Editor’s note: This is an edited version of an article that first appeared in the May/June issue of the Ivey Business Journal. Read the entire issue at iveybusinessjournal.com/.
Google now provides free net-search services in more than 120 languages, with a large number of web-based products in its portfolio and generates about 97 per cent of its revenue through online advertisements. The Google brand is valued at $100 billion, making it the world’s first ‘$100 billion brand.’ In 2009, Fortune magazine ranked it as the best place to work in the United States, which is indeed a tribute to the company’s leadership and people-management practices.
The Google Style
The inclinations for independent thinking and research of Google founders Larry Page and Sergey Brin may have had an impact on their leadership style, especially in matters of empowering their employees and encouraging them to come up with innovative ideas and implement them. They have a policy of recruiting only class-A employees and giving them the freedom to exercise their creativity. While there could be some cost saving in recruiting class-B people, it would push the organization into mediocrity in the long run.
There is a 70-20-10 norm about time allocation by employees: 70 per cent of the time should be devoted to Google’s core business of search and advertising; 20 per cent to off-budget projects related to the core-business; and 10 per cent to pursue ideas based on one’s own interest and competencies.
There are also generous rewards and awards for implementing innovative ideas. Though employees perceive such systems as perks, the company sees these systems as “the seed corn for its future,” as it would ensure entrepreneurial employees implement their innovative ideas within the company rather than go out and create a competing new venture.
It is estimated about 50 per cent of Google’s new products are generated using the ‘free’ time employees are granted.
Who wouldn’t want to work for Google?
Communicating the vision and granting employees the freedom to implement it is one part of Google’s people-management system. The other is to provide the employees with a hassle-free environment so that they can concentrate fully on work. In other words, the goal is to strip away everything that gets in the employees’ way.
The company provides a standard package of benefits to employees that it tops up with a seemingly endless – and highly enviable – array of perks: first-class dining facilities with a free and unlimited supply of wholesome food, snack stations in various parts of the office, gyms, laundry rooms, massage rooms, haircutting salons, car washes, dry cleaning services, commuting buses equipped with bike racks, leather seats, Internet access and facilities to carry pets onboard — and just about anything a hardworking employee might want to be taken care of while he/she is at work. In fact, employees don’t even have to worry much about getting dressed up, as Google’s corporate vision includes such axioms as, “You can be serious without a suit.”
Leadership’s policy of empowering and facilitating employees’ work has led to a large number of innovations and, consequently, to the explosive growth of the company. As a startup, Google had relied primarily on the personal funds of the founders. Finally, Page and Brin decided to bring in venture capitalists. They also started to allow unobtrusive text advertisements alongside search results. By 2000, the company had started making a profit.
The founders managed the company until 2001, with Page as the CEO. By then, Google had grown to more than 200 employees, and widened its board to include representatives of the venture capitalists. They brought in a professional manager, Eric Schmidt, as the CEO, with the responsibility for providing the organizational and operational expertise and company leadership. Page and Brin continued to provide the engineering, technological and product development leadership.
Thus, the foundation of the leadership triumvirate at Google was laid in the year 2001.
Between 2001-04, the annual salaries of the top three executives were $250,000 for Schmidt, $150,000 each for Page and Brin. However, just before the IPO in 2004, the trio asked the board to cut their salaries to $1, with a view to boosting investor confidence in the company. This was indeed a smart move whereby the leaders could convey to potential investors the immense confidence they had in their company’s performance and tell them they were willing to link their own remuneration to the market performance of their company.
As pointed out by Ken Auletta in his book, Googled, Schmidt was primarily the choice of venture capitalist and Google board member John Doerr, which was why others viewed him apprehensively, at least initially. Schmidt’s past performances gave out mixed messages. He had been a successful chief technology officer at Sun Microsystems in its glory days, but had performed poorly in his one stint as CEO at Novell. Besides, there was worry the Mercedes he drove and the suit and tie he wore would not go down well with Google’s informal culture.
In any case, nobody thought he was an inspirational leader, a great speaker or salesman, a take-charge leader like Paul Otellini of Intel, Carol Bartz of Autodesk or John Chambers of Cisco.
But for a company like Google, which took pride in its “distributed leadership” culture, it was perhaps possible the patient, unobtrusive engineering management style of the mild-mannered Schmidt was better than the more aggressive, go-getter style of individual-oriented leadership.
However, it took some time and another intervention by Doerr, who brought in Silicon Valley’s best-known management coach, Bill Campbell, to mentor and coach the triumvirate and mediate between the new CEO and the critics. Campbell, then 61, was probably the right person to mediate. Campbell’s prior work experience also added credibility to his new role. He had once been Columbia University’s head football coach, a senior executive at Apple and the CEO of several Silicon Valley companies, including Intuit. His major contribution was to take emotion out of the decisions and help the principal decision-makers evaluate the options in an objective manner.
It would not be an exaggeration to say the mentoring and mediation by Campbell have made a major contribution to the development of Schmidt into a ‘Superman CEO’ who could win over ever-skeptical critics.
Google’s results speak for his performance. The company reached $1 billion in revenue in six years, 10 years faster than Microsoft. In April 2007, Schmidt was elected chairman of the board while simultaneously holding the position of CEO. In 2011, Schmidt became the executive chairman, as Page once again assumed the post of CEO.
Eric Schmidt’s best leadership practices
Analysts are of the view that, though Schmidt came from a corporate background, his leadership style had many things in common with the culture already created and put in place by the founders of Google.
Schmidt’s leadership practices could be summarized in the following five precepts:
- Get to know your employees;
- Create new ways to reward and promote your high-performing employees;
- Let your employees own the problems you want them to solve;
- Allow employees to function outside the company hierarchy;
- Have your employees’ performance reviewed by someone they respect for their objectivity and impartiality.
The happiness trickles down and out the door
The leadership practices of the triumvirate cascaded throughout the organization and had an enormous impact on the cadres. According to Laszlo Bock, Google’s innovative senior vice-president for human resources, the teams working under the best managers perform better, are happier and stay longer with the company. He therefore initiated a project to identify the key qualities of such managers based on an analysis of data available and collected internally. His research team has come up with the following eight qualities of leader-managers at Google (listed in the order of importance as identified by the study):
- Be a good coach;
- Empower your team and don’t micromanage;
- Express interest in your team members’ success and well-being;
- Be productive and results-oriented;
- Be a good communicator and listen to your team;
- Help your employees with career development;
- Have a clear vision and strategy for the team; and
- Have technical skills so you can advise the team.
The qualities identified are amazingly simple and do not require a manager to change his or her personality. Rather, the changes required are a matter of behavioral changes, which can be accomplished by regular and deliberate practice. Bock simplifies them further:
“The two most important things I can do are to make sure that I have some time for them and to be consistent.”
It may be noted, ironically, though Google is a hi-tech company, having the technical skills has emerged as the least important among the eight qualities of leadership. Obviously, the quality of any technology will only be as good as the quality of the people who operate it.
Mathew J. Manimala is professor of Organization Behaviour and Chairperson-OBHRM Area, Indian Institute of Management, Bangalore. He is the editor of the South Asian Journal of Management. Kishinchand Poornima Wasdani is a doctoral student in the Department of Management Studies, Indian Institute of Science, Bangalore.