Can Google Stay Google?

Of course, Google is far from the first Silicon Valley powerhouse to cultivate a reputation as a place for the most brilliant engineers. Like its predecessors -- Microsoft, Oracle, Apple -- Google can be elitist and a bit haughty. Nelson Minar, a midlevel Google engineer, starts off well by saying, "At Google, a lot of people are motivated by the beauty of what they do. A key thing in the engineering culture is a lot of pride in the technical challenge. Larry and Sergey have set the tone that we're in this for the long run." But then he realizes too late that he's sliding into arrogance when he says, "At Google, my assumption when I meet new engineers is they are as good as I am or better. When I worked at other places, the first question was, Is this person worth my time?"

Share the Wealth

Duke Ellington was once asked how he managed to take the many individualistic members of his band and get them to play together so harmoniously. "I have a gimmick," he said. "I pay them." That's one of Google's gimmicks, too. Even when people are motivated by challenge and idealism, pay and recognition remain important.

Brin has been thinking a lot lately about how to revamp Silicon Valley's basic approach to compensation, which long relied on stock options. When there are only a few hundred people in a company, stock is a strong motivation, he says, because everyone gets enough options to have the chance to really make a lot of money. But "at thousands, it doesn't work that well as an incentive," because there are so many people that the options have to be spread too thin. "And people want the chance to be really well rewarded." Even though Google now has some 3,000 employees worldwide, he says, "I feel the compensation should be more like a startup's. Not entirely, because there's significantly less risk. But more like one. We provide the upside -- maybe not the identical upside, maybe a little less -- and higher odds of being successful."

Google's most visible innovation in compensation is the Founders' Award -- a huge spot bonus for great work on a project. The first two awards, given out earlier this year, added up to $12 million and were announced at an all-staff gathering. The awards are paid in stock to give the winners incentive to keep striving.

"These founders are quite willing to share generously the wealth that's created here," says Dave Rolefson, a compensation specialist who worked around the Valley before joining Google. "A lot of companies say they pay for performance, but Google actually does." The higher you are in the company, the more heavily your pay package depends on rigorous evaluations of your personal contribution. The exception comes at the very top: No matter how well they perform, Page and Brin now take only a $1 annual salary with no bonuses or grants of options or stock. They save the stock as a reward for other employees.

In the past couple of years, other Silicon Valley companies have responded to the big changes in accounting rules by cutting back dramatically on the stock options they grant to employees as incentives. They have typically gone from giving 7% of equity each year to as little as 2%, and the cuts have had the biggest impact on lower-level employees. "At Google, we're seeing that none of the employees are cut," Rolefson says. "Full-time employees at all levels are still offered equity when they come in."

In addition to stock grants, Brin says that Google is trying to do more with "bonuses and refreshers" and especially looking to develop more financial incentives for people in the fast-growing middle levels of the company. Still, he admits that "there are some inherent flaws with compensation incentives in a large company." That thought sends him off on a more philosophical tangent: "As you grow larger, you should be more efficient," he says, "or split into smaller companies if there are diminishing returns. The key is to look at the advantages you get from being larger."

So does Brin think Google is a bit like Burning Man, the annual festival in the Nevada desert that's a magnet for artists and techies from northern California? Burning Man has grown from an intimate gathering into a mass pilgrimage for tens of thousands of people, many of whom talk nostalgically about how it was better when it was smaller and before it was changed by its renown. Brin has actually been to Burning Man -- how many CEOs can say that? -- but he contends that both the festival and Google have improved in many ways with size: "There's so much more to see and do now" at Burning Man, he says. As for Google, "It's a mistake to be nostalgic for two or four years ago, because you can be blind to all the benefits you get." The recently introduced features for searching and displaying maps with satellite photos, for example, were a "really collaborative effort from people at Google offices around the world -- we couldn't do that at a smaller company."