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Why Google's Retention Plan Backfired

Over the last few months, a stream of Google (GOOG) employees have left the company to work at Facebook and Twitter. In an effort to retain staff, the search giant has begun offering lavish raises, stock options and promotions. The problem with this retention strategy is that more Googlers are now taking outside interviews -- not because they want to leave, but because they want to snare this bonus for themselves.

This kind of diaspora is common in Silicon Valley. Once upon time, Google was the beneficiary. Back in 2005 Microsoft (MSFT) began suing Google to stem the tide of migrating workers. A year later, Vic Gundotra, now Google's VP of Engineering, took a whole year off just so he could get around Microsoft's non-compete clause and move to Mountain View.

Google has tried several offbeat strategies to keep talented employees around. A WSJ article describes how the company put its mathematical talent to work developing an algorithm to determine which employees were most likely to leave, making it easier for HR to nip departures in the bud. Staffers already get 20% of their time to work on personal projects. Google has implemented a regular review process so that these ideas were heard by upper level management and employees didn't feel ignored.

But the reason so many Googlers are defecting to Twitter and Facebook is no mathematical mystery: pre-IPO stock. While neither of these firms have indicated that a public offering is near -- Facebook, in fact, just said the opposite -- the multi-billion dollar valuations floating around are a powerful lure.

That's why Google's strategy makes little sense. It's offering such a liquid bonus, staffers who might be happy with their jobs are tempted to pretend otherwise. Google should be offering what places like Facebook and Twitter can't: A chance to move almost anywhere in the world or to work on a project in new fields that range from television to green energy to politics. Because no matter how much money they offer employees, it can't compete with the payday at the end of the IPO rainbow.

Image from Flickr user Greg O'Connell
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