Finally a good HR department

My general advice to new CEOs is that their first initiative should be to abolish their company’s HR department. This will make them very popular with their staff and generally enhance their operational effectiveness. Each section manager should be capable of basic HR management and just have a lawyer or two on call for the difficult stuff.

But Google may be an exception to my rule. Stuff reported:

A few years ago, Google’s human resources department noticed a problem: A lot of women were leaving the company.

Like the majority of Silicon Valley software firms, Google is staffed mostly by men, and executives have long made it a priority to increase the number of female employees.

But the fact that women were leaving Google wasn’t just a gender equity problem – it was affecting the bottom line. 

Unlike in most sectors of the economy, the market for top-notch tech employees is stretched incredibly thin. Google fights for potential workers with Apple, Facebook, Amazon, Microsoft, and hordes of startups, so every employee’s departure triggers a costly, time-consuming recruiting process.

If employees are good, most employers are highly motivated to keep them.

Google calls its HR department People Operations, though most people in the firm shorten it to POPS.

The group is headed by Laszlo Bock, a trim, soft-spoken 40-year-old who came to Google six years ago.

Bock says that when POPS looked into Google’s woman problem, it found it was really a new mother problem: Women who had recently given birth were leaving at twice Google’s average departure rate.

At the time, Google offered an industry-standard maternity leave plan.

After a woman gave birth, she got 12 weeks of paid time off. For all other new parents in its California offices, but not for its workers outside the state, the company offered seven paid weeks of leave.

So in 2007, Bock changed the plan.

New mothers would now get five months off at full pay and full benefits, and they were allowed to split up that time however they wished, including taking some of that time off just before their due date.

If she likes, a new mother can take a couple months off after birth, return part time for a while, and then take the balance of her time off when her baby is older.

And did it work?

Yet it would be a mistake to conclude that Google doles out such perks just to be nice. POPS rigorously monitors a slew of data about how employees respond to benefits, and it rarely throws money away.

The five-month maternity leave plan, for instance, was a winner for the company. After it went into place, Google’s attrition rate for new mothers dropped down to the average rate for the rest of the firm.

“A 50 percent reduction – it was enormous!” Bock says.

Excellent. No laws needed. Just good incentives. An extra two months paid leave is a cheap price for keeping an employee, rather than losing them and the costs (actual and opportunity) of getting a replacement.

Under Bock, Google’s HR department functions more like a rigorous science lab than the pesky hall monitor most of us picture when we think of HR.

At the heart of POPS is a sophisticated employee-data tracking program, an effort to gain empirical certainty about every aspect of Google’s workers’ lives – not just the right level of pay and benefits but also such trivial-sounding details as the optimal size and shape of the cafeteria tables and the length of the lunch lines.

In the last couple years, Google has even hired social scientists to study the organisation.

The scientists – part of a group known as the PiLab, short for People & Innovation Lab – run dozens of experiments on employees in an effort to answer questions about the best way to manage a large firm.

How often should you remind people to contribute to their 401(k)s, and what tone should you use?

Do successful middle managers have certain skills in common – and can you teach those skills to unsuccessful managers?

Or, for that matter, do managers even matter – can you organise a company without them?

And say you want to give someone a raise – how should you do it in a way that maximizes his happiness?

Should you give him a cash bonus? Stock? A raise? More time off?

A science and research based approach to HR. Great stuff.

The group ran a “conjoint survey” in which it asked employees to choose the best among many competing pay options. For instance, would you rather have $1000 more in salary or $2000 as a bonus?

“What we found was that they valued base pay above all,” Setty says. “When we offered a bonus of X, they valued that at what it costs us. But if you give someone a dollar in base pay, they value it at more than a dollar because of the long-term certainty.”

In the fall of 2010, Schmidt announced that all Google employees would get a 10 per cent salary increase.

Setty says Googlers were overjoyed – many people cite that announcement as their single happiest moment at the firm, and Googlegeist numbers that year went through the roof. Attrition to competing companies also declined.

Not all companies can afford to do that, but if you challenge is staff retention nice to know what works – not one off bonuses, but pay increases.