To encourage retention of its employees, Google Inc. is giving a 10% pay raise to each one of its 23,000 employees. This is in response to increased competition from Facebook Inc. Many Google employees have gone on to work for Facebook; these veterans making up about 10% of Facebook’s employees. Former Google employees are extremely attractive to many other Silicon Valley companies as well. Chief Executive Eric Schmidt wrote in an e-mail to employees regarding the raise: "We want to make sure that you feel rewarded for your hard work. We want to continue to attract the best people to Google." This raise in pay will obviously hit Google’s profit margins hard, so it shows how important staff retention is to the search engine giant.
This decision illustrates how vital the Human Resource department is for a huge company, like Google, with equally huge competitors, like Facebook. If Google did not take notice of the fact that they were losing so many employees to Facebook and act to correct this, Google could lose its competitive edge. Something unique to the telecommunications industry is how important human capital is, particularly in the areas of innovative ideas. This is essentially an industry of intellectual innovation, so if a company loses their employees then they’re basically losing what makes them profitable, especially if they are an industry leader. Google obviously recognized this and, hopefully, the impact of this pay raise on their profits will be out done by the profitability of their employee’s ideas.
http://online.wsj.com/article/SB10001424052748703523604575605273596157634.html#ixzz14vjBxqUB
As you said that pay rise they did is going to affect their production costs and as consequence their profits. But they are obviously not willing to loose their staff and less if they are going to work for the competition. They recently had some workers that leave their job at Google and with all the knowledge of how the system worked build up another search engine, so they have recently experienced one of the worst staff turnover scenario. Probably Blekko, the search engine that was created by those former Google workers would not be such a threat for Google but if those system techniques and knowledge that many of their workers have ends on the hands of potential competitors then they could have troubles. In conclusion maintaining a company's workforce not only is vital for the prosperity of companies but for maintaining their little secrets, their secret formula that is what make them unique.
ReplyDeleteClaudio
Savannah,
ReplyDeleteI agree with you that this industry really is "an industry of intellectual innovation." Just five years ago it seemed like Google was the place to work at. I have seen pictures online of cookie trays, sliding boards, and video games among many other things. These extra services in the past had attracted the best and the brightest brains. Recently however, many companies have apparently been picking up Google employees at a rate they evidently weren't comfortable with. I wonder if employers such as Facebook offer the same amenities workers got at Google or if they were lured by strictly higher financial compensation.