DISTRIBUTED LEADERSHIP AT GOOGLE: TRIUMVIRATE AT THE TOP AND EMPOWERMENT OF THE CADRES Google’s Leadership Triumvirate (left to right): Eric Schmidt (Executive Chairman), Larry Page (Co-­‐founder and CEO), and Sergey Brin (Co-­‐founder) Google needs no introduction to the netizens of the world. Within about a decade of its inception in 1998, it has become their preferred search engine. The company’s popularity can be gauged from the fact that its name is now used as a verb in the English language meaning ‘to search on the net’. It provides free net-­‐search services in more than 120 languages, with a large number of web-­‐based products in its portfolio (which is constantly being updated by adding new products and rationalizing and simplifying the existing ones), and generates about 97% 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 2009Fortune magazine ranked it as the best place to work in the US, 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 at the Stanford PhD program in computer science, they developed the idea of a search engine company and decided to drop out of the PhD program to launch the new company in 1998 from a friend’s garage. Both Larry and Sergey have ‘academic’ ancestries: Larry’s father, Dr. Carl Victor Page, was a computer science professor at Michigan State University; Sergey’s father and paternal grandfather were mathematicians and his mother was a research scientist with NASA. Sergey was Russia-­‐born and immigrated to the US when he was six years old. Both Larry and Sergey were researchers at heart (though neither of them completed their PhD), and 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. The issue was becoming increasingly complex with the explosive growth of the materials on the web. Hence the duo have taken 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, and 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), and thereby indirectly conveying the company’s unique vision to organize and procure ‘infinitely’ large amounts of information for users and possibly make as much money. 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 A-­‐class employees and giving them freedom to exercise their creativity. Though there is some cost-­‐saving in recruiting B-­‐class 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% of the time should be devoted to Google’s core business of search and advertising, 20% to off-­‐budget projects related to the core-­‐
business, and 10% to pursue far-­‐out ideas based on one’s own interest and competencies. There are also generous rewards and awards for implementing innovative ideas. Though such systems are perceived by the employees as perks, for the company it is “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% of Google’s new products are generated using the ‘free’ time granted to the employees. Interestingly, the choice of a new product or strategy for the company 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 into existence through this process, as exemplified by the creation of Gmail by Paul Buchheit, or the informal motto of the company (“Don’t be evil”) 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 the customers’ ignorance but should be ready to forego short-­‐term gains if that is required for providing sustainable services to the society. In the context of Google’s business, a specific implication of this is that the company would strive not to get the authentic search content confused with or influenced by the advertised material. Communicating the vision and granting the freedom to employees for implementing it is one part of Google’s people-­‐management system. The other is to provide the employees with a hassle-­‐free environment so that he/she could concentrate fully on work. In other words, the goal is to strip away everything that gets in the employees’ way. Hence they provide a standard package of fringe benefits to employees and top it up with first-­‐class dining facilities with free and unlimited supply of wholesome food, snack stations in various parts of the office, gyms, laundry rooms, massage rooms, haircutting saloons, 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, they do not even have to worry much even about getting dressed up, as Google’s corporate vision includes such axioms as: “You can be serious without a suit.” Such policies of empowering and facilitating employees’ work has led to a large number of innovations and consequently to the explosive growth of the company. The startup, which had been relying primarily on the personal funds of the founders, was reeling under resource constraints. “We had to use all of our credit cards and our friends' credit cards and our parents' credit cards", recalls Larry Page. Finally they decided to bring in VC funds and to allow unobtrusive text advertisements alongside search results, and the company started making profits in the year 2000. The founders managed the company till 2001, with Larry Page as the CEO. By the year 2001, Google had grown to employee strength of over 200, and had a wider Board with representatives of the venture capitalists on it. They brought in a professional manager, Dr Eric Schmidt, as the CEO, with the responsibility of providing the organizational and operational expertise and leadership for the company. 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 foundations of the leadership triumvirate at Google were laid in the year 2001. Between 2001 and 2004, the salaries of the top three were: US$250,000 per annum for Schmidt, and US$150,000 each for Page and Brin. However, just before the IPO in 2004 (trading on the NASDAQ as GOOG), they 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 they could convey to potential investors the immense confidence they had about their company’s performance and tell them that they were willing to link their own remuneration to the market performance of their company. Supplementing this, they also adopted an innovative method for fixing the price of IPO; they used a Dutch auction in which the market determined the initial stock price, which also helped in preventing insiders and institutions from quickly selling for a profit. Their confidence in their own company and the market was not misplaced. Schmidt’s 12.45 million shares of Google are 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, but they declined to accept it. 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, and so was initially viewed by others with some apprehension. His past performances were giving 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 apprehension that the Mercedes he drove and the suit and tie he wore would not go down well with the informal culture prevalent at Google. In any case, nobody thought that he was an inspirational leader, a greater 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 these apprehensions, Schmidt’s staunchest critic was another venture capitalist member of the Board, Michael Moritz of Sequoia Capital, who felt that Schmidt lacked the toughness required for pushing ahead with the revenue plan based on the advertisement formula being experimented during 2001-­‐02. For a company like Google, which took pride in its ‘distributed leadership’ culture, perhaps the patient and unobtrusive engineering management style of the mild-­‐mannered Eric Schmidt was better suited 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 in their twenties and the new CEO who was 20 years older than them. His prior work experience also has added credibility to his new role – he has been Columbia University's head football coach at one time, a senior executive at Apple, and CEO of several Silicon Valley companies including Intuit. Bill’s major contribution was in taking emotion out of the decisions and in helping the principal decision-­‐makers to evaluate the options in an impartial 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. The results were also seen in the performance of Google. 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. From 2011, Schmidt is the Executive Chairman, as Larry Page has assumed the post of CEO once again. 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. According to this view, 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, and (5) Get your employees’ performance reviewed by someone they respect for their objectivity and impartiality. Some examples of such behavior are listed below: • 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 from 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 has 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 the society at •
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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 the turnover by 200%. As the corporate hierarchies can often create obstructions to employees’ work, Schmidt has reinforced the existing system of allowing employees a certain degree of freedom to create their own projects and choose their own teams. In reviewing the employees’ performance, Schmidt has made it a point to identify reviewers from among professionals whom the concerned employee respects for their objectivity and impartiality. The leadership practices of the triumvirate at the top had a permeating effect on the leadership behavior of 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 8 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 The qualities identified are amazingly simple and does not require any major changes in the personality of the manager – they are a matter of behavioral changes, which can be accomplished by regular and deliberate practice. Laszlo Bock simplifies them further: “The two most important things I can do is to make sure I have some time for them and to be consistent.” It may specially be noted that, though Google is a hi-­‐tech company, having the technical skills has emerged as the least important among 8 qualities of leadership. Obviously, the quality of any technology will only be as good as the quality of the people who operate it. Note: This case was prepared by Mathew J Manimala and Kishinchand Poornima Wasdani using information available on the following secondary sources (accessed during 3-­‐7 December 2012): http://www.google.co.in/about/company/facts/management/; http://www.realtimeperformance.com/RealTimeLeadership/?p=777; http://www.forbes.com/2009/11/23/ken-­‐auletta-­‐leadership-­‐intelligent-­‐technology-­‐google.html; http://management.fortune.cnn.com/2011/04/18/what-­‐would-­‐larry-­‐page-­‐do-­‐leadership-­‐lessons-­‐from-­‐
googles-­‐doyen/; http://benmorrow.info/blog/leadership-­‐culture-­‐at-­‐google-­‐inc; http://www.scribd.com/doc/19030674/Leadership-­‐Style-­‐Of-­‐Google-­‐Ceo-­‐Eric-­‐Schmidt; http://www.woopidoo.com/biography/larry-­‐page/index.htm; http://www.forbes.com/profile/sergey-­‐
brin/; http://en.wikipedia.org/wiki/Don%27t_be_evil; http://money.cnn.com/2006/03/31/technology/google/index.htm;