Compensation Strategy of Google

Google’s Business Strategy and Compensation System

Google is well-known for its online search engine services. The company operates from many regions where it has established subsidiary units to facilitate management operations. This means that it has a significant number of employees that are the cream of the crop from a big pool of candidates according to Google’s hiring rules. As a compensation strategy, these employees are awarded large remuneration packages and broad-based stock options. As a result, this study focuses on Google’s business strategy, system implementation, and how strategic system management fits the reward system to company plans as well as environmental conditions (Becker, 2006).

Innovative Business Strategy

As an innovative company, Google employs an innovator business strategy. This form of approach stresses on new product or services as well as brief response time to the market trends. Therefore, an aiding compensation strategy lays limited emphasis on skills and jobs evaluation and more stress on incentives devised to promote innovations. According to Porter’s generic business strategy structure, Google focuses on differentiator strategy rather than cost leadership strategy where it provides exceptional product and services at premium prices. On the other hand, Google fits as a prospector on Miles and Snow’s framework as it focuses on innovation as well as new and emerging markets. According to Google’s compensation manager, John Schirm, the alignment of pay system with the corporate’s business strategy is vital (Becker, 2006).

Diversity in Organizational Strategy and Compensation

According to Kaplan and Norton (1996), diversity in the organizational strategy ought to be backed by similar variations in human resource policy, mainly compensation. The contingency notion and underlying premise state that extensive alignment between corporate strategy and compensation strategy results in high efficiency and effectiveness in a company.

Google’s Compensation Philosophies

The philosophies of Google’s compensation strategy are strategically tailored with business strategies primarily to attract and retain talent, pay for performance, and ensure that employee performance outcomes are lined up with shareholder’s performance results. These result-oriented philosophies are based on the five main dimensions of compensation strategy including goals, managerial decisions, workforce contribution, competitive advantage, and internal alignment (Barney, 1995).

Payment Policy and Business Strategy

The payment policy is formulated to support the business strategy through the emphasis on commitment and exceptional employee performance. Therefore, changes in business strategy will force Google to change the payment system such as the case involving the strategic and cultural shift by IBM. Besides, Google has several business units including internet search engine, Adsense, and cellular phone manufacturing within the same organization. Therefore, these business units face mixed competitive conditions which require tailored business strategies to fit variable compensation systems. Google’s emphasis on talent retention is due to the sorts of skills it hires demanding longer time to train which is also expensive.

Aligning Compensation and Business Strategies

In conclusion, AMO performance theory indicates that support by compensation policy on business strategy signifies an extensive alignment connecting human resource and compensation strategies. Conventional knowledge suggests that competition on cost necessitates average compensation, whereas bidding on innovation has a higher likelihood of succeeding with pay for performance as an incentive. Most companies such as Google do not have generic strategies, but on the contrary, they prefer to adopt the elements of innovation and cost. Similarly, compensation policies do not primarily line up precisely with the proprietary business strategies (Weatherly, 2003). Therefore, Google has a reward system that is aligned to the business strategies to ensure the employee performance is balanced with the shareholder’s anticipated results. With various business units, the business and compensation strategies are differently based on the environmental aspects.

References

Barney, J. B. (1995). Looking inside for competitive advantage. Academy of Management

Executive, 9, 49-61

Becker, B., & Huselid, M. (2006). Strategic human resources management: Where do we

go from here? Journal of Management, 32, 898-925

Kaplan, R., & Norton, D. (1996). The Balanced Scorecard. Boston: Harvard Business

School Press.

Weatherly, L. (2003, March). Human capital-the elusive asset; measuring and managing

human capital: A strategic imperative for HR. Research Quarterly, Society for Human Resource Management. Retrieved on June 1, 2003, from http://www.shrm.org/research/quarterly/0301capital.pdf