Is Higher Pay the Best Way to Retain Employees at Google?

In Employee Engagement, Job seekers, Organizational Communication, Organizational Culture Change

Things to consider to retain employees

Google has been losing talent to Facebook and other competitors so to retain talent, they’ve decided to give everyone–executives and staff–a 10% raise, effective January 1, 2011.

An internal memo published by Business Insider that was sent by Google CEO Eric Schmidt to employees states:

We’ve heard from your feedback on Googlegeist and other surveys that salary is more important to you than any other component of pay (i.e., bonus and equity). To address that, we’re moving a portion of your bonus into your base salary, so now it’s income you can count on, every time you get your paycheck. And one last thing…today we’re announcing that everyone will get a holiday cash bonus, too.

The memo also says:

Googlers, you are what makes this company great, and our goal here is to recognize you for your contribution, in a way that’s meaningful to you.

Retaining talent is essential for companies and as Eric Schmidt confirms–the actions that a leader takes to promote retention must be ones that are meaningful to the employee. The solution of throwing money at people is not a bad problem for employees. But research shows that if pay meets two qualities, it no longer serves as a retention tool:

  1. Pay must be fair. Pay must be fair relative to what others in similar positions in the organization and outside the organization are receiving. If the pay is fair, a higher pay does not tend to be what most people are looking for to be happy at work.
  2. Pay must be adequate. If an employee is able to live as he or she wants to live with the pay received, then an increase in pay will not typically be a meaningful retention tool.

When pay is both fair and adequate, leaders and managers must look to other areas to retain employees. For example:

  • FIT: Is the organization a fit for the employee? Is the organization’s contribution meaningful to the employee? And are the values of the workplace in harmony with the employee’s values?
  • TRUST: Does the employee have a trusting workplace that exhibits fairness, respect, integrity and competence?
  • CARING: Is the work setting a caring workplace where the employee has meaningful relationships, a sense of belonging and camaraderie?
  • COMMUNICATION: Does the employee feel the workplace is transparent, with open, two-way communication?
  • DEVELOPMENT: Is the work challenging giving the employee a feeling that he or she is developing skills and building mastery?
  • OWNERSHIP: Does the employee feel like an owner–involved and participating in decision making and having flexibility and autonomy?

Retaining employees requires more work than handing out an across-the-board pay raise. Pay is just the initial filter–and once pay has passed the test of being fair and adequate, then the solution to retention is much more complicated. Retention requires ensuring that each employee has an engaging workplace–it’s an individual thing that may require new Priorities that impact the culture of the organization.