Google's 10% Raise: Five Reasons It is a Waste of Money

Last Updated Nov 10, 2010 3:35 PM EST

Google just announced it is giving a 10% raise to everyone in the company. Which is, actually, like announcing that the company lost the recruiting war in Silicon Valley. I think it's safe to say, at this point, that working for Google is like working for Microsoft. It's safe, it's an established business, and no one is going to turn into a star by staying at a company like that long term.

Which is why, of course, everyone is leaving Google and Google is resorting to ten percent raises.

In case any other desperate company is thinking of following suit, here are five reasons that the ten percent raise is a complete waste of money:

1. A ten percent raise is too little. Ten percent does not change someone's life. It would be shocking to hear that people leave Google to make more money. Employees leave Google to get more interesting work. The people Google wants to recruit do not choose their jobs based on who will pay them ten percent more. Also, let's just say, for argument's sake, that some compensation analyst told Google they were underpaying everyone by 10%, many people take salary cuts - of even 50%- if the job is cool enough.

2. Across-the-board raises are about the company, not the people. If you have a great employee, you give that employee special recognition and that employee likes working for you because he or she feels special and appreciated. If you give everyone a raise, you are telling everyone that the company has a problem, and the raise has nothing to do whether or not the employee is special. The worst thing you can do for an outstanding employee is give that employee the same treatment as the mediocre employees. And announce it.

3. Polls show young people do not rank money as an important factor. If you poll Generation Y, which makes up the majority of Google's workforce, they will tell you that the top three factors for choosing a job are: friends at the company, flexible hours, interesting work. Which means that most people are not leaving the company because of pay. Google's fundamental misunderstanding of what motivates people is probably a cause of so many people leaving.

4. Senior management is leaving because it's an oligarchy. For those of you who are unaware, Google actually runs like a private company, not a public company. The voting stock weighted to heavily favor three people -founders Larry Page and Sergey Brin, and CEO Eric Schmidt. Self-respecting senior managers do not work for an oligarchy. They get frustrated and leave. Google is a great place to go to build up a network and look for a good job, while you service the oligarchy. (Example: Sheryl Sandberg.)

5. Don't get in the press for having recruiting trouble. I had planned today to write about Veteran's Day. Maybe some feel-good piece about how we should stop making up reasons to invade other peoples' countries. But instead, look, I'm writing about how Google is having recruiting problems. It would never have been such an interesting story if they had not made such a big deal about it, to such an ineffective end.

Read More on BNET:
Google's 10% Pay Raises: A Desperate Move to Buy Employee Loyalty