Why Paying "Talent" A Lot Doesn't Work

Last Updated May 24, 2011 11:32 AM EDT

There are many reasons that Google's stock has been having a rough ride recently. The company's failure to capitalize on social media has clearly been viewed as a big stumble. Allegations that they're poor corporate citizens, using every dodge available to reduce their tax obligations, haven't helped either. But one of the biggest causes of concern is cost. Put simply, Google's expenditure on people is higher than it has ever been: in March, it reached a record $522,000 per employee.

Nice Work if You Can Get It?
Google no doubt would argue that you get what you pay for. Offering tremendous benefits and working conditions is a pretty conventional way of trying to attract the best and the brightest. And if it worked as simply as that, Wall Street might not be so worried.

But here are some of the reasons for concern.

1. Money isn't a great motivator

There's tremendous evidence that high pay isn't correlated with tremendous creativity or indeed productivity. Dan Pink's written about this extensively in his book, DRIVE. Dan Ariely has designed and conducted cool experiments demonstrated that thinking about money all the time actually limits your creativity. Positive psychologists like Martin Seligman and economists like Richard Layard keep proving that money doesn't make people happy either. So at the very least you have to ask: just what does Google think it's getting for its money?

2. Money promotes anti-social tendencies.

More pertinent perhaps, there's a large body of evidence to suggest that money impedes peoples' social motivation. Thinking about money makes people less helpful, less collaborative, less willing to engage socially. You shouldn't be so surprised by this. Money is often a substitute for relationships: if I don't have a date, I can pay an online dating service to fine me one. But with enough friends, I'll never need to employ a decorator, babysitter or mover: my friends will pitch in. And of course if I have a great deal more money than my peers, that can be a social barrier too. The super-rich, often use money specifically as a barrier to keep them away from people; that's part of what the limos and the private jets are for.

For a creative company to develop and sustain a workforce disproportionately overpaid may, therefore, not just be a waste of money but a waste of talent. The truly motivated want other things: adventure, recognition, autonomy. These things are hard for them to find inside a gigantic corporation. Money is no substitute.

Chart courtesy of Silicon Alley Insider

Further Reading:

  • Margaret Heffernan On Twitter»

    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.