By any standard or metric, Google is a standout company, and
perhaps the main reason for its superiority is its remarkable style of
leadership. What employee turnover or attrition? That enviable style, however,
was not established overnight. At least, not quite, as readers will learn.
Google now provides free net-search services
in more than 120 languages, with a large number of web-based products in its
portfolio and generates about 97 percent of its revenue through online
advertisements (Google Adwords and Adsense). The Google brand is valued at USD
100 billion, making it the world’s first ‘one-hundred billion brand.’ In 2009, Fortune magazine
ranked it as the best place to work in the U.S., which is indeed a tribute to
the company’s leadership and people-management practices.
Like many other well-known companies, Google
Inc. too had a garage startup. When Larry Page and Sergey Brin met in the
Stanford PhD program in computer science, they developed the idea of a search
engine company. They decided to drop out of the PhD program and to launch the
new company from a friend’s garage, which they did in 1998. Both Page and Brin
have academic ancestries: Page’s father, Dr. Carl Victor Page, was a computer
science professor at Michigan State University; Brin’s father and paternal
grandfather were both mathematicians, and his mother was a research scientist
with NASA. Brin was Russia-born and emigrated to the U.S. when he was six years
old.
Both Page and Brin were researchers at heart
(though neither of them completed their PhD). Their venture was a rather
‘unanticipated’ outcome of their research project on “The Anatomy of a
Large-scale Hypertextual Web Search Engine.” The search engines available at
that time were not very efficient in quickly finding the most relevant results
for the user. This issue was becoming increasingly complex, with the explosive
growth of the materials on the web. Hence, the duo took up the challenge of
designing an efficient system for crawling information from the web, keeping
the crawled information up to date, storing the indices efficiently, and
handling many queries quickly. In the process, they developed the PageRank
technology (now proprietary to Google), which ranks the quality of each web
page using a complex calculation of link structure based on the linkages among
web pages. Their confidence in their invention was so high that when selecting
a name for their company they picked up a modification of a mathematical term
(GOOGOL, which is the name of the number represented by 1 followed by 100
zeroes). In doing so, they indirectly conveyed the company’s unique vision to
organize and procure ‘infinitely’ large amounts of information for users, and
possibly make as much money.
The Google style
The academic ancestry of the founders and
their own inclinations for independent thinking and research may have had an
impact on their leadership style, especially in matters of empowering their
employees and encouraging them to come up with innovative ideas and implement
them. They have a policy of recruiting only class-A employees and giving them the
freedom to exercise their creativity. While there could be some cost saving in
recruiting class-B people, it would push the organization into mediocrity in
the long run.
There is a 70-20-10 norm about time allocation
by employees: 70 percent of the time should be devoted to Google’s core
business of search and advertising, 20 percent to off-budget projects related
to the core-business, and 10 percent to pursue ideas based on one’s own
interest and competencies. There are also generous rewards and awards for
implementing innovative ideas. Though employees perceive such systems as perks,
the company sees these systems as “the seed corn for its future,” as it would
ensure that entrepreneurial employees implement their innovative ideas within
the company rather than go out and create a competing new venture. It is
estimated that about 50 percent of Google’s new products are generated using
the ‘free’ time that employees are granted.
Leadership that
empowers
Interestingly, the choice of a new product or
strategy is not dictated by the founders nor is it based on the grandeur of its
sponsor’s title. Ideas must compete on their merits, in a ‘Darwinian
environment’ of survival of the fittest. Many of Google’s popular products and
strategies came on the market through this process, as exemplified by the
creation of Gmail by Paul Buchheit, or the informal motto of the company
(“Don’t be evil”) coined by Buchheit and Amit Patel. Though this slogan does
not appear in the exposition of the official management philosophy of Google,
it was a major theme in the founders’ letter in connection with their 2004 IPO,
so much so that this letter was subsequently called the “Don’t-Be-Evil
Manifesto.” The basic thrust of this manifesto is that one should not exploit
customers’ ignorance, but should be ready to forego short-term gains if this is
what is required to provide sustainable services to society. One specific
implication of this belief is that the company will not strive to get the
authentic search content confused with or influenced by the advertised
material.
Who wouldn’t want to
work for Google
Communicating the vision and granting
employees the freedom to implement it is one part of Google’s people-management
system. The other is to provide the employees with a hassle-free environment so
that they can concentrate fully on work. In other words, the goal is to strip
away everything that gets in the employees’ way. The company provides a
standard package of benefits to employees that it tops up with a seemingly
endless – and highly enviable – array of perks: first-class dining facilities
with a free and unlimited supply of wholesome food, snack stations in various
parts of the office, gyms, laundry rooms, massage rooms, haircutting salons,
car washes, dry cleaning services, commuting buses equipped with bike racks,
leather seats, internet access, and facilities to carry pets onboard — and just
about anything a hardworking employee might want to be taken care of while
he/she is at work. In fact, employees don’t even have to worry much about
getting dressed up, as Google’s corporate vision includes such axioms as: “You
can be serious without a suit.”
Leadership’s policy of empowering and
facilitating employees’ work has led to a large number of innovations and,
consequently, to the explosive growth of the company. As a startup, Google had
relied primarily on the personal funds of the founders. “We had to use
all of our credit cards and our friends’ credit cards and our parents’ credit
cards”, recalls Larry Page. Finally, Page and Brin decided to bring in venture
capitalists. They also started to allow unobtrusive text advertisements
alongside search results. By 2000, the company had started making a profit.
The founders managed the company until 2001,
with Larry Page as the CEO. By the year 2001, Google had grown to more than 200
employees, and it had widened its board to include representatives of the
venture capitalists. They brought in a professional manager, Eric Schmidt, as
the CEO, with the responsibility for providing the organizational and
operational expertise and company leadership. Page and Brin continued to
provide the engineering, technological, and product development leadership –
Page as President of Products, acknowledged as the company’s thought leader,
and Brin as President of Technology, with the responsibility for
advertisements, the major source of the company’s revenues. Thus, the
foundation of the leadership triumvirate at Google was laid in the year 2001.
Between 2001 and 2004, the salaries of the top
three executives were US$250,000 per annum for Schmidt, and US$150,000 each for
Page and Brin. However, just before the IPO in 2004, the trio asked the board
to cut their salaries to US$1, with a view to boosting investor confidence in
the company. This was indeed a smart move whereby the leaders could convey to
potential investors the immense confidence they had in their company’s
performance and tell them that they were willing to link their own remuneration
to the market performance of their company.
They also adopted an innovative method for
fixing the price of the IPO; they used a Dutch auction, in which the market
determined the initial stock price, and that helped prevent insiders and institutions
from selling immediately for a quick profit. Their confidence in their own
company and the market was not misplaced. Schmidt’s 12.45 million shares of
Google are now worth about US$4.86 billion. Similarly, Brin’s 31.6 million
shares and Page’s 32 million shares are each worth more than US$12 billion.
Considering the strong performance of the company following the IPO, the board
in 2006 offered to raise the salaries of the top trio from the nominal amount
of US$1. All three declined.
As pointed out by Ken Auletta in his book, Googled,
Eric Schmidt was primarily the choice of venture capitalist and Google board
member John Doerr, which was why others viewed him apprehensively, at least
initially. His past performances gave out mixed messages. He had been a
successful chief technology officer at Sun Microsystems in its glory days, but
had performed poorly in his one stint as CEO at Novell. Besides, there
was worry that the Mercedes he drove and the suit and tie he wore would not go
down well with Google’s informal culture. In any case, nobody thought that he
was an inspirational leader, a great speaker or salesman, a take-charge leader
like Paul Otellini of Intel, Carol Bartz of Autodesk, or John Chambers of
Cisco. While the founders themselves shared some of the apprehension, Schmidt’s
staunchest critic was another venture capitalist member of the board, Michael
Moritz of Sequoia Capital. He felt that Schmidt lacked the toughness required
for pushing ahead with the revenue plan based on the advertising formula being
experimented with during 2001-02.
But for a company like Google, which took
pride in its “distributed leadership” culture, it was perhaps possible that the
patient, unobtrusive engineering management style of the mild-mannered Eric
Schmidt was better than the more aggressive, go-getter style of
individual-oriented leadership. However, it took some time and another
intervention by John Doerr, who brought in Silicon Valley’s best-known
management coach, Bill Campbell, to mentor and coach the triumvirate and
mediate between the new CEO and the founders as well as the two VCs, Moritz and
himself.
Campbell, then 61, was probably the right person
to mediate between the founders, then in their twenties, and the new CEO, who
was 20 years older than they were. Campbell’s prior work experience also added
credibility to his new role. He had once been Columbia University’s head
football coach, a senior executive at Apple, and the CEO of several Silicon
Valley companies, including Intuit. His major contribution was to take emotion
out of the decisions and help the principal decision-makers evaluate the
options in an objective manner. It would not be an exaggeration to say that the
mentoring and mediation by Bill Campbell have made a major contribution to the
development of Eric Schmidt into a ‘Superman CEO’ who could win over not only
the founders but also the ever-skeptical, venture-capitalist critic on the
board, Michael Moritz. Google’s results speak for its performance. The company
reached $1 billion in revenue in six years, 10 years faster than Microsoft. In
April 2007, Schmidt was elected chairman of the board while simultaneously
holding the position of CEO. In 2011, Schmidt became the Executive Chairman, as
Larry Page once again assumed the post of CEO.
Eric Schmidt’s best
leadership practices
Analysts are of the view that, though Eric
Schmidt came from a corporate background, his leadership style had many things
in common with the culture already created and put in place by the founders of
Google.
Schmidt’s leadership practices could be
summarized in the following five precepts:
Examples of such behavior include the
following:
- Schmidt used to make a list of his best employees, as
identified by multiple levels of peer-references, and interact with them
personally to encourage them to implement their innovative ideas and to
insulate them from unwanted interferences by others.
- For rewarding high performers, there were a few systems
already in place, such as financial incentives, stock option plans, dinner
with the CEO, and so on. In addition, Schmidt created a five-hour long
video called The Factory Tour, where the protagonists themselves would
explain the idea and its working.
- In order to make the employees the owners of their
work, Schmidt used to provide a very broad definition of the company goal
and leave the implementation entirely to the employees. In defining the
goal, care was taken to highlight the benefits to the customers and
society at large rather than to the company. For example, Schmidt
has defined Google’s goal as: “Organizing the world’s information and
making it universally accessible and useful.” This is something that every
employee can easily relate to, compared to a statement of company targets
like increasing turnover by 200 percent.
- As corporate hierarchies can often obstruct employees’
work, Schmidt reinforced the existing system of allowing employees a
certain degree of freedom to create their own projects and choose their
own teams.
- In reviewing employees’ performance, Schmidt made it a
point to identify reviewers from among professionals whom the concerned
employee respects for their objectivity and impartiality.
The happiness trickles down and out the door
The leadership practices of the triumvirate
cascaded throughout the organization and had an enormous impact on the cadres.
According to Laszlo Bock, Google’s innovative Senior Vice-President for Human
Resources, the teams working under the best managers perform better, are happier,
and stay longer with the company. He therefore initiated a project to identify
the key qualities of such managers based on an analysis of data available and
collected internally. His research team has come up with the following eight
qualities of leader-managers at Google (listed in the order of importance as
identified by the study)
- Be a good coach
- Empower your team and don’t
micromanage
- Express interest in your team
members’ success and well-being
- Be productive and
results-oriented
- Be a good communicator and
listen to your team
- Help your employees with
career development
- Have a clear vision and
strategy for the team
- Have technical skills so you
can advise the team
The qualities identified are amazingly simple
and do not require a manager to change his or her personality. Rather, the
changes required are a matter of behavioral changes, which can be accomplished
by regular and deliberate practice. Bock simplifies them further: “The two most
important things I can do are to make sure that I have some time for them and
to be consistent.” It may be noted, ironically, that though Google is a hi-tech
company, having the technical skills has emerged as the least important among
the eight qualities of leadership. Obviously, the quality of any technology will
only be as good as the quality of the people who operate it.
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