Google and Costs-Benefits

Established in 1998, Google has more than 20,000 employees, and keep adding more at the rate of around 6000 people per year, and around 7000 job application sent per day. Co-founded by Larry Page and
 Sergey Brin while they were students at Stanford University, Google has a great variety of products and services like web search, image search, product searches, etc. Google also famous as a company providing a unique work environment for employees that provides plenty of benefits. But in fact, these benefits come with a high cost structure.

Google’s operating costs exceed $1.5 billion per quarter (Kafka 2009). Payroll-related benefits account for about 50% of revenue. Compared to another firms in the same industry sector, this amount is very high. Food expenses alone exceed $63 million for just its US employees per year (Mergent Online 2009), $5,000 per year per employee (Sridharan, 2008). Google has been also subsidizing employee childcare for $37,000 per child (Young, 2008).

Why would Google willing to spend such a huge money like that? Are these costs worth it? It is said that providing value to the employee will also provide value to the firm and to the customer. The assumption is the more employees are satisfied, the more customers will satisfied, the more firm profitability and market share. The success of Google cannot be separated from their employee satisfaction. Their employees are their main asset and the employees have a great responbility to this philosophy. Basic people management practices including selective hiring, employment security, reduction of status differences, benefits and compensation are causing the increase of productivity, innovation and cost reduction (Pfeffer 1998). Google's benefits and corporate culture made this successful business. That’s why every company has to measure the cost of benefits compared to the increase in productivity and efficiency of the organization to have the best people in the right jobs and to have low turnover.

To measure the
 value employees give to the firm, we could see their productivity rate, which also means profit per employee. In 2008, Google’s profit was $209,624 per employee, beating another big companies like Microsoft, Apple, Intel and IBM, and competitor Yahoo! which profit was $31,000 per employee (Pingdom 2009). In this competitive world, brand value and equity are essential things. The brand value of company represents its value in the market.

Based on this short discussion, we can assume that Google has not only succeeded in developing its brand and product variety, but also succeeded in implementing a good cost and benefit which led it to be a successful story and becoming one of the best company in the world.

Reference :
Kafka, P. (2009, April 16). Google revenue slumps but cost cutting pays off. The Wall Street Journal Digital Network: http://mediamemo.allthingsd.com/20090416/googles-revenue-slumps-but-cost-cutting-pays-off/
Mergent Online. (2009). google. http://www.mergentonline.com.esearch.ut.edu/compdetail.asp?company=109717&Type=financials&DataType=Ratios&DataPeriod=AnnualsIFRS&DataArea=BS&DataRange =3&Footnotes=off&Currency=AsRep&Scale=AsRepPfeffer, J. (n.d.) Presentations and Topics. Retrieved from Stanford Graduate School of Business Website
Pingdom.com (2009). Congratulations, Google staff: $210k in profit per head in 2008. http://royal.pingdom.com/2009/05/14/congratulations-google-staff-210k-in-profit-per-head-in-2008/
Seddon, J. (2009). Top 100 brands.
Sridharan, V. (2008, April 23). Google's Ginormous Free Food Budget: $7,530 Per Googler, $72 Million A Year*.The Business Insider: http://www.businessinsider.com/2008/4/googles-ginormous-food-budget-7530-per- googler
Young, C. (2008, July 30). Are Killer Benefits Poised to Kill Employee Morale and Your Bottom Line? Retrieved from HR