Google says it’s raising employee pay in performance review revamp

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Sundar Pichai, Google CEO

David Paul Morris | Bloomberg | Getty Images

Google is overhauling its performance evaluation process, implementing changes that will result in increased salaries, as the company tries to ease tension between employees and leadership on the issue of compensation.

Starting this week, Google is using a new process for performance reviews called GRAD, which stands for Google Reviews and Development. It’s part of an effort to streamline the evaluation process, limiting reviews to once a year, instead of twice, and putting more responsibility in the hands of managers rather than relying heavily on peer reviews, according to internal documents reviewed by CNBC.

“Under this new process, we expect the majority of Googlers will be modeled for higher pay than they would under the old Perf system and the overall amount paid will increase too,” one of the documents said.

Google Search boss Prabhakar Raghavan reiterated that point at a company town hall meeting on Friday, according to two people with knowledge of the matter who asked not to be named because the information is confidential.

A Google spokesperson said in an email that the company has “nothing else to share.”

Employee pay has been a sensitive subject at Google. In the annual “Googlegeist” survey, which CEO Sundar Pichai considers a key indicator of employee satisfaction, staffers gave Google particularly poor marks on how compensation compares to pay for similar jobs at other companies. Employees also downgraded their ratings on the process of performance reviews and opportunities for career growth.

Results of the survey were circulated in March and underscored the challenges Google faces from the “Great Resignation,” with workers leaving their jobs at a record pace and tech companies clamoring for talent

Google employees have been voicing their concerns to management directly, not just in the annual survey. At an all-hands meeting in December, Frank Wagner, Google’s vice president of compensation, responded to questions about whether the company would provide a pay increase to address soaring inflation, especially as Google’s revenue had boomed during the pandemic with hits stock price hitting a record in November.

Wagner said Google would not implement a blanket raise to match inflation even as executives had received pay bumps.

Google is now making fundamental changes to how workers are paid and promoted. As a part of the new GRAD system, promotions will be primarily determined by management as opposed to a consortium of managers and peers. Employees, however, can still request promotions twice a year, documents show.

How to get promoted

The company is also ditching its long-held practice of lengthy promotion packets, which were long forms employees needed to fill out that included reviews from bosses and co-workers. Managers will make promotion decisions as a group instead of employees having to solicit them separately .

Google said in March it would be trying to make changes to its long-held “perf” process, which has been replicated at other companies in the industry. The Information previously reported some of the details of the performance review changes.

As part of the new system, Google employees will get a new tool to set expectations for goals, or objectives and key results (OKRs) as they’re known, one internal note said. Employees will also get “regular check-ins” with their managers each quarter to discuss career development among other things, the documents state, addressing a central complaint among workers.

For employee ratings, Google is introducing a new scale with five different levels.

Most staffers will be in the middle, which “reflects the significant impact they’re making.” The two ratings below the middle are “Moderate Impact” and “Not enough Impact” and the two above are “Outstanding Impact” and “Transformative Impact” ” for those who “perform above or below that high standard.”

There’s also a new promotion system. In it, an employee’s manager will complete a form assessing whether the person has shown the skills required for elevation.

“Googlers aren’t expected to already perform next-level work to demonstrate that they’re capable of next-level success,” one document said. There will, however need to be a business need for the promotion.

“Googlers will then be considered for promotions if they demonstrate signals for success at that level of work,” the company said.

WATCH: Jim Cramer explains why the ‘Great Liberation’ is a more apt name for the Great Resignation

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