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How Google's Novel Management System Aids Growth
Carl Bialik from WSJ writes "Gary Hamel, visiting professor at London Business School, argues in a Wall Street Journal commentary that Google's 'novel management system seems to have been designed to guard against the risk factors that so often erode an organization's evolutionary potential.' Among Google's advantages: The 20% rule, an 'expansive sense of purpose' and the credo, 'keep the bozos out and reward people who make a difference.' Hamel also traces the company's evolution from Google 1.0, 'a search engine that crawled the Web but generated little revenue,' to Google 5.0, 'an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, 6.0 is around the corner.'"
...Google Beta 5.0, 'an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, Beta 6.0 is around the corner.
Fixed.
The funny thing is, that's exactly what the article was all about. Kudos.
As the artical points out, Google is pretty much going right where all have gone wrong in the past with traditional business models before. This is what makes them so innovative. The tremendous openess in the company, along with their creedo to do no wrong has also given them a squeky clean public image. The world loves Google and wants to see the friendly Giant smash the mean people eating one.
All that said, how long can Google really maintain it's unorthadox business methods while allowing VERY orthadox investors to buy stocks in the company. I'd say it's only a matter of time, and the price for become a truly large corporation. I can only hope that I am wrong.
Go ahead and call me unreliable; reliable is just a synonym for predictable.
of 'The Seven Day Weekend' from Ricardo Semmler. The CEO of SemCo with revolutionary ideas about business. A lot of his ideas are mentioned in TFA.
Really great book if you're interested in the ideas behind firms like Google.
I completely agree with you. Those big companies are in trouble. IBM after all showed only a 25% growth in profit for Q1 2006. And, just a few minutes before I posted this, Microsoft announced a small jump of 16% growth in profit AND a 13% growth in revenue. Leaving the tech industry, Exxon Mobile had a horrible quarter with only $89 Billion in Revenue.
Yeah, those large companies, they are just falling apart....Oh, wait...
You haven't been reading this website long have you? Here the attacks on MicroSoft never end, and Google is like the second coming.
"It is driven by an open-ended mission to organize the world's knowledge..."
and:
"Google seems to have grasped the new century's most important business lesson: The capacity to evolve is the most important advantage of all."
My bet is on Google to solce the problems of a working A.I., maybe by accident, maybe by design.
Down With Slashdot BETA!!! I've been around the corner and seen the oliphant; you can only abuse me from your perspecti
Elitism may be out of fashion, but Google is famously elitist when it comes to hiring. It understands that companies begin to slide into mediocrity when they start to hire mediocre people. A-level people want to work with A-level people.
The only problem is that a company cannot thrive longterm with only A-level people. As a software company grows and matures so the average age of the company code base increases, and there's a gradually increasing requirement for maintenance of the older products. A-level people rarely consider their primary task in life is settling in as a maintenance coder on products that are no longer considered to have a substantial "wow" factor.
Having said that, code maintenance can be some of the most demanding work around, as programmers are asked to come up to speed on outdated code they didn't write and make it do things it was never designed to do. But, speaking generally, this isn't considered something that will make you stand out in your company and it's not where A-level people want to be.
Equally well, having everyone take a turn at maintenance doesn't work either. I would imagine that there's few programming tasks worse than taking over code that's been maintained by half a dozen people who only wanted to move on to other things. You probably aren't going to get any of the awards mentioned in the article by burying yourself in old code, regardless how valuable that might be.
Seriously, look at the submitter...
Actually, no. I was wondering what on earth Google and Novell had to do with Aids growth...
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onedotzero
thedigitalfeed.co.uk
Looks strikingly similar to the models that 3M, IBM and possibly a number of other companies used during their rapid growth periods, particularly in their research/development departments. An emphasis on employee driven product development has high overhead to the number crunchers (lots of work is thrown out) but it really only takes 1 unique application of an idea (all ideas are old) in 100 to more than make that back.
Rod Taylor
Google 1.0 was a search engine that crawled the Web but generated little revenue; which led to Google 2.0, a company that sold its search capacity to AOL/Netscape, Yahoo and other major portals; which gave way to Google 3.0, an Internet contrarian that rejected banner ads and instead sold simple text ads linked to search results; which spawned Google 4.0, an increasingly global entity that found a way to insert relevant ads into any and all Web content, dramatically enlarging the online ad business; which mutated into Google 5.0, an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, 6.0 is around the corner.
It should be:
Google 1.0: A nobody search engine
Google 2.0: Outsourcing search engine
Google 3.0: Contextual ads in searches
Google 4.0: Adsense network
Google 4.1: Information hoarding of users
My version 4.1 highlights Google's recent overt interest in aggregating data on its users through services like the personalized homepage, Gmail, Gcal, Gchat, and the Google Desktop. Why is it not 5.0? Because these enhance the previously established revenue streams without changing the way they make money. It is not an evolution in Google's financial model, just new ways to better target their contextual ads (3.0 and 4.0).
In order for a 5.0 to happen, Google has to redefine its primary revenue stream or add a new one that pulls in revenue from a seperate audience. My point is made most clear by highlighting the benefiting party of each evolutionary step:
Google 1.0: A nobody search engine - You and me
Google 2.0: Outsourcing search engine - Yahoo/AOL/portals
Google 3.0: Contextual ads in searches - Web advertisers
Google 4.0: Adsense network - Web masters
Google 4.1: Information hoarding of users
Likely candidates for a 5.0 would be:
Television or radio advertisement domination
Online music store, or other type of goods for cash type of business
Online payment system (clone paypal)
A novel online service as a subscription service (seems least likely with Google's history)
Those would be Google 5.0.
A-level people want to do what is best for everybody (for themselves and the company). If Google keeps rewarding people who make the most contributions, then code maintainers will be rewarded. Maintenance is considered a low-tier job at hierarchical companies where only people working on the 'wow' products are rewarded.
The whole point of googles flat structure makes it possible to have maintenance be a sexy task within the organization by allowing rewards to go where they should go too. I would say that 'most companies' create the hierarchy because they don't have the guts to manage the way that google does.
I've worked at far too many companies where the disconnect between espoused values and actual values create the kind of situation you describe (ie maintenance coding is a loser job, best avoided or gotten promoted out of).
Who, exactly, would you like to manage large projects (or large companies)? People who don't know anything about management or business, because they are educated in tech? Yes, occasionally companies run from the top down by techies work, but that's not the reason why they work. Believe it or not, the ability to lead, to allocate resources, to plan ahead, to determine whether something is marketable, to deal with supply chains and distribution, and to keep people happy are skills. Good MBA programs teach those skills. The second /. heresy in this post is the following: the best piece of software doesn't always make the best product! Look, I've been programming since I was 5 years old and so I have the same feelings as the most of you about great software. At the same time, I realize the business world isn't a perfect world. Sometimes your clients don't want it perfect-- they need it now. Sometimes you _could_ spend a few more weeks adding really great functionality to your project-- but marketing research says that it won't change sales numbers a bit.
====
Crudely Drawn Games
I don't know if it means anything, but one of my former coworkers left a (very good) NASA engineering position to get his MBA from Columbia. He'd been with NASA for about 10 years, and was looking to shift out of engineering for a change. He certainly came from a background that was a lot different and much more technically oriented than almost all of his classmates.
Google just hired him to do business development. Unlike the stories I hear about how difficult it is to get hired there, he did very little work to get the position except submit a resume - in fact, it was more like they were actively looking for someone like him.
Anyways, perhaps that's some sort of indicator of the MBA types Google is recruiting.
Worst...sig...ever!
Its not MBAs that are the problem. Its MBAs that don't know anything about the industry that their company is in. Even worse if they think they know a lot more than they do (ie. PHB). An MBA that is also very technically proficient is worth his/her weight in gold.
Google's apparent indifference to the use of Google Groups by anonymous posters to wreck Usenet with SPAM, off-topic posts, and overall abuse has led some to call for a Usenet Death Penalty (configuring news servers to drop all articles originating from a given site). See:
Call for UDP against Google Groups
Well, everybody does that, don't they? Even the Bush administration does that. The key is in your perception of who the bozos are, and who makes a difference...
Leave it to Google to come up with a better design than "alphabetically, by author, then title"
(Sorry, I couldn't resist.)
Yes, but you're forgeting something. There's plenty of accounting magic you can use to show a profit year after year even when in reality you're loosing money hand over fist. A publicly traded company :::depends::: on continuting to show a profit; frequently the first indication that a company is in real trouble is when they file for chapter 11.
-Chris
--an unbreakable toy is useful for breaking other toys--
A friend of mine run a small company.
...
He tried to hire only the best of the best for a while and after gave up.
You cannot reward everybody in the company otherwise reward loose its meaning. So you must choose. If you have a team with a guy who is 2 times beter than an average employee in another company, he is still mediocre compared to his colleague who is 2.1 times beter.
In addition, the less performant employees are the 'disposable' percentile. At the next company difficulty they know they are terminated, so even if they are top-performers by other companies standards, they still are under basic underperformer pressure.
Even by paying top-salaries for less performing, they were leaving because of the pressure and the lack of consideration.
Ironically, even the top performer were leaving, because in his company they were yet another genius
Finally he managed beter results keeping some looser in his company ( buffer/fuse employees ). It happened very quickly for him but off course his company was not google, there was no hype to keep employees working there. And also people having his company on their resume were not automatically considered as half-god by concurent companies.
Hiring above the mean makes sense for jobs where a better employee means a potentially higher return for the company - it does not make sense for positions where a better employee means higher costs and no higher return and higher turnover.
In fact, for a large number of positions, it makes sense to look for the weakest candidate that can do the job satisfactorily within reasonable margins, assuming you get a chance to hire them at a matching salary, because such candidates are more likely to have a possible career ladder (and so be more likely to stay) and/or are more likely to stay because it's harder for them to move elsewhere, and are likely to be cheaper than the alternatives.
Even if you're looking purely at developer jobs, if you keep hiring above the mean, it means eventually you'll have people with PhD's and umpteen years experience doing routine maintenance programming for trivial, non-critical systems that you could have safely handed to some intern.
Capitalism exists only to make a society more efficient than other economic systems and help civilization progress, mostly in terms of standard of living in the ways of medicine, food, shelter, and that sort of thing alongside aiding our desires to find out who and what the hell we are and what we're doing here (arts, religion, philosophy, exploratory and theoretical science). That is the be all and end all for capitalism, there is no other point to it. The problem is that alot of people don't see it that side of it with the drive to succeed, and see money as the only reason we have this setup. The worse of these are usually MBA's, and the worst are usually CEO's and fellow higher-ups, the ones hell-bent on driving the gap between rich and poor as far apart as possible. While many economists and "captains of industry" would have the world believe that a free market and their version of capitalism is the real thing, nothing could be further from the truth.
The current system is a perversion of the original idea: products are no longer judged on quality and craftsmanship but on advertising, stifling real innovation or foresight into the long term effects certain products can have on the future, such as global warming, toxic waste, growing amounts of artificial chemicals in the land, water, and air, side effects of artificial chemicals in agriculture and livestock, side effects of pharmaceuticals, etc. The best example I can think of here would be Monsanto, who have used advertising to present a friendly image while using lawyers to silence reporters and competitors and massive amounts of cash to silence the FDA about rBGH, the artificial hormone given to cows to increase milk production, which is banned in every other civilized nation but the US because of possible cancerous effects (not to mention their Agent Orange or GM crops).
Anyway, that was a slight tangent. The point is that the entire concept of making money through the manipulation of money without thought to the end result defeats what I believe strongly to be the idea behind capitalism: reward through ingenuity, invention, and hard work in a way that benefits society. The idea is not to find as many tax and regulation loopholes and cut as many corners as possible to increase the top 5 employees salaries to 7 digits. Civilization also needs a well educated, well paid, large middle class to produce large numbers of people who will succeed because of their talent and ideas to progress and keep from collapsing, which is disappearing.
Remember, money is only a system of measurement, and the stock market is imaginary, as it is an abstract concept of people paying for paper what other people say they should. The only thing of real worth is labor. MBA's should not be paid as handsomely as they are for essentially supervising a company. The goal of a company's CEO should not be making money by whatever means possible, but rather making sure that the company's work and products are the best they can be, as logically, that will make you profitable and that's the only reason you should be profitable.
I'm going to be slightly smug and end with a quote by someone much smarter than me:
Ex nihilo nihil fit.
Google is in the honeymoon phase. It just went IPO. Its too early to draw any lessons about its "success". The biggest test is when Google suffers a setback and has to do layoffs. Another test is when people start retiring prematurely to play with their money...and yes, as you mention, grunts are left with code maintenance. Everybody used to sing praises about Sun Microsystems too (with fluff articles about the "wacky" pranks employees would pull -- as signs of "innovation" and "creativity" -- and the casual dress code), and now look at where Sun is.
With all of the "brainpower", what makes headlines? The products of companies they bought (not the products developed from within) and copies of other companies' products:
- Google Earth (originally developed externally by Keyhole)
- Skechup (originally developed externally by @Last Software)
- Writely (originally developed externally by Upstartle)
- dodgeball social networking (originally developed externally by dodgeball.com)
- GoogleTalk (instant messaging idea copied from ICQ and others)
- AdWords (patented externally by Overture)
- GMail (internet mail idea copied from Hotmail)
- GoogleMaps (mapping idea copied from Mapquest and others)
This points out there is a flaw in the system. They may have thousands of "little 'Googlettes'" (to quote TFA) running inside of the company, but the true innovation is happening outside of the company. These ideas weren't created by the Mensa-like brains who passed the Google hiring gauntlet.
The article mistakenly says that Google's management ideas are novel, but they aren't; they are copied from a number of other companies, some of which are still around, some of which aren't.
At the end of the day, Google still gets its revenue from advertising, which is no different from any other portal since circa 1996. The quality of Google's core application (search results) is subjective. Google's primary user-interface is trivial (from the end-user's standpoint, it has few states). Easy rise, easy fall.
Ultimately, the question becomes: Who wrote this article? A journalist for the Wall Street Journal? Nope. The article's author is Gary Hamel, who owns a management consulting business. This is a fluff promtional piece he can add to his resume when trolling for new clients. That's why the article is offered for free (no registration required); it's an advertisment.
The greatest irony is that the former senior vice president of engineering at Google pre-IPO and shortly post-IPO was Wayne Rosing (who in 2004 held about 28 million dollars worth of Google stock).
It's my understanding that Rosing has no college degree.
Huh? Lets keep a perspective here.
Let's wait 5 years to see if Google is indeed so wonderful, ground-breaking, innovative blah blah blah.
The rapid growth trajectory they are on at the moment has been traced by many tech and other companies in the past, and along the way things get more complicated and organisations and their environment can change dramatically, often for the worse. G. are not unique in this or any respect, and don't live outside of history.
I'd also like to dispute statements that Google is "an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base "? There is nothing innovative about the items in that list at all - Google didn't invent (nor even significantly improve) web-based email, nor web-based database front-ends, nor good search algorithms nor desktop search nor photo-sharing on the web nor web-based satellite mapping nor the delivery of contextual web-based advertising etc etc etc. And to call the 'Google Desktop' an innovation when it is just a round up of basic software tools (many of which aren't even Google's) is especially dumb.
There is, in fact, very little that Google has done in terms of products or its business model that is 'innovative' by any stretch of the imagination. Let's face it, they haven't really invented much at all.
They are indeed very good at buying up other small innovative companies, they do web search well, they run a good ad banner network in AdSense, and offer good software like GDS, Picasa, SketchUp and other titles for free. I thank them for that, and their business has indeed successfully delivered those things to me and millions of other people, but I'm not going to lose my sense of judgement about the company because of these nice but hardly innovative achievements.
Another company that hired only A-level talent, robustly avoided B-level talent, ran strong internal competitions to try and attract other employees onto your star project, and talked a lot about "darwinian" processes running between internal projects was: Enron
Like Google now, Enron back in the day had management consultants writing magazine articles about the wonders of their "fluid" structure, the way petty beaurocrats were kept out of people's way, and their hiring practices. It was The Way Of The Future. Enron was the best, was going to take over and Rule Supreme. Like Google, Enron was proud that it didn't just keep to one boring idea of what they did, the company could perpetually reinvented itself.
Those standard management structures exist for a reason. If google finds a way to work without them long-term, then good for them. But it's harder than it might seem.
Lets not forget that Gary Hamel had Enron "leading the future", his now revised book, with its decentralized management structure. As many of us know, in the current thinking decentralized structures promote innovation at the expense of control. Hamel's one sided view of structure didn't work out so well.
Googles 20% +10% rule is jsut best practice from the 3M post-it case taught to every HBS MBA with the 10% twist. It works. Its not new. Google does some things exceptionally well. But I don't need a revisionist telling me about that.
They've obviously don't sit at their desk for long enough each day ;)
which is totally what she said
These ideas aren't new. Have any of you read Built to Last? Google walks and talks like a textbook example of a visionary company.