without losing its best people to rivals?

April 21, 2015

New Delhi: Considered one of the world's best companies to work for, why is it that search giant Google doesn't pay its employees fairly even as it continues to grow impressively without losing its best people to rivals?

In his new book titled- Work Rules!- SVP of Google's People Operations in 2006, Laszlo Bock, decodes Google's counter-intuitive strategy of paying employees unfairly to keep its best people from defecting to hot companies like Facebook and Twitter.

Bock says that he and Google's leadership spent years after the company's IPO in 2004 in determining how to keep the retention rate of top talent as high as possible by opting for this alternative strategy. He writes, "At Google, we … have situations where two people doing the same work can have a hundred times difference in their impact, and in their rewards."

He notes that there are cases where people at more 'junior' levels make far more than average performers at more 'senior' levels which is a natural result of having a greater impact and a compensation system that recognizes that impact, a Stuffco.nz report notes.

An unfair compensation system might sound provocative, but Bock says that it might be better characterized as 'pay unequally' policy where it is fair to pay a top performer significantly more than an employee with the same job title that produces less value.

He writes further that Google's employees fall into a power law distribution in which the large majority of employees are 'below average' and its few top performers bring up the average.

Bock says managers at any company should ask, "How many people would you trade for your very best performer? If the number is more than five, you're probably underpaying your best person. And if it's more than ten, you're almost certainly underpaying."

Bock acknowledges that Google has more cash to play with than most companies, but says, "it is much harder to watch your highest-potential and best people walk out , making you wonder which companies are really paying unfairly: the ones where the best people make far more than average, or the ones where everyone is paid the same."


Courtesy: IBNLive

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