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Jun. 28, 2007 at 4:16pm Eastern by Greg Sterling

Is Google Losing Its Magic For Employees?

Today's Wall Street Journal featured an article entitled Start-Ups Make Inroads With Google's Work Force, which focused on emerging potential retention problems at Google (in particular vs. Facebook).

Yahoo has recently shed – both voluntarily and involuntarily – a number of high profile employees and suffered negative publicity from some of those departures. Now it may be Google's turn. Yesterday Barry Schwartz wrote about an internal Microsoft email containing the reflections of a former Google employee who had joined the company.

The WSJ article focuses on several specific employee departures and "defections" from Google, including two engineers who had won Google Founders' Award, which was created in part to retain employees:

Two other Google defectors, Bret Taylor, 26, and Jim Norris, 26, started yesterday at venture-capital firm Benchmark Capital as entrepreneurs-in-residence and are working on their own Internet start-up idea. Two of the engineers who created the Google Maps service, they last year received the prestigious Google Founders' Award for their work. "Google has grown to be a larger company now, so I wanted to find our own destiny," says Mr. Taylor, who joined Google in March 2003 and estimates his net worth at under $10 million.

In addition, Google Webmaster Central product manager Vanessa Fox left Google for Seattle-based real estate site Zillow.

As Google has grown to be a large company it has become less "entrepreneurial" and less desirable for some, according to the WSJ. And the financial incentives and "upside" are potentially less than when Google was a younger company:

Google had more than six times the number of workers at the end of the first quarter than it had at the same point in 2004, which some former employees say tends to slow decision-making and make it harder for individuals to feel like they're having an impact.

Another big consideration: Some highly lucrative stock options are beginning to finish vesting for thousands of employees brought on during a big Google hiring spree in 2003 and 2004, lessening the financial incentives to stay. Options granted during 2003 have average exercise prices as low as 49 cents, compared with the $526.29 price in trading at 4 p.m. on the Nasdaq market yesterday.

Despite these issues, anecdotal evidence suggests that Google still appears to have a mystique and cachet that is broadly appealing to many would-be employees.

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