How Does Google Retain A Low Level Of Labor Turnover?

Introduction Google Inc. is one of the fastest growing businesses around the world. Far from being a search engine firm, Google has been a large technological company providing various Internet services. Moreover, Google's share price has increased almost six times since IPO in 2004 and its revenue always keeps a double-digit growth (Appendices figure 1). However, in late 2010, the mass media reported Google's brain drain at the firm's headquarters in Mountain View, California, the world's most attractive working place. It is said that many employees had quit Google and joined other smaller developing companies or built up their own businesses. If we analyze the company and the Internet realm in depth, it may not be such a serious problem as the newspapers described. By contrast, Google does pretty well on retaining staff and attracting new employees. After analyzing the financial table, I found that the size of workforce in 2010 grew 700% compared with that in 2004. The net income contributed by each employee was $250146 in 2007 and increased to $348565 in 2010. In this essay, I will investigate how Google is avoiding high labor turnover. The applied business tools and theories are Maslow's motivation theory, PEST analysis and laissez-faire leadership.

Maslow theory According to the reports, many employees, especially programmers, chose to leave Google. The engineering group pattern is one obvious example of its misused management style. There used to be three engineers for developing a world-class product whereas now it has enlarged to more than 20 people per group required by directors. Consequently, people may have lower productivity, or even quit the job. Their resignations seem to have little effect on daily operation. Google has taken precautions against labor turnover since it was founded. As the CEO Erin Schmitt stated, "Let's face it: programmers want to program, they don't want to do their laundry. So we make it easy for them to do both" . The company offers many non-financial incentives to help these programmers concentrate on their innovative activities, which will be investigated in the following paragraphs based on Maslow's motivation theory . Employees' physiological needs are perfectly satisfied as Google offers relatively high salaries compared with other high-technology corporations. Plus, it supplies free food all day long and recreation facilities, long vacations and paid holidays. Google is thorough with security needs. They even offer trivial benefits such as dental insurance. Besides, the morning commute service contains over 30 buses equipped with comfortable seats and Wi-Fi which are available for more than 1,000 employees . For social needs, Google holds various parties which are ways of informal internal communication and make most programmers know each other well. Moreover, the flextime system has been adapted in the company, which allows the staff to have more quality time with their families or friends. In terms of esteem needs, the achievements of loyal and competent staff have been appreciated in the corporation as most of them are promoted to be managers or issued work titles. The employees feel that they are recognized by the business and have a sense of self-respect. They are also pleased to introduce themselves as administrative staff. How self-actualization needs have been realized may be that managers permit engineers 20% of working hours to do what they like. As a result, they can display their abilities or talents and majority of products are innovated during this period. Interestingly, low-paid or low-skilled people decided to stay. This might because of the satisfied material needs. It is a different story for professional workers as more than ten senior managers have left the job. As Maslow interpreted, once one level of needs has been satisfied, humans will strive to achieve the next level. Google fails to meet the needs of higher level core staff. It explained that implementing these motivators is costly and probably likely to fail.

PEST analysis External environment influences the operation of the business significantly and its opportunities and threats can be illustrated by using PEST analysis . Below is a table to show the conditions of the Internet industries:

Political ? The political environment is stable ? Immigration law has been revised for many times to attract more advanced technology personnel. ? the United States government increases the amount of H-1B visa ? Europe accused Google monopoly Economics ? Post effect Credit crunch of The United States suffered an economic recession in 2008-2009. ? The economy of the US is not recovered completely. ? the consumer confidence index(CCI) shows an evident rise ? the US government continued the tax cut policy ? the Consumer Price Index(CPI) is 221 Social ? More people rely on the Internet. ? Computer science becomes one of the most popular areas. ? The societies pay much attention on the Internet. ? General public have high level of education. Technological ? In 2010 numerous of new concepts have been raised. ? Higher speed and wider range of accessing to the Internet. ? Computer performance has improved prominently.

The United States has revised the immigration law many times to attract more advanced technology personnel. In recent years, enough H-1B visas have been approved for computer workers to fill 87% of computer job growth since 1999. Therefore, Google can easily recruit foreign experts. The United States economy has not completely recovered from the damage of the 2009 global monetary crisis. In December 2010, the United States government continued the tax cut policy which is an effective expansionary fiscal policy. It stimulates the economy directly and nationals are encouraged to found their own businesses or to expand the existing firms. Thus, the policy may result in a high labor turnover among the Internet companies, especially in Silicon Valley where Google's headquarter situated. The society pays more attention to the Internet nowadays which contains large opportunities and low barriers to entry for businesses or individuals. Every technician, who has the passion and skills of yesterday's Bill Gates or Larry Page, could create the next Microsoft or Google. The increased prevalence and acceptance of the Internet in societies also provide many businesses opportunities and it is a cause for employees leaving. Last but not least, technological factors have affected the whole Internet. Numerous new concepts have been raised just in 2010, such as cloud computing, Long Term Evolution (LTE). These give a higher speed and wider range of accessing the Internet. Google has benefitted from external factors since it received more than 75,000 job applications in the early 2011 . Google has more technicians to fill vacancy. It is advisable to introduce new blood and eliminate outdated working practices. Nevertheless, staff may not have great recognition on non-financial methods and the expenditure on it is potentially massive.

Laissez-faire leadership It is said that about 140 engineers transferred to Facebook from Google in 2010. However, the company still believes that it was not a major problem because of a 23% increase in the number of employees (Appendices figure 2). Google has, actually, taken positive action to strengthen the laissez-faire leadership against the labor turnover. Google has set up an innovative strategy which is called "autonomous units" to cope with this problem. "Autonomous units" refers to a policy that small project groups can hold a relatively independent leadership. Google's managers discussed this policy with a few employees and took Slide, a firm acquired by Google, as the first sample. It seems to work well as only a few people left after the acquisition of Google. Laissez-faire leadership style can motivate the staff to come up with more creative and valuable ideas. It is recommended for high-technology companies such as Google to adopt this style. The revolutionary "autonomous units" can be seen as an attractive point for technicians. The firm adopts laissez-faire leadership in most cases and takes contingency management to some extent. Google offers some financial incentives to retain the employees who plan to leave. Google offered $6,000,000 dollars to urge one engineer to stay. The managers also persuaded one talented programmer to stay by allowing him to work in any position he wanted. In 2011, all labors' salaries and wages will be raised by about 10%. The monetary reward is a direct and efficacious method. However, it may lead to huge cost and a potential burden on Google's cash flow. Another strategy which I think may be helpful is to adapt the "flexible organization structures" . Managers could retain expert people who are loyal to the culture of Google as core staff. Once they plan to launch new products or services, they can temporally employ programmers as portfolio workers to help carry them out. They could also find outsourced workers to do some jobs which do not have strong connections with the core business. In this case, the possibility of facing high labor turnover may be diminished, and Google may not have to invest too much money in improving working conditions.

Conclusion I believe that the lost labor force will not damage the company to a large extent. However, Google should be cautious of the problem anyway as many new businesses have poached its senior managers. Apart from the employees' personal reasons, I think the fickle Internet market which is analyzed with the PEST analysis is the main reason for their resignations. I believe that they discarded Google because they cannot realize their dreams there. Therefore, I suggest that Google should start a process to examine and verify some novel ideas raised by program engineers and allow them time to put these into effect instead of refusing them. The newest strategy- autonomous units- is what I think will save it. Additionally, flexible organization structures can help the firm avoid high labor turnover and cut down expenditure. How does Google retain a low level of labor turnover? After investigation, I have found that Google has a good mechanism of human resources management, and it will help the company retain and attract countless employees.