Google Dream Team

At $1 million of revenue per employee, Google has the funds to share the wealth and they do so quite freely. Compensation of employees has always long been a topic of debate especially as a company gets bigger and starts to build those mid-level positions. Alan Deutschman explores this compensation issue at Google and how they plan to attack this in an article on Fast Company. Upon interviewing Sergey Brin he quickly discovers what their formula is.

Brin has been thinking a lot lately about how to revamp Silicon Valley's basic approach to compensation, which long relied on stock options. When there are only a few hundred people in a company, stock is a strong motivation, he says, because everyone gets enough options to have the chance to really make a lot of money. But "at thousands, it doesn't work that well as an incentive," because there are so many people that the options have to be spread too thin. "And people want the chance to be really well rewarded." Even though Google now has some 3,000 employees worldwide, he says, "I feel the compensation should be more like a startup's. Not entirely, because there's significantly less risk. But more like one. We provide the upside -- maybe not the identical upside, maybe a little less -- and higher odds of being successful."

In addition to stock grants, Brin says that Google is trying to do more with "bonuses and refreshers" and especially looking to develop more financial incentives for people in the fast-growing middle levels of the company. Still, he admits that "there are some inherent flaws with compensation incentives in a large company." That thought sends him off on a more philosophical tangent: "As you grow larger, you should be more efficient," he says, "or split into smaller companies if there are diminishing returns. The key is to look at the advantages you get from being larger."

Of course, Google is far from the first Silicon Valley powerhouse to cultivate a reputation as a place for the most brilliant engineers. Like its predecessors -- Microsoft, Oracle, Apple -- Google can be elitist and a bit haughty. Nelson Minar, a midlevel Google engineer, starts off well by saying, "At Google, a lot of people are motivated by the beauty of what they do. A key thing in the engineering culture is a lot of pride in the technical challenge. Larry and Sergey have set the tone that we're in this for the long run." But then he realizes too late that he's sliding into arrogance when he says, "At Google, my assumption when I meet new engineers is they are as good as I am or better. When I worked at other places, the first question was, Is this person worth my time?"

Still, it's likely that individuals at Google will have a harder time feeling they can have an impact on the company now that it has thousands of people, not hundreds. And many talented individuals will surely leave for startups once Silicon Valley discovers its next big thing. Some of the people who stay will find motivation harder to come by once their stock grants vest and they no longer need to work to make a living or even to buy real estate in the nation's least affordable housing market. At Microsoft in the '90s, engineers and marketers took to wearing buttons around the office that said "fuifv." You can guess what the first two letters stand for. The last three meant "I'm fully vested."