Recently Google announced a 10% pay increase across the board for all employees effective January 1st, 2011 in a private company-wide email. The email was promptly sent out of the company to some very eager news organizations to expound upon (I admit, I am no exception). For this the engineer was promptly fired.

Further news got out that not only would employees be receiving a substantial pay hike, but they would also receive a $1,000 holiday cash bonus with all taxes paid. So employees get to keep the whole thing. This sounds great, especially if your an employee. But it also indicates, rather strongly, that trouble is brewing at Google HQ.

Problems Ahoy!

Just why would Google be in trouble? They are a company renowned the world over for excellent working environments, great pay, amazing benefits, and throngs of potential employees practically beating down their doors trying to work there. In recent years Google has been facing a number of high profile defections to competitors, most notably to Facebook. Even when they have offered an employee a 15% raise with a $500,000 cash bonus just to stay for another year the employee chose to defect anyway. Apparently everything is not rosy in Google-land.

What They Did Wrong

The first thing they did wrong was openly fire the employee that leaked the information. I understand why the company responded the way they did. However by firing him they only made the situation even more high profile. Both the raise itself and the firing screams of an outright nervousness amongst Google management at their attrition rate. Competitors will often hire you just for working at Google. This is because Google only hires the absolute best and brightest and to remove them from a competitors grasp for your own purposes is a strong and strategic move. A better move would have been to reprimand the employee privately, possibly docking their pay or even leaving them out of the blanket pay raise for releasing private internal information.

The second thing they did wrong was to make a habit out of offering employees excessive pay raises and bonuses at the mere threat that they might leave. This has trained their employees that they can squeeze Google very easily for more money and benefits with very little effort. This creates a bad environment where Google is no longer in control. They have given their employees the power and shown a large weakness to their competitors. This could very well cost them dearly in the end if it hasn’t already.

Google needs to balance their approach much better than this and be more strategic. As smart as a company as Google can be they can’t keep playing games, they need to start taking employee concerns seriously and address the core problems instead of just throwing money at it. The United States government can attest to the fact that money doesn’t solve everything. I am a fan of Google, a huge fan. I would like to see them come out on top, but they can’t do that by continuing to operate the way they have been.

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