Google's Organizational Culture

Abstract
A company's organizational culture plays a vital role in its success. A company's culture
helps it attract the best talent available in the industry. The case discusses the
organizational culture at Google Inc. Google was one of the few companies that
successfully blended technological innovation with strong organizational culture.
The case provides insight into the work environment, and recruitment process at Google.
The case also provides insight into how Google fostered innovation among employees.
The case ends with a critique of Google's organizational culture.
"We try to provide an environment where people are going to be happy. I think that's a
much better use of money than, say, hundred-million-dollar marketing campaigns or
outrageously inflated salaries."
- Sergey Brin, Google co-founder

'So Far So Good'

Google Inc (Google) has been hailed as the one of the most successful Internet start-up
companies. In 2003, it was the most preferred search engine the world over due to its
precision and speed in delivering search results. Apart from the technological edge it had
over its competitors, Google's success was also attributed to its ability to attract the best
talent and retain these employees. And this was made possible by Google's organizational
culture. During the dotcom boom in the late 1990s, Google was the only company that
did not experience any employee turnover, while all other major tech companies
experienced employee turnover rates of around 20-25%.
Google's work culture became legendary in Silicon Valley. Google was an icon of success
among Internet companies. For many, the company represented the most successful blend
of culture and technology in Silicon Valley.
They felt that Google was successful because it had removed unnecessary managerial
hierarchies and gave its engineers a free hand to work. However, not every one was
impressed with Google's culture. Some felt that Google would not be able to sustain its
growth with its present culture.
They felt that Google had outgrown its informal culture, and that informality would, from
now on, only lead to confusion among both employees and customers. Further, Google

was also criticized for its recruitment system and its lack of unity of command at the top
level.

Background Note
The founders of Google, Larry Page (Larry) and Sergey Brin (Sergey) graduated in
computer science from Stanford University in 1995. In January 1996, Larry and Sergey
began work to extend their summer project work on a search engine.
They wanted to develop a technology that would retrieve appropriate information from
the vast amount of data available on the internet They named their search engine
'BackRub' because of its ability to identify and analyze 'back links' that pointed to a given
website.
By 1997, BackRub had gained a lot of popularity due to its unique approach to solving
search problems on the Internet. Throughout the first half of 1998, Larry and Sergey
focused on perfecting their technology.
To store huge amounts of data, they bought a terabyte of memory disks (one trillion bytes
equal one terabyte) at bargain prices.
Larry used his dormitory room as a data center, while Sergey used his room to set up a
business office. By now, they knew that their search technology was superior to any other
technology available. They started looking actively for potential partners interested in
licensing their search engine technology.
Larry and Sergey contacted many people including friends and family. One of the people
they got in touch with was David Filo (Filo), the founder of Yahoo, a leading portal. Filo
complimented them for the 'solid technology' they had built, but did not enter into any
agreement with them. Instead, he encouraged them to start their own company.
The owners of many other portals also refused to invest in their technology. The CEO of
one such portal told them, "As long as we are 80% as good as our competitors that is
good enough. Our users do not really care about search."
During the late 1990s, 'dotcom fever' was at its peak in the US, and almost everyone was
opening a dotcom company. Though Larry and Sergey were not very keen on opening
their own company, they decided to set one up, since they were unable to attract any
partners.
However, they first had to clear off the debts they had accumulated to buy the memory
disks and to move out of their 'dorm office'. The duo put their PhD plans on hold, and
began looking for a prospective investor in their business.
Help came in the form of a faculty member from Stanford University who introduced
them to Andy Bechtolsheim (Andy), one of the co-founders of Sun Microsystems. Andy

saw their presentation and was very impressed. He knew that it had a lot of potential and
handed over a check of $100,000 in favor of Google Inc., an entity that did not yet exist.
Since Larry and Sergey could not deposit the check in their accounts, they decided to set
up a corporation named Google Inc.
After collecting another $1 million from their families, friends and acquaintances, Larry
and Sergey opened office on September 7, 1998. The office was located in the garage of a
friend's house in Menlo Park, California. The name Google, though chosen by accident,
indicated the company's mission to sort out and organize the immense data available on
the web. The website www.google.com became operational and the duo recruited their
first employee - fellow Stanford student Craig Silverstein (Silverstein), who later became
Google's Technical Director.

Google's Organizational Culture

Google had an informal work culture at Googleplex (its headquarters). Both Larry and
Sergey wanted to make Google a fun place to work. Reflecting their beliefs, the
Googleplex was decorated with Lava Lamps and painted in the bright colors of the
Google Logo.
Googlers were allowed to bring their pets in to the workplace, and were themselves
provided with free snacks, lunch and dinner prepared by a celebrity chef Charlie Ayers.
The Googleplex had snack rooms offering Googlers cereals, gummy bears, cashew nuts
and other snacks along with fruit juices, soda and cappuccino...

Recruitment
Sergey and Larry also focused on recruiting people with the right frame of mind. They
were themselves personally involved in the recruitment process. In order to attract high
performing candidates, Google posted top ten reasons to work for Google on its website
Google recruited people with diverse skills and qualities. While recruiting, Google
attached a lot of importance to academic excellence as revealed in grade scores in SAT
and other graduate exams. To get an interview call from Google, a person had to be from
a top-ranking university...

Innovations at Google
Google management also focused on encouraging innovation and creativity at the
workplace. It realized that to maintain its growth, the company had to come out with new
products/features. However, the company faced problems on how to tap ideas that could
be turned into successful products. Said Silverstein, "We always had great ideas, but we

didn't have a good way of expressing them or capturing them." To overcome the problem,
Google set up an internal web page for tracking new ideas...

A Critique of Google's Culture

Many analysts feel that Google's zero per cent employee turnover rate during the dotcom
boom, was a testament to its salubrious organizational culture. But not everyone was
convinced that Google had got it right in terms of its work culture. They felt that
company's culture was not set to manage its growth. A 12-hour working day had become
norm at the company. Google's recruitment process was also criticized by analysts.
It was pointed out that Google had become too narrow in its recruitment by focusing only
on the academic records and graduate ranks of the applicants rather than on experience.
Commenting on the recruitment process, one Googler said, "If you've been at Cisco for
20 years, they don't want you." But the management defended the recruitment process
saying that they valued intelligence and brainpower more than experience...

The Good and Bad of Wal-Mart's Culture

Abstract
Wal-Mart was the biggest company in the world. With sales at a quarter of a trillion and
over 1.3 million employees, it was the biggest retailing success ever. A lot of Wal-Mart's
success was attributed to the strong and pervasive culture at the company, which was
developed and nurtured by founder Sam Walton. In over four decades of operation, WalMart managed to retain most of the elements of culture it had when it first started out, as
well as the entrepreneurial spirit which often drives startup companies to success. The
fact that the company's growth rate was often in double digits bears this out. Wal-Mart's
culture was characterized by an orientation towards customer service and providing the
best value at the lowest prices.
Employee well being was also given a lot of importance and the company tried to project
an image of a socially responsible entity.
However, despite the positive aspects and strength of the culture, there were a
number of issues on which Wal-Mart was severely criticized. In the light of the
number of law suits filed against the company, the top management realized that
there were drawbacks in the culture of the company and began taking steps towards
correcting them.
All associates work for the customers who buy our merchandise. In fact, the customers
can fire everybody in our company. And they can do it by simply spending their money
somewhere else. The greatest measure of our success is how well we please the customer,
'Our Boss'. "
Sam Walton, Founder of Wal-Mart
"Our commitment to meeting the needs of each individual Customer can be fulfilled only
by recruiting, developing and promoting the very best people we can find around the
world".
John B. Menzer, Head, Wal-Mart
"Our family is proud of the accomplishments of our Wal-Mart Associates around the
world. Without their dedication and commitment, there would be no Wal-Mart."
Rob Walton, Chairman, Wal-Mart

'Good to Great'
In 2003, with sales at a quarter of a trillion, a double digit growth rate, and employees
exceeding 1.3 million, Wal-Mart was one of the most successful companies in the world.

Not only was Wal-Mart the biggest retailer in the world, it was also the biggest customer
for companies like Disney, Proctor and Gamble, Revlon, Campbell Soup, Gillette, etc. In
addition to this, it was the biggest seller of DVDs, CDs, groceries, guns, diamonds and a
number of other products in the US. Wal-Mart was a super-retailer where a customer
could get whatever he wanted under one roof. The company thrived on convenience and
reasonably priced products.
Wal-Mart always gave more importance to volumes than margins and promised
customers the lowest prices on every kind of goods. Analysts believe that culture is one
of the most important determinants in making a good company a 'great' one.
The success of Wal-Mart has long since been attributed to the company's strong cultural
base. Analyst Jim Collins observed that Wal-Mart had the kind of 'cult-like' culture that is
shared by all great companies. Even the employees of Wal-Mart were sometimes referred
to as "Walmartians" by outsiders, reflecting the distinctiveness of the people who shared
that culture. It was a wonder that a company of such a huge size and scope could
maintain its entrepreneurial spirit so many decades after it first started, besides achieving
admirable growth rates which were poised to make it the first trillion dollar company in
the world.
However, over the years, the company became the target of much criticism. It held the
record for having been sued the maximum number of times. Its work culture was
criticized on various grounds which included gender-based discrimination, its overtime
policies, using sweatshop products and 'killing off' small local business.

Background
Wal-Mart was the realization of the dream of Sam Walton (Walton), who wanted to set up
a store which provided customers 'high value, low prices and a warm welcome.' Walton
was born on March 29, 1918, in Kingfisher, in the state of Oklahoma. While he was in
school, he worked part-time in his father's store which gave him his first experience of
retailing. In 1940, he graduated with a bachelor's degree in economics from the
University of Missouri at Columbia. Soon after graduating, he worked as a management
trainee at JC Penney. In 1942, he joined the US Army as a Captain in the Army
Intelligence Corps and worked in that position till the Second World War ended in 1945.
On returning to civilian life, Walton decided to start his own store. His father-in-law
(Walton got married in 1943), who was a banker, helped him with a loan of $20,000 to set
up a Ben Franklin variety store in Newport.
Walton did not have any business experience. He soon gained the requisite experience by
attending training programs conducted by Butler Brothers for their franchisees. He also
visited a competing departmental store across the street, to observe their prices and
policies, and derived valuable inputs.
Walton's store was very successful. Most of the success came from his innovative ideas.

He realized that he could obtain competitive advantage by buying products in bulk

directly from manufacturers and offering them at lower prices to customers.
He also kept the store open for longer hours than his competitors and took advantage of
its good central location. In the very first year Walton earned a profit with his cost-cutting
ideas.
Within five years his store became the number one Ben Franklin store in a six state
region and had earnings between $30,000 and $40,000 per year.
Some of the important operational policies adopted by Wal-Mart in later years, such as
giving importance to store location, purchasing in bulk and maintaining longer store
working hours, had their roots in Walton's first store. Unfortunately, due to carelessness
in negotiating the lease agreement, Walton lost his store in early 1950...

Walmart's Culture - Supporting Success

Analysts attribute Wal-Mart's success to its strong and pervasive culture. In spite of its
huge size and tremendous growth rate, the company retained most of the cultural
elements which contributed to its success in the early years. Walton believed that happy
and satisfied employees performed well and were responsible for happy customers.
Towards this end, he store to create a culture which encouraged employees to contribute
their best. It also ensured discipline and uniformity in an organization that was growing at
such a rapid pace and had been operating for over 40 years.
Wal-Mart's culture was essentially customer-centric and service-oriented. It embodied
Walton's dream of creating a store which provided the best value at the lowest prices. A
unity of purpose and a spirit of oneness was created and maintained across the
organization.
Some unique features bound the people associated with Wal-Mart together, one of these
being that Wal-Mart followed a separate calendar which was based on 'Wal-Mart time',
i.e. 'week 1' in the calendar was the first week of the company's fiscal year that started on
February 1st every year.

The Foundation of Wal-Mart's Culture

Wal-Mart's culture was built on three basic beliefs or tenets established by Walton in
1962, when Wal-Mart was first set up. These tenets constituted the foundation of its
culture in later years. They were...

Human Resource Culture

Wal-Mart realized that employees played a very important role in the success of a retail
business and gave considerable importance to them. To instill a spirit of equality and
oneness among employees, the company adopted the practice of terming employees

'associates', thus creating in them a sense of belonging and involvement in Wal-Mart's

activities and success. Walton believed that if he took care of the employees, they would
take care of the customers in the same manner.
He tried to create a positive and cheerful atmosphere in the company. Wal-Mart was one
of the first companies to introduce profit sharing and stock options for its employees.
After it went public Wal-Mart began its "Profit Sharing Plan". The plan offered an
opportunity to its employees to improve their income depending on the profitability of
the store. Employees were also offered stock options and store discounts.
This was to motivate them to take an active interest in the working of the company. A
system of performance linked compensation and bonus also ensured that employees
contributed their best to the organization. One of the unique features of Wal-Mart's
human resource policy was that the company did not authorize overtime work. It did not
allow store managers to overburden employees with work.
The company was also committed to improving the career prospects of its employees. It
had a policy of recruiting more than 70 percent of its personnel in managerial positions
from the ranks of hourly workers in the stores...

The Darker Side of Walmart's Culture

In spite of being generally applauded for its culture, Wal-Mart was also severely
criticized for certain aspects of its culture.

Overtime Woes
Although Wal-Mart had a very strict policy on overtime and the company's rules
forbade it, it was observed that, at most of the stores, employees worked between 5
and 15 hours overtime per week. (The company had a 40 hour work week). Since
the company was very strict about not allowing overtime (there were instances
where store managers who paid overtime were demoted and in cases, even
dismissed), it was usually done on an unofficial basis.
Since overtime was not allowed, store managers often asked workers to clock out after
their shift was over and then continue working. Sometimes workers were put to work as
soon as they came to the stores at the start of the shift, even before they could clock in.
This way, employees sometimes worked a couple of hours before they clocked in. One
employee recollected an instance when she had worked for 3 hours in a store before she
officially clocked in.
Another tactic employed was to lock the doors of the store at the end of a shift (ostensibly
to prevent theft) to prevent employees from leaving at the scheduled time. This often
enraged employees as well as their families and created a poor image of Wal-Mart.

Sometimes the time cards were also edited by the people in charge of payroll to show that
employees worked only 40 hours per week. When people clocked in more than 40 hours
the additional hours were deleted from the records. This was a regular practice at the
stores to control the expenditure on salaries...

Towards a Better Walmart

The problem with Wal-Mart was that, as the largest company in the world, it had three
times the number of employees that the second largest company behind it had. Analysts
felt that the size of the company itself suggested that the scope of problems was likely to
be higher. It was not practically possible for the headquarters or the top management to
keep track of everything going on at the store level. Therefore, some stores deviated
considerably from the corporate principles.
In view of the flak it received, Wal-Mart began some change programs in its stores. It
developed a posting system for all management jobs so that all the employees could be
informed about them and be given the chance to apply for promotions...

3M's Organizational Culture

The case examines the organizational culture at 3M and the way in which it facilitated
innovation at 3M. The policies and mechanisms adopted by 3M's management to
encourage the spirit of innovation in its employees are also discussed.
The case takes a close look at 3M's environment of innovation; the culture of
knowledge sharing; and the reward system. It also discusses the steps implemented
by the new CEO, James McNerney, to accelerate growth at 3M. The impact of
cultural change at 3M on the spirit of innovation is also discussed.
3M! No doubt about it. You never know what they're going to come up with next. The
beauty of it is that they probably don't know what they're going to come up with next,
either. But even though you never predict what exactly the company will do, you know
that it will continue to be successful."
- Bill Hewlett, Founder of HP, commenting on the company he admired most.1
"My job is to add scale in a fast-moving, entrepreneurial environment. If I end up killing
that entrepreneurial spirit. I will have failed."
- James McNerney, CEO, 3M in January 2002.2
"There is a change in culture, and it is cause for concern."
- Arthur Fry, inventor Post-it Notes, in June 2002 commenting on culture overhaul
at 3M.3
"In a company that's really driven by creative thinkers - how do you do Six Sigma and
creativity? You can't. And if you force that model on an organization, you're just bound to
make it moribund."
- Ryan Mathews, business consultant and critic of Six Sigma management, in June
2002.

One Hundred Years of Successful Innovation

It was celebration time at 3M! The company completed 100 years in business in 2002.
For many, 3M represented the house of innovation (Refer Exhibit I). For 100 years, 3M
formula for growth - recruit the right people, provide them with the right environment to
work and let them do their things - resulted in around 55,000 products and over thousands
of patents for the company.
Analysts attributed 3M's success to its commitment to innovation. They pointed out that
3M gave its employees the freedom to conduct research in areas of their choice even if

that research was not related to their official projects.

By thus nurturing the talents of its employees and fostering a climate of innovation, 3M
became one of the most innovative companies in the world.

In 2001, James McNerney Jr. (McNerney) took over as Chairman and CEO of 3M and
announced several initiatives to revive the stagnating growth rate of the company. He
initiated cost cutting measures, rationalized purchases, and implemented process
improvement programs in the company. He gave a centralized direction to the
company from its earlier laissez-faire working style. Analysts cautioned that the
changes brought about by McNerney might harm the 100-year old culture at 3M that
fostered innovation and sustained its growth over the years. However, McNerney
pointed out that the changes brought about in 3M would provide the company a
strategic direction in a volatile business environment without harming its
organizational culture...

Inventing 3M
In 1902, five businessmen founded Minnesota Mining and Manufacturing (popularly
referred to as 3M) in Two Harbors, US. The new company was in the business of
mining corundum, a mineral best suited for making sandpaper and grinding wheels.
In 1904, when an artificial abrasive replaced corundum, 3M decided to manufacture
sandpaper.
Edgar Ober (Ober), one of the founding members of 3M, approached his friend
Lucius Ordway (Ordway), a successful businessman for funds for the new venture.
Ordway agreed to invest $25,000 in the company, on condition that he won't be
involved in the day-to-day affairs of the company.
However, by 1906, Ordway had invested around $200,000 in 3M and had become
involved in the day-to-day affairs of the company. In the same year he became the
President of the company.
When 3M realized that the corundum owned by it was a low-grade anorthosite, it decided
to shut down the mine and shift to Duluth in 1905. In the same year, 3M decided to
import garnet5 from Spain. 3M received its first shipment of garnet in 1907 and started
producing sandpaper. By 1911, 3M reported sales of $212, 898 and in the same year Ober
appointed William L. McKnight (McKnight), who joined the company in 1907 as
assistant bookkeeper as sales manager. In 1911, 3M brought out its first breakthrough
product, Three-M-ite cloth. Three-M-ite became the company's first profitable product.
The Carborundum Company, which had developed artificial abrasive coated emery cloth
before 3M, filed a patent infringement suit against the company.

3M hired Paul Carpenter, a Chicago based lawyer and expert in patent law, and won the
case against Carborundum. Due to Three-M-ite's success, 3M became debt free and
announced its first dividend of 6 cents per share in 1916. In the same year, McKnight
became vice-president.
In the 1920s, 3M recruited people with diverse backgrounds and expanded its product
portfolio. It also introduced two breakthrough products, waterproof sandpaper and Scotch
masking tape, invented by Francis Okie (Okie) and Dick Drew (Drew) respectively. In
1922, 3M entered the English market and reported sales of $68,000 in the first year of its
operations. In order to consolidate its presence in global markets, 3M established research
laboratories, and a sales and marketing network across Europe...

Fostering Innovation
From its early days, 3M fostered a culture of innovation in its organization. McKnight
tried to create an organization that would encourage its employees to take the initiative
and come up with new ideas...

Recruiting and Retaining Talent

3M recruited people who were creative and had a broad range of interests. According to
company sources people who had a broad range of interests were willing to learn and
explore new ideas. In addition, they brought a multi-disciplinary approach to their work.
To make it easy for recruiters, 3M codified the six traits of innovative people in its
recruiting brochure:
Creativity
Broad interests
Self motivated
Resourceful
Hard working
Problem solvers...

Creating a Challenging Environment

Initially 3M was organized into various product divisions. As these divisions increased in
size, McKnight noticed that there was a slowdown in innovation; not much time was
devoted to new product development.
To increase the pace of new product launches, McKnight introduced the philosophy of
divide and grow.
In line with this philosophy, new businesses were spun off and new management teams
were devoted to the spun off units. As a result, these new units were able to grow quickly.

When these new businesses were spun off, the established divisions had to develop new
products and find new markets to achieve their growth objectives to make up for
contributions from the businesses that had become independent. This mechanism, which
analysts called 'Renewal,' resulted in increased diversification at 3M...

Knowledge Sharing
In addition to providing an environment that stimulated innovation, 3M also took steps to
encourage knowledge sharing among its employees. According to analysts, innovation
could flourish in 3M because the management encouraged its employees to talk. 3M
employees never experienced any communication barriers...

Rewarding Innovation
In addition to recruiting innovative people, creating a challenging environment for
employees, and encouraging a culture of knowledge sharing, 3M also focused on
rewarding employees.
To encourage the spirit of innovation among employees 3M realized it was necessary to
reward them appropriately. The dual ladder career path adopted by 3M, created two
career ladders - technical and management.
This approach allowed even a technical person to get promoted to the vice-president level
without taking on managerial and administrative responsibilities...

Culture Overhaul
By the late 1990s, 3M's growth rate started slowing down. According to reports, the stock
price of 3M dropped from $83.00 in 1996 to $71.13 in 1998 and the price-earning ratio
(P/E ratio) of the company also declined considerably
It was reported that during 1995-2000, earnings per share grew at an average of only
8.8% and shareholder returns fell far behind Dow and the S&P 500. Analysts felt that 3M
was unable to respond to market conditions. Commenting on 3M's performance during
the decade, Bob Burgstahler (Burgstahler), chief of Business development, said, "We
have not produced elite results that correspond to the view that this is an elite
organization." In December 2000, 3M announced the appointment of James McNerney Jr.
(McNerney) of General Electric as its CEO. For the first time, an outsider was appointed
as CEO of 3M. The stock markets responded positively to the appointment of McNerney
and 3M's stock price closed at $120.50, the highest in the decade...