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How Google's Novel Management System Aids Growth 156

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.'"
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How Google's Novel Management System Aids Growth

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  • Novell? (Score:1, Funny)

    by Zen ( 8377 )
    Was anybody else besides me wondering why Google was using a Novell system when they read the headline?
  • by Volante3192 ( 953645 ) on Thursday April 27, 2006 @05:15PM (#15216011)
    ...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.

  • by ZSpade ( 812879 ) on Thursday April 27, 2006 @05:17PM (#15216024) Homepage
    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.
    • very orthodox investors will continue to buy as long as GOOG continues to make money. The recent growth in earnings means that GOOG is still GOOD. Size doens't matter nearly as much as culture. If GOOG can maintain their culture, they can maintain everything else. Culture is the Most Important Thing.

      More products and more inovation means more dollars. more dollars means hap-hap-happy investors. now if only Google would hire me.

    • by DragonWriter ( 970822 ) on Thursday April 27, 2006 @05:31PM (#15216132)
      Google is currently somewhat insulated because its Class A stock (the publicly traded one) has 1 vote per share, and its Class B stock (held only by a narrow group of insiders) has 10 votes per share, which give those insiders something like 2/3 of the voting power.
    • by erbmjw ( 903229 ) on Thursday April 27, 2006 @05:51PM (#15216276)
      Another example of a company that utilizes unorthadox business methods, but still manages to please share holders; look at Costco, because they were able to convince their orthodox share holders of the benefits of supporting Costco's unorthdox business methods.

      If these companies continue to communicate to their share holders the sustained benefits of long term gain, we won't see a signifigant change in their unorthadox business methods.

    • Google is still young - let another 10 years pass, and see what happens. People get stale - it's just part of the human condition. The only way I see to gaurd against this is to ensure that there is a controlled degree of turnover in staff (especially managmement) so that nobody gets too comfortable.
      • Or.. you can do what google is trying to do, and keep your staff stimulated, thereby not letting them go 'stale'. If people are kept in an environment where they actually get to do work that they enjoy doing, then they will manage to keep up with the times. Old engineers are still good engineers, and still understand modern developments. The internet, or at least the services being run on the net, changes rapidly, and some people don't enjoy the changes that much.

        I've always found HTML, web scripting, da
        • You make an interesting point. Keeping people motivated with an innovative frame of mind might very well be one way to address the "staleness" issue.
  • Reminds me (Score:5, Interesting)

    by Peturrr ( 940456 ) on Thursday April 27, 2006 @05:18PM (#15216030)
    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.
  • Now it's Google's turn in the box. With the way Google is getting involved in Politics, both in the US and China, I'm sure a lot of people are going to start having issues with them and I'm sure a lot of it will spill over into their workplace.

    As a previous poster said, as it gets bigger, things will not go as well. Just as everyone turned on MicroSoft, I'm sure one say everyone will turn on Google as well. We're a fickle industry.
    • Oh absolutely, everyone has completely turned their back on Microsoft [dallasnews.com]

      • Re:Ah yes (Score:3, Insightful)

        by Banner ( 17158 )
        You haven't been reading this website long have you? Here the attacks on MicroSoft never end, and Google is like the second coming.
        • Clearly, you haven't been reading this website long either. You're missing a clause:

          YHere the attacks on MicroSoft never end, and Google is like the second coming...
          ... of Microsoft.
          • If you look at the start of this thread, you will see the grandparent just expressed that sentiment himself. Google is a good company, and they still make good products, I haven't ever experienced a crash in a single one of my thousands of Google searches. The whole ad-brokering thing does kind of suck, but at least they do it in a targetted manner, so that any ads are actually likely to be relevant for what I want (but if I want to buy something, I tend to just Google for the relevant company rather than s
  • Whooops (Score:1, Funny)

    by Anonymous Coward
    I read that article title and did that "automatic brain" thing where you only read key words.

    The article title came out "Google's management (has) AIDS"


  • ...I'd say that Amazon is starting to turn into one of these. Their new S3 storage service is a very nifty thing; I've seen folks using it all over the place.

    We're using it for the indi [getindi.com] downloads and it's been working great - especially when paired with the Ruby API [blogs.com].
  • All it takes to cripple an innovative company is for people outside the tech world, usually managers from ivy league schools with big fancy MBA's, to come in and cement themselves into positions of power and shift the focus from innovation to profits. Happens all the time... people with MBA's don't really contribute much to society and they know it (honestly, slight contribution to efficiency, maybe, but absolutely nothing else), but they also know to look for the most up-and-coming sector and the companies
    • by Valar ( 167606 ) on Thursday April 27, 2006 @05:49PM (#15216261)
      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.
      • Please not that I'm not talking about management that have experience, training, and/or education in technology. Regular managers and folks with MBA's are better suited to environments like factories and non-tech corporations, where the majority of their workforce is not particularly smart or well trained in a profession that's much closer to lawyers, engineers, and architects than accountants or average corporate employees. I think alot of managers forget they're talking to incredibly intelligent folks whe
        • Some things can be automated, yes, and some the coders could do themselves - but who wants to trawl through thousands of user requests for software when they could be coding? The coders that love to code would rather not be too involved with the making of deadlines and the reviewing of what users want etc. Admittedly those coders will likely be intelligent people who enjoy learning new things, and would enjoy talking to intelligent customers and helping them develop software that will help them, but your id
          • Wha?? I think you misread my post... I was comparing engineers to lawyers and architects as examples of careers that require a very high intellect and often run their own small, independent firms without the leadership of some ivy league suit.

            You bring up some good points, but I am sure that companies could trim a lot of fat (pun intended) by using their engineers and programmers to develope a much more efficient way of running things and giving alot of management the pink slip and a 2 year tech school broc
    • by cyclone96 ( 129449 ) on Thursday April 27, 2006 @05:53PM (#15216297)
      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.
      • Google is run very well, which is why I'm praying that nothing screws it up somehow. We need a better role-model for structuring tech companies.

        I have a great amount of reverence for people with the kind of experience you mention in the tech world with MBA's, as that degree makes an excellent... how to say it, icing on top of the rather large and impressive foundation of 10 years at NASA.
    • by pete6677 ( 681676 ) on Thursday April 27, 2006 @05:59PM (#15216341)
      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 is a business. They are out to make, yep you guessed it, money. More over -- it is a public business, thereby its owned by serveral hundreds of people. Guess what these people want from their company? This is the capitalist system. It creates a need, and this need is filled by shiny MBAs who get paid very handsomely for what they do -- make money.
      • This is going to be long (skip to the end if you like) because you just hit a rather sensitive nerve when you said:

        "More over -- it is a public business, thereby its owned by serveral hundreds of people. Guess what these people want from their company? This is the capitalist system. It creates a need, and this need is filled by shiny MBAs who get paid very handsomely for what they do -- make money."

        Capitalism exists only to make a society more efficient than other economic systems and help civilization pr

        • 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.

          That's what the manipulation of money (investment) is, that's its DEFINITION. So some folks don't invest money in the places you would prefer, boo hoo. Some other folks invest money in illegal/immoral ways (monsanto, feedlots, illegal immigr
          • Labor is the only thing of value in the market, period. Trading stocks and all the slime on wall street surely are an annoyance to the people that make society what it is, but are unnecessary. Would doctors, nurses, EMS, and orderlies forget how to take care of people if all the MBA's vanished from the face of the earth? Somehow, I doubt it. Would police stop keeping you safe? Power plants suddenly fail? Somehow, I doubt it. Now try it the other way around. Get it through that thick money-grubbing skull tha
            • Capitalism is the only thing that has lifted the standard of living for billions of people on this planet. Not generosity, not socialism, not "living wages" but pure bloodthirsty competition. This competition has made everyday products cheaper for all allowing more and more people to enjoy a decent life.

              I wouldn't expect a lover of Marx to understand that though.
  • by rts008 ( 812749 ) on Thursday April 27, 2006 @05:28PM (#15216115) Journal
    "It is driven by an open-ended mission to organize the world's knowledge..."
    "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.
  • by Calibax ( 151875 ) * on Thursday April 27, 2006 @05:32PM (#15216133)
    From the article:

    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.

    • Very good point you have there.
    • by kognate ( 322256 ) on Thursday April 27, 2006 @05:47PM (#15216241)
      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).
    • You just explained why everything google does is perpetually "beta."
    • 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,
    • by Anonymous Coward
      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 th
  • Seriously, look at the submitter...
  • Novel? (Score:3, Interesting)

    by rtaylor ( 70602 ) on Thursday April 27, 2006 @05:35PM (#15216157) Homepage
    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.
  • by moochfish ( 822730 ) on Thursday April 27, 2006 @05:38PM (#15216172)
    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.
    • I agree completely.

      Google 5.0, 'an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base'

      Innovation factories are great - innovation is great. I'm really hard pressed to figure out how google is making more money by deploying these products. Sure Gmail has adsense, but how many of those ads are really relevent? My experience has been mostly "miss". More over, do the clicks really pay for the cost of deploying and maintaining the accounts, who
    • Google 5.0: ???
      Google 6.0: Profit!

      It's late. Please forgive me.
    • My candidate of 5.0 (maybe i would not call the step 4.1, but maybe 5.0 beta or preview) is the consolidation of those somewhat separate services. There is some already (i.e. talk in mail or maps in calendar) but still there is a needed bit more of integration to reach something that could be called the final 5.0 version.
  • by Parker51 ( 552001 ) on Thursday April 27, 2006 @05:59PM (#15216343)
    Google's apparent indifference to the use of Google Groups [google.com] 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 [google.com]
  • Bozos, etc. (Score:5, Insightful)

    by drooling-dog ( 189103 ) on Thursday April 27, 2006 @05:59PM (#15216345)
    keep the bozos out and reward people who make a difference

    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...

    • 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...

      Except the bozo in charge!
  • "an innovation factory that produces a torrent of new Web-based services"

    Anyone got a link to this torrent?

  • Leave it to Google to come up with a better design than "alphabetically, by author, then title"

    (Sorry, I couldn't resist.)
  • Keep the Bozos out (Score:2, Interesting)

    by neves ( 324086 )
    Arguing for the "Keep the Bozos out" mantra, the very smart Peter Norvig posted a stupid post [blogspot.com] at Google Research Official Blog. He describes Google hiring strategy as "hiring above the mean" and plot some graphics showing how great it is.

    The premisse is that you can reduce all the richness of human beings to an unidimensional measure. The best teams I worked with have a diversity of talents, each one contributing for the success.

    • Well they -definitely- wouldn't hire you if you can't even understand the graph and it's purpose.

      • by vidarh ( 309115 ) <vidar@hokstad.com> on Thursday April 27, 2006 @08:30PM (#15217469) Homepage Journal
        I assume the point of the poster you replied to is that you shouldn't always hire the best people. Many jobs require little skill, and hiring top skilled people and assigning them gruntwork achieves two things: You pay more than you have to, and those people are likely to leave.

        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.

        • We're talking about Google Research here, their idea factory, not Google as a whole. I don't know whether all Google departments hire in this fasion, and yes in many it wouldn't make sense to. But my guess is that the "grunt work" can always be shipped out to other departments from Research.

          Also, Google employees get to work on their own ideas/etc for 20% of their employed time, which also puts a different spin on it, wrt the quality of projects developed during this time, and in fact down the the amount of
          • Actually the blog post happened to be posted to the Google Research blog, but it doesn't say anything about it being limited to Google Research, and points to a generic Google job page... But even in a research environment a lot of the work is "grunt work". If they ship everything like that out, then yes, hiring above the mean could make sense, but if so it's downright misleading to make a big point about it if what it really means is "we hire above the mean in this very specialised little department which
            • The blog was not only posted to the Google Research blog, but it was posted by the Director -of- Google Research, which says a little more about where he's going to be talking about. But still, there are other things to take into consideration.

              For other departments (some or all others) who employ "above the mean", it's more than likely gonna be within the context of the department, ie, someone hired for art/graphics skills aren't necessarily going to be vigorously compared on their programming skills with t
  • Whenever a company is doing well at the moment, somebody writes an "In Search of Excellence" type of book or article explaining why. Then a few years later (sometimes a few months later) the company falters despite the fact that their "great/innovative/creative/yada-yada-yada" practices haven't changed a bit.

    Now if a writer looked at 100 start-up companies and predicted which ones would succeed and which ones would fail in the next 5 years based on their management practices and he got most of them right, I
  • 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
  • Enron (Score:3, Interesting)

    by sean.geek.nz ( 735084 ) on Thursday April 27, 2006 @11:19PM (#15218318)

    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 revisio
  • This isn't new (Score:2, Informative)

    by galdosdi ( 891570 )
    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.

"This is lemma 1.1. We start a new chapter so the numbers all go back to one." -- Prof. Seager, C&O 351