Question

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 wind up 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.”

QUESTIONS:

6.1 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 2 percent raise, what should employees earning 4’s and 5’s get?

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

6.3 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?

Answer 1

Answer 6.1 :-

The appraisals should be strictly based on performance as per the following schedule :-

Average rating	% of Appraisals
5	7%
4	3.75%
3	2%
2	1%
1	0.5%

However the company has to maintain a pool of employees with different working backgrounds and cannot be completely biased by providing only these incentives which completely distinguishes the star performers and the average performers thereby decreasing the morale of average performers.

As a solution to this most of the corporates follow a consistency based bonus in addition to this, which is a bonus based on a consistent performance of a employee where whether even if he is into the the category of an average performer still is maintaining his targets on a consistent basis.

This helps the company to identify the star formers and the consistent performers thereby providing incentives to both type of employees according to their performances and maintaining an ethical and motivating environment in the organisation.

Answer 6.2:-

The common practice followed by the Corporates to determine the percentage of Appraisal is a cost justification performance report . This report includes monthly targets of the employee , achievement percentage of these targets and a brief report by the the team manager as well as the revenue head which tells whether the performance and targets achieved by the employee justify their salary or not.

All employees are given a certain percentage of targets depending upon the salaries. A person who justify at least 25 to 30% of the monthly revenue of the particular wing, branch, organisation is considered to be a star performer ,someone who contributes upto 10 to 25% is considered to be an average performer while someone who is contributing less than 10% of the the monthly revenue is considered as below average performers .

1) The targets are set by the revenue head who determine what should be the average revenue that the firm should earn within a particular month, quarter, year and divides this revenue into small targets for each team and employee according to their work area and salary .

2) the person who justifies their salary and earns revenues more than their salaries are divided into sections depending on the percentage of revenue generated over and above their salary.

3) The percentage are divided into slabs and accordingly the appraisals percentage are decided depending upon their salary justification and target completion criteria.

Answer 6.3:-

Google model of employee motivation follows a traditional leadership Theory which focuses more on the result based on the targets achieved by the employees.

In addition to that there is is a huge list of non monetary benefits like flex spending accounts , no cost health and Dental benefits, insurance, vacation packages , tutor reimbursements, reimbursement of employees legal expenses up to a certain limit, Maternity benefits up to 18 weeks ,financial support for adopting a child, onsite car wash, bike repair, gym, massage therapy, on site doctor and fitness trainers in Centre, free lunch and dinner which really motivates the employee to remain loyal to the organisation and thus Google maintains a strong employee base with a very small amount of employee turnover ratio.