At 10-year mark, Google's glossy facade shows cracks

Google's transformation from hip startup to corporate giant over the past decade has resulted in some significant cultural changes, and the cracks are starting to appear.

Now that Google has reached its 10-year-mark, the company is facing the cultural complexities and challenges that come with the transition from hip startup to corporate giant.

In the early days of Google, the company was able to take Silicon Valley by storm because it was a tiny company with a big idea. Unencumbered by the corporate bureaucracy of larger companies like Microsoft, Google was able to build grassroots support around its search engine and online advertising business model to grow quickly and nimbly into the multibillion-dollar company it is today.

However, with that kind of fast growth and mega-success comes a down side. The excitement of Google's game-changing technology and the collegiate culture that the company founders fostered at corporate headquarters in Mountain View, California, made the company for many years the hot place to work. But in the past year, the image of the Silicon Valley nirvana Google has created has begun to show some cracks, with key members of the brain trust leaving for other companies and stories of employee dissatisfaction with the corporate culture beginning to travel up and down the valley.

As it turns 10, one of Google's main challenges is to continue to foster technology innovation and draw the caliber of talent that startups can attract even as the company, in both size and culture, begins to look more like a Microsoft or an IBM -- behemoths over which Google once had an edge because it was different.

"Gravity affects all organizations and will inevitably affect Google," said Charles O'Reilly, Frank E. Buck professor of management at Stanford University's Graduate School of Business. "The question is whether they will deal with this in a productive way, or do something foolish."

A little more than a year ago, Google began to experience the brain drain that comes when a startup becomes a corporation and many of the early intelligentsia cash out and go on to bigger and better things -- or leave to start their own ventures.

Key Googlers such as former Chief Information Officer Doug Merrill and former Vice President of Global Online Sales & Operations Sheryl Sandberg left the company in the last year -- the latter for Facebook, where other key Google employees also defected.

Then there was the child-care fiasco that made Google's executives question the sense of entitlement the company had created among employees, and how long they could sustain it. At a TGIF (thank God it's Friday) meeting -- a weekly forum where Google's leaders meet with employees in a question-and-answer session to address any concerns or thoughts they have about the company -- employees expressed concern that the costs of company-provided child care were going to nearly double. In response, according to published reports, Google co-founder and co-President Sergey Brin bristled about employees feeling a little too entitled to perks like bottled water and candy, which the company gives out for free.

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The meeting left some at the company thinking that their executives were beginning to feel the pressures about the culture they created, insiders said privately.

Indeed, "the management challenges of running a 15,000-person organization are completely different from a 1,000-person firm," Stanford's O'Reilly said.

People who have left the company recently said they felt disposable and easily replaced, and that the Google culture of long days and hard work -- where many employees feel frowned upon if they leave at a reasonable hour -- was not fully appreciated by their managers or Google executives.

To be fair, Google's woes aren't unique to the company. Many of them are the growing pains any startup experiences when it expands as fast as Google does, especially one that prides itself on creating an atmosphere that lures the best and the brightest with freebies and a laid-back vibe.

Cesar Mascaraque, European managing director for Ask.com, left Google after four years early this year, and was there as the company transitioned from having 1,000 employees to tens of thousands. Google has more than 20,000 employees worldwide now.

Mascaraque said it was the expansion of the company that inspired him to leave; he is someone that prefers to work for a company as it transitions from being a startup to a growth company rather than working for a corporation.

"Once the business is 20,000 people, I don't enjoy it," he said. "I like the day-to-day flexibility of being in a smaller company."

Mascaraque said he was part of a team that helped develop the processes and policies that would help Google run its business as a corporation rather than a small company. While setting such a policy is required of a company in order to grow successfully, "the downside is, you take away a lot of the creativity and the flexibility that a smaller company has," he said.

"There's nothing wrong or right about it; that's the nature of the beast," Mascaraque said.

Rob Kniaz, a venture capitalist at Fidelity Ventures, cited a similar reason to Mascaraque's for leaving Google, after being with the company for four years.

Kniaz, who was a product manager on Google's Adsense advertising platform team, left in July. He said he missed the camaraderie of his early days at Google, when "you'd walk into the cafeteria and know more than 85 percent of the people."

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As the company grew and the people he worked with day to day in the beginning became more geographically dispersed and absent from his everyday work life, it became "harder keep that same level of excitement you had when it's you and your friends working late at night," Kniaz said.

Google is aware of the challenges to its culture as it grows and is doing its best to meet them, said Craig Neville-Manning, engineering director at Google who joined the company in 2000 when Google had only about 200 employees.

"As companies grow larger, it's more difficult to allow people to be creative," he acknowledged. The key, Neville-Manning said, is to "give people autonomy" even as the company adopts more of a corporate structure and culture.

Google tries to do this by allowing teams working on certain projects the same creative and development freedom they might have if they were still working for startup, he said.

Neville-Manning cited Google's recently released Internet browser Chrome and the Android mobile platform as examples of these types of projects. Those teams "have a pretty clear mission and have been given more or less carte blanche" to do what they need to achieve that mission, he said.

There are downsides to this approach, even though it is an attempt to emulate the startup culture. Some former Googlers said privately that this autonomous culture left them feeling directionless. While they appreciated the ability to create their own projects and duties for their appointed positions, it was difficult to gauge how well they were performing without specific direction or feedback from managers, they said.

However, this experimental approach will remain in place at Google, and the company plans to tweak its organizational structure in a similar way as it grows, Neville-Manning said. This inevitably will lead to a lot of trial and error, he acknowledged.

"Since we are growing so quickly, we've had to sit back every six months and redesign processes as they've become too unwieldy," Neville-Manning said.

For example, when Neville-Manning was given the task of opening up the first Google engineering site in New York in April 2003, the company let the engineers at the new site figure out on their own what they would work on, merely by communicating with other engineers at the company to ensure they were not stepping on anyone's toes.

As the company grew, however, "we had to rethink this," he said. Eventually, Google had to set up a global database of projects that gave engineering teams a view of what all the engineering teams were working on.

"It's really important to leave people with some degree of autonomy," Neville-Manning said, "but at the same time, you don't want duplication of effort and you want to make sure people are communicating effectively."