Technology

Is Google Draining or Retaining?

Reports of an exodus of talent from the company have been greatly exaggerated.

Based on coverage in the business-and-tech press, you are forgiven for thinking that all the best talent in the industry is jumping off the Good Ship Google. For the last two months, bloggers and business reporters have breathlessly cataloged the names of Google bigwigs who’ve left the company. Facebook, in particular, snatched up some of the search giant’s most valuable names: head of global communications Elliot Schrage, vice president of global sales Sheryl Sandberg, and director of social media Ethan Beard. Whether appearing on Wired.com or the BBC or in Fortune magazine, the story was the same: Google has lost its Valley mojo, and as the company’s growing bureaucracy stifles its smartest employees’ creative impulses, a “brain drain” threatens to bleed it of the very talent that made it Google.

At first glance, David Friedberg perfectly epitomizes this trend. When he joined Google in 2003, he and three other people were charged with putting together the company’s corporate-development team; eventually he would become the business-product manager for Adwords, the advertising function that nets billions in revenue. But over time, he began to notice that Google’s early free-wheeling culture was disappearing under layers of bean counters and bureaucrats. Eventually, he left to start the weather-risk-management firm WeatherBill.

“Anyone who joined the company in the past four years has seen a project they could work on, and in three months launch it, and have it have a major impact on the business,” Friedberg says. “You could have this creative chaos, and then see millions of people use it immediately and have enormous financial implications. You had the world’s largest sandbox. … Because of the maturity of the company, it became harder and harder for me to do interesting things.”

But what really strikes Friedberg is how few of his contemporaries have done the same thing. Despite all the buzz about Google’s talent exodus, he says, the company has managed to hold onto a remarkable number of smart, impossibly rich employees—men and women who could spend the rest of their lives sipping margaritas but choose to stay at Google because it’s still so damn fun. “Any company has an attrition rate, and I think Google’s is lower than almost any other company,” Friedberg says. “I know people who have been there for more than six years, are fully vested, and they’re staying there because they’re doing interesting things.”

While there’s no absolute yardstick for whether a company is retaining or draining talent, evidence suggests that Google is not leaking that badly. Veteran search-engine reporter Danny Sullivan recently tallied up the number of senior executives who have left Google and found that just six had departed in the last eight years. By contrast, Yahoo lost 17 senior executives in the first six months of 2007 alone.

Salman Ullah, who recently left his gig as Google’s vice president of corporate development to found Merus Capital, agrees that the firm’s smartest talent is mostly staying put. “Any company that has 20,000 employees, people are going to leave. That’s just normal,” Ullah says. “I spent three years there, and it’s just an extraordinary talent pool they have accumulated. It’s going to take many, many years before they regress to the mean and become just another company.”

Even some of Google’s Silicon Valley rivals claim that Google has nothing to worry about. “People love to work there; it’s a fun environment,” says Craig Donato, who founded the rival classified ad aggregator Oodle. “I’ve actually been surprised and impressed by the number of people they’ve retained.”

So where does all this hype come from? What prompted Fortune magazine to publish a 3,000-word story on the subject, with the title “Where Does Google Go Next?” According to Brett Bullington, who advises Valley startups and sits on the board of Digg.com, Google is just going through the same process of growth and maturation that Microsoft and Yahoo did a few years earlier. “The bigger issue they’ve got is that as they expand their employee base, so many employees, their experience with Google is really post-IPO, and the challenge is how do they keep this small, creative atmosphere alive,” Bullington says. However, he adds, every company loses some of its more interesting players when it reaches a certain size, and the real story is how well Google is managing this process: “You go to a meeting at Google and ask yourself: [Can you] find a person who doesn’t want to be at that meeting? They’re all very active, and all very engaged. Show me another company where that’s true.”

That’s not to say that Google doesn’t face any challenges in keeping its smartest people. For one thing, the pre-IPO days when an early employee could expect massive stock windfalls are over. And for years, company managers have worried that someone has to do the dull, infrastructural coding, and hiring the best and the brightest will leave some people so bored that they’ll leave to start afresh. “That was a problem in 2004,” says David Friedberg. “I think the term was voyager engineers, like they would travel around and work on the things that most people didn’t want to do.” Google has tried to address this by offering “20 percent time,” or one day a week when engineers get to work on pet projects like the social-networking site Orkut. In addition, Friedberg says, Google has begun contracting its infrastructural work to outside companies, reserving its own work force for the more intriguing projects.

Google’s biggest problem may be that the company trains its employees so well that they become uniquely qualified to start businesses of their own. When asked about this supposed talent exodus, Chief Executive Officer Eric Schmidt told Fortune that the venture capital market was just too dry to lure people into the startup game right now. And in fact, venture investment dropped more than 8 percent in the first quarter. But according to Friedberg, it’s one thing when any schmo with a business plan approaches a V.C. firm for seed money—it’s another when you can boast Google on your résumé: “All the V.C.s are saying, ‘Oh yeah, these Google companies are doing really well.’ They’re noticing that Google companies are better than the average company.”

Nonetheless, Google seems merely to be entering the same maturing phase that its biggest rivals did before it—and managing the process better. If a true Google brain drain is going to occur, it will probably have to wait for the day that a better company emerges.