Case Study: One motivational issue that Google pays particular attention to concerns its star performers

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Case Study:

One motivational issue that Google pays particular attention to concerns its star performers.Most organizations treat performance evaluation ratings—and accompanying compensation differences—much like grades in a college course. Just as a distribution of grades might have a few A's, more A-'s, B+'s, B's, and B-'s, and a few C's, so too do performance evaluations windup with a few 5's, more 4's, 3's, and 2's, and a few 1's. Thus, scores and rewards have a "bell-curve" distribution, with fewer people in the tails and more in the middle. Moreover, just as an A is only a bit more rewarding than an A-, so too does a 5 get just a bit more than a 4. Although there's a logic to that view of evaluation and compensation, it misses an important insight from scientific work on performance. That work suggests that the top 1 percent of performers contribute 10 percent of the firm's productivity all by themselves. Similarly, the top 5 percent of performers contribute 25 percent of the productivity all by themselves. Put differently,stars aren't just a little bit better than typical employees—they're worlds better. This is especially true in white collar jobs where there are no equipment or process constraints on what employees can do. As Bill Gates once argued, "A great lathe operator commands several times the wage of an average lathe operator, but a great writer of software code is worth 10,000 times the price of an average software writer." Laszlo Bock, the former head of Google's People Operations group, followed such advice when rewarding star performers. He argues, "Internal pay systems don't move quickly enough or offer enough pay flexibility to pay the best people what they are actually worth.The rational thing for you to do, as an exceptional performer, is to quit." Thus, Google practices what he calls "paying unfairly"—where "unfairly" means a rejection of the notion that 5's should only get a little more than 4's or 3's. "If the best performer is generating ten times as much impact as an average performer, they shouldn't necessarily get ten times the reward," Bock notes, "but I'd wager they should get at least five times the reward." He continues, "The only way to stay within budget is to give smaller rewards to the poorer performers, or even the average ones. That won't feel good initially, but take comfort in knowing that you've now given your best people a reason to stay with you, and everyone else a reason to aim higher."

Post your Questions:

1.    Compare the findings described above for Millennials to your own views on Millennial characteristics. What surprises you about the findings? What doesn't surprise you?

2.    If you think about the three types of commitment—affective, continuance, and normative—which do you think is most changed among Millennials (or twenty-somethings)? In what way?

3.    Consider all the initiatives and programs Google uses to inspire employee loyalty. Do most of those seek to "move the needle" on affective commitment, continuance commitment, or normative commitment?

4.    Do you agree with Bock that star performers should get a lot more—not just a little more—than average performers? If someone earning a 3 on Google's evaluation system gets a two percent (2%) raise, what should employees earning 4's and 5's get?

5.    Given the budget issues created by giving star performers more, should someone earning a 3 get a two percent (2%) raise—or should they get less? What are the arguments for and against a two percent raise level for average performers?

6.    Consider all the things Google's People Operations group does to motivate its employees. Which motivation theories do they seem to be leveraging, and how?