By any standard or metric, Google is a standout company, and perhaps the main reason for its superiority is its remarkable style of leadership. What employee turnover or attrition? That enviable style, however, was not established overnight. At least, not quite, as readers will learn.

Google now provides free net-search services in more than 120 languages, with a large number of web-based products in its portfolio and generates about 97 percent of its revenue through online advertisements (Google Adwords and Adsense). The Google brand is valued at USD 100 billion, making it the world’s first ‘one-hundred billion brand.’ In 2009, Fortune magazine ranked it as the best place to work in the U.S., which is indeed a tribute to the company’s leadership and people-management practices.

Like many other well-known companies, Google Inc. too had a garage startup. When Larry Page and Sergey Brin met in the Stanford PhD program in computer science, they developed the idea of a search engine company. They decided to drop out of the PhD program and to launch the new company from a friend’s garage, which they did in 1998. Both Page and Brin have academic ancestries: Page’s father, Dr. Carl Victor Page, was a computer science professor at Michigan State University; Brin’s father and paternal grandfather were both mathematicians, and his mother was a research scientist with NASA. Brin was Russia-born and emigrated to the U.S. when he was six years old.

Both Page and Brin were researchers at heart (though neither of them completed their PhD). Their venture was a rather ‘unanticipated’ outcome of their research project on “The Anatomy of a Large-scale Hypertextual Web Search Engine.” The search engines available at that time were not very efficient in quickly finding the most relevant results for the user. This issue was becoming increasingly complex, with the explosive growth of the materials on the web. Hence, the duo took up the challenge of designing an efficient system for crawling information from the web, keeping the crawled information up to date, storing the indices efficiently, and handling many queries quickly. In the process, they developed the PageRank technology (now proprietary to Google), which ranks the quality of each web page using a complex calculation of link structure based on the linkages among web pages. Their confidence in their invention was so high that when selecting a name for their company they picked up a modification of a mathematical term (GOOGOL, which is the name of the number represented by 1 followed by 100 zeroes). In doing so, they indirectly conveyed the company’s unique vision to organize and procure ‘infinitely’ large amounts of information for users, and possibly make as much money.

 

The Google style

The academic ancestry of the founders and their own inclinations for independent thinking and research may have had an impact on their leadership style, especially in matters of empowering their employees and encouraging them to come up with innovative ideas and implement them. They have a policy of recruiting only class-A employees and giving them the freedom to exercise their creativity. While there could be some cost saving in recruiting class-B people, it would push the organization into mediocrity in the long run.

There is a 70-20-10 norm about time allocation by employees: 70 percent of the time should be devoted to Google’s core business of search and advertising, 20 percent to off-budget projects related to the core-business, and 10 percent to pursue ideas based on one’s own interest and competencies. There are also generous rewards and awards for implementing innovative ideas. Though employees perceive such systems as perks, the company sees these systems as “the seed corn for its future,” as it would ensure that entrepreneurial employees implement their innovative ideas within the company rather than go out and create a competing new venture. It is estimated that about 50 percent of Google’s new products are generated using the ‘free’ time that employees are granted.

Leadership that empowers

Interestingly, the choice of a new product or strategy is not dictated by the founders nor is it based on the grandeur of its sponsor’s title. Ideas must compete on their merits, in a ‘Darwinian environment’ of survival of the fittest. Many of Google’s popular products and strategies came on the market through this process, as exemplified by the creation of Gmail by Paul Buchheit, or the informal motto of the company (“Don’t be evil”) coined by Buchheit and Amit Patel. Though this slogan does not appear in the exposition of the official management philosophy of Google, it was a major theme in the founders’ letter in connection with their 2004 IPO, so much so that this letter was subsequently called the “Don’t-Be-Evil Manifesto.” The basic thrust of this manifesto is that one should not exploit customers’ ignorance, but should be ready to forego short-term gains if this is what is required to provide sustainable services to society. One specific implication of this belief is that the company will not strive to get the authentic search content confused with or influenced by the advertised material.

 

Who wouldn’t want to work for Google

Communicating the vision and granting employees the freedom to implement it is one part of Google’s people-management system. The other is to provide the employees with a hassle-free environment so that they can concentrate fully on work. In other words, the goal is to strip away everything that gets in the employees’ way. The company provides a standard package of benefits to employees that it tops up with a seemingly endless – and highly enviable – array of perks: first-class dining facilities with a free and unlimited supply of wholesome food, snack stations in various parts of the office, gyms, laundry rooms, massage rooms, haircutting salons, car washes, dry cleaning services, commuting buses equipped with bike racks, leather seats, internet access, and facilities to carry pets onboard — and just about anything a hardworking employee might want to be taken care of while he/she is at work. In fact, employees don’t even have to worry much about getting dressed up, as Google’s corporate vision includes such axioms as: “You can be serious without a suit.”

Leadership’s policy of empowering and facilitating employees’ work has led to a large number of innovations and, consequently, to the explosive growth of the company. As a startup, Google had relied primarily on the personal funds of the founders.  “We had to use all of our credit cards and our friends’ credit cards and our parents’ credit cards”, recalls Larry Page. Finally, Page and Brin decided to bring in venture capitalists. They also started to allow unobtrusive text advertisements alongside search results. By 2000, the company had started making a profit.

The founders managed the company until 2001, with Larry Page as the CEO. By the year 2001, Google had grown to more than 200 employees, and it had widened its board to include representatives of the venture capitalists. They brought in a professional manager, Eric Schmidt, as the CEO, with the responsibility for providing the organizational and operational expertise and company leadership. Page and Brin continued to provide the engineering, technological, and product development leadership – Page as President of Products, acknowledged as the company’s thought leader, and Brin as President of Technology, with the responsibility for advertisements, the major source of the company’s revenues. Thus, the foundation of the leadership triumvirate at Google was laid in the year 2001.

Between 2001 and 2004, the salaries of the top three executives were US$250,000 per annum for Schmidt, and US$150,000 each for Page and Brin. However, just before the IPO in 2004, the trio asked the board to cut their salaries to US$1, with a view to boosting investor confidence in the company. This was indeed a smart move whereby the leaders could convey to potential investors the immense confidence they had in their company’s performance and tell them that they were willing to link their own remuneration to the market performance of their company.

They also adopted an innovative method for fixing the price of the IPO; they used a Dutch auction, in which the market determined the initial stock price, and that helped prevent insiders and institutions from selling immediately for a quick profit. Their confidence in their own company and the market was not misplaced. Schmidt’s 12.45 million shares of Google are now worth about US$4.86 billion. Similarly, Brin’s 31.6 million shares and Page’s 32 million shares are each worth more than US$12 billion. Considering the strong performance of the company following the IPO, the board in 2006 offered to raise the salaries of the top trio from the nominal amount of US$1. All three declined.

As pointed out by Ken Auletta in his book, Googled, Eric Schmidt was primarily the choice of venture capitalist and Google board member John Doerr, which was why others viewed him apprehensively, at least initially. His past performances gave out mixed messages. He had been a successful chief technology officer at Sun Microsystems in its glory days, but had performed poorly in his one stint as CEO at Novell. Besides, there was worry that the Mercedes he drove and the suit and tie he wore would not go down well with Google’s informal culture. In any case, nobody thought that he was an inspirational leader, a great speaker or salesman, a take-charge leader like Paul Otellini of Intel, Carol Bartz of  Autodesk, or John Chambers of Cisco. While the founders themselves shared some of the apprehension, Schmidt’s staunchest critic was another venture capitalist member of the board, Michael Moritz of Sequoia Capital. He felt that Schmidt lacked the toughness required for pushing ahead with the revenue plan based on the advertising formula being experimented with during 2001-02.

But for a company like Google, which took pride in its “distributed leadership” culture, it was perhaps possible that the patient, unobtrusive engineering management style of the mild-mannered Eric Schmidt was better than the more aggressive, go-getter style of individual-oriented leadership. However, it took some time and another intervention by John Doerr, who brought in Silicon Valley’s best-known management coach, Bill Campbell, to mentor and coach the triumvirate and mediate between the new CEO and the founders as well as the two VCs, Moritz and himself.

Campbell, then 61, was probably the right person to mediate between the founders, then in their twenties, and the new CEO, who was 20 years older than they were. Campbell’s prior work experience also added credibility to his new role. He had once been Columbia University’s head football coach, a senior executive at Apple, and the CEO of several Silicon Valley companies, including Intuit. His major contribution was to take emotion out of the decisions and help the principal decision-makers evaluate the options in an objective manner. It would not be an exaggeration to say that the mentoring and mediation by Bill Campbell have made a major contribution to the development of Eric Schmidt into a ‘Superman CEO’ who could win over not only the founders but also the ever-skeptical, venture-capitalist critic on the board, Michael Moritz. Google’s results speak for its performance. The company reached $1 billion in revenue in six years, 10 years faster than Microsoft. In April 2007, Schmidt was elected chairman of the board while simultaneously holding the position of CEO. In 2011, Schmidt became the Executive Chairman, as Larry Page once again assumed the post of CEO.

 

Eric Schmidt’s best leadership practices

Analysts are of the view that, though Eric Schmidt came from a corporate background, his leadership style had many things in common with the culture already created and put in place by the founders of Google.

Schmidt’s leadership practices could be summarized in the following five precepts:

 

1. Get to know your employees.

2. Create new ways to reward and promote your high-performing employees.

3. Let your employees own the problems you want them to solve.

4. Allow employees to function outside the company hierarchy.

5. Have your employees’ performance reviewed by someone they respect for their objectivity and impartiality.

 

Examples of such behavior include the following:

• Schmidt used to make a list of his best employees, as identified by multiple levels of peer-references, and interact with them personally to encourage them to implement their innovative ideas and to insulate them from unwanted interferences by others.
• For rewarding high performers, there were a few systems already in place, such as financial incentives, stock option plans, dinner with the CEO, and so on. In addition, Schmidt created a five-hour long video called The Factory Tour, where the protagonists themselves would explain the idea and its working.
• In order to make the employees the owners of their work, Schmidt used to provide a very broad definition of the company goal and leave the implementation entirely to the employees. In defining the goal, care was taken to highlight the benefits to the customers and society at large rather than to the company.  For example, Schmidt has defined Google’s goal as: “Organizing the world’s information and making it universally accessible and useful.” This is something that every employee can easily relate to, compared to a statement of company targets like increasing turnover by 200 percent.
• As corporate hierarchies can often obstruct employees’ work, Schmidt reinforced the existing system of allowing employees a certain degree of freedom to create their own projects and choose their own teams.
• In reviewing employees’ performance, Schmidt made it a point to identify reviewers from among professionals whom the concerned employee respects for their objectivity and impartiality.

 

The happiness trickles down and out the door

The leadership practices of the triumvirate cascaded throughout the organization and had an enormous impact on the cadres. According to Laszlo Bock, Google’s innovative Senior Vice-President for Human Resources, the teams working under the best managers perform better, are happier, and stay longer with the company. He therefore initiated a project to identify the key qualities of such managers based on an analysis of data available and collected internally. His research team has come up with the following eight qualities of leader-managers at Google (listed in the order of importance as identified by the study):

 

1. Be a good coach
2. Empower your team and don’t micromanage
3. Express interest in your team members’ success and well-being
4. Be productive and results-oriented
5. Be a good communicator and listen to your team
6. Help your employees with career development
7. Have a clear vision and strategy for the team
8. Have technical skills so you can advise the team