Larry Page and Sergey Brin took a look at management theory and were not impressed: Too much hearsay, too little data. There’s got to be a better way to manage companies. So google made their own rules.
Now, with 548 Billion$ market capitalization, 18 years since its founding, most people still think of Google as bold, entrepreneurial, unconventional and smart. It seems that there is something to learn from Google about management.
Google is willing to share its wisdom:
- Eric Schmidt, ex CEO of Google and now chairman of its holding company Alphabet, co-authored “How Google works” in 2014
- Lazlo Bock, Head of People Operations of Google, authored “Work rules!” in March 2016
- Re:work an initiative an website of Google to promote its management practices to other companies
Why care? Google has an extreme propensity to experiment in order to come up with decisions based on data. It applied its data driven, experimental approached not only to its range of products, but to its management and internal organization as well. So with all the hear-say and opinionated discussions on management, it is good to have a company (helped by university scholars) spending time, money and effort to find out what good management is all about and putting these insights into action.
There is a lot of empirical, data driven, work on good management practices available in Management sciences. But there are few cases where these insights were acted upon, iterated and optimised over time. An amazing journey.
But are these insights helpful to other companies? After all google is an outlier in so many ways.
Disclaimer: Google is different
Google is through and through the brain child of its founders, Larry Page and Sergey Brin. As with most founders, their values defined the values of google. Both founders appear to have very strong values.
They share an elitist outlook to the world. In a piece for the New York times from 2014 author Brad Stone used the illustration (see left) to describe the values of Larry and Sergey:
- 80% is never good enough
- Goals must be set so high to be only very rarely attainable
- Smart creatives are everything, forget about the rest
The rest of people might be useful elsewhere, but not at Google Inc.
To the defense of google: It is an engineering company working on leading edge technology. It needs “moon shot mentality” engineers for what it aspires to. Google has an academic approach to business: Money is secondary – the money question will be solved if the product is based on break-through technology.
Still, these values makes people uneasy, see the 2013 best selling novel “The Circle“. There is something fundamental sinister in a company that slogan is “Do no evil”, that values transparency very highly, thats puts the user above everything else – but makes 90% of its money by selling advertisement space driven by an engine no outsider really knows – that is a secret that is kept for “the best of our customers”. Trust us.
History shows that power needs checks and balances – or be inevitably corrupted over time:
“Power corrupts – absolute power corrupts absolutely” (Lord Acton).
But laws providing checks and balances lag behind technological progress. One of the most pressing open questions of out time, as google might change its search algorithms at any time in so many subtle ways. Thereby billions of dollars spend might be shifted away from one market or supplier to others. Even more threatening is the potential manipulation of votes. As the outcome of democratic votes often depends on small group of swing voters, changes to googles search engine might tilt the balance and decide political power democratic elections.
Currently, it might be safe to assume that Larry and Sergey are benevolent dictators...
Lets leave this side track. So what else is different about Google?
- Software Engineering is the still the focus: Google is very much a one product company, as 77% of google revenues come from its Adwords engine, selling advertisement space. By venturing into Cars, Rockets and Biotech Alphabet is transforming itself into an engineering company
- High Margin operating environment: Google is as rich in profits as it is in market capitalization. They can afford to experiment, afford to be people oriented. Googles management model may not be replicable to others, because of cost reasons
- Silicon Valley: It is one of the Valleys Poster companies, “it drank the Kool-aid right from the start”. A phrase meaning one has mindlessly adopted the dogma of a group or leader without fully understanding the ramifications or implications. Silicon valley is a very special place, with its own challenges and values, that may not line up with challenges and values companies in other locations face
Having this disclaimer in mind: Is there something to learn from Google that is applicable to other companies as well? Oh, yes – a heap of refreshing wisdom for any company – in my humble opinion.
How google works
Googles approach to management is refreshing. It challenges conventional wisdom with the data driven mindset of an engineer, who accepts not only “physical” artifacts as evidence, but soft, psychological evidence as well: As long as there is data to prove that outcomes are better, Google will go with this form of management and organization.
So what has been tested and proven at google?
1. Strategy is a creative process
What has this blog been obsessed with the question of strategy! I am relieved to find in Google a believer of Henry Mintzbergs view of strategy as a creative process, as spelled out in his 1994 book “The rise and fall of strategic planning“.
Strategy is not viewed as a
- “market research driven”
- “voice of the customer” or
- “competitive positioning” or
- “number crunching” exercise.
Google never went for these kind of strategic planing exercises. Traditional companies, that face business environments that may only allow incremental changes might benefit from those analytical techniques. But these techniques invariably end up with small, incremental changes.
In the VUCA (volatile, uncertain, complex and ambiguous) world of digital disruption that more and more traditional companies face, strategy should be looked at as a creative process. Mintzberg and others believe that any planning effort not embedded in a creative strategic frame is not worth being engaged in at all.
Technology and products are interlinked in Googles approach to strategy: “Find the geek, find the stuff“. In companies that are not as much technology driven, the product usually still plays the most important role in any strategic discussion. Technology is a secondary concern, if a concern at all.Without technology to disrupt products incremental change is the norm and the discussions soon center on the way products are provided.
Core competencies are discussed instead of technology. Any company wishing to aim higher in this technology driven world needs to learn to discuss technologies on board level, too.
2. Culture is there to release creative potential
Here too, Google – being a product centric company – is all but geared towards creativity. By reading Schmidts and Bocks book, the underlying theme of Alex Pentlands works comes to mind, as discussed in Social Physics: The Revival of Science in Management:
Innovation = f (Exploration * Synthesis)ˆN
Innovation is a function of repeated exploration and synthesis.
Google is build, in all aspects, to release the creativity of the individual, to maximize his contribution.
The amount of space, time and trust provided by google is very high compared to efficiency focused organizations. That is not to say that efficiency is not valued at google, as the authors are quick to mention.
Google builds its culture on all the values of the lean start-up movement. Basically, without reading and understanding Eric Ries 2008 book, Google can not be understood. It is such an immensely influential book, read it – if you have not yet got around to do that.
3. Lightweight Organizational Structure
The one message gets from Google is: Keep it light – do not be distracted by org charts. Org charts are needed, absolutely. But keep them easy to understand for everyone by
- Stay with a functional organization. A department for products, one for sales, one for accounting, one for logistics etc.
- Do not invest in bean counting and internal competition by going into divisional, regional, profit center or matrix organisations. Those organization forms are distracting from the real challenges and lead to an inwards instead of an outwards focus
- Keep hierarchies flat. One manager per 12 to 18 employees is sufficient.
- Avoid multiple purpose organizations. One purpose, one organization.
The last bullet indicates the main reason why google split up into Alphabet with 17 subsidiary companies, all with their specific purposes. But the rule is applied in every organisational department as well: Give each department one clear purpose. Do not go for matrix organisations.
4. Management: Project Oxygen and Project Aristotle
Starting 2002, Google tried for half a year to get rid of managers. They failed.
In 2008 google set out with a couple of researchers to prove that managers do not matter. They found out, that managers matter a lot. Management can neither be done away with nor ignored:
Managers matter a lot.
Their effectiveness can be improved a lot by applying some simple rules.
Interested ? Keep tuned. This is part 1 of 3 of a series on the lessons of google on management.
By the way: What do you think of google as a corporation? Is it the upcoming empire of evil or the savior of humanity?