What Happens When You Pay Your Employees Enough to Become Financially Secure?

They leave, happily ever after.

Photo credit: Roman Boed, CC BY 2.0.

Today in “wait, this is a bad thing?” we have the story of Google’s car project, and what happens when you pay your employees well:

Early staffers had an unusual compensation system that awarded supersized payouts based on the project’s value. By late 2015, the numbers were so big that several veteran members didn’t need the job security anymore, making them more open to other opportunities, according to people familiar with the situation. Two people called it “F-you money.”

I’m reading that as “several veteran members were no longer afraid of what might happen if they lost their job, making them more open to what they really wanted in life,” but I wasn’t there, so I don’t know if this interpretation is accurate.

I do know that this turned out to be a problem for Google:

The payouts contributed to a talent exodus at a time when the company was trying to turn the project into a real business and emerging rivals were recruiting heavily.

Although you could just as easily flip “talent exodus” into “hiring opportunity,” there’s a lot to be said for institutional memory and for building a team that has proven to work well together long-term. Turnover is expensive, to the point that many companies claim that it costs tens of thousands of dollars to recruit/onboard/train a new employee.

Some studies (such as SHMR) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that’s $20,000 to $30,000 in recruiting and training expenses.

Did Google pay their employees too much? Was the bonus structure too incentivizing? Should they have figured out what salary range fell within “comfortable enough that you spend your days worrying about our problems, not yours—but not enough to quit your job?”

At this point, you’re probably wondering how much those Google car project team members were getting paid. Here’s what Bloomberg reports:

A large multiplier was applied to the compensation packages in late 2015, resulting in multi-million dollar payments in some cases, according to the people familiar with the situation.

Ah. Got it. So it takes multiple millions before a person feels financially secure enough to quit Google. (I suppose if you’re earning that much, it doesn’t make sense to walk away after just the first million.)

I’ve made a lot of jokey speculations and assumptions in this post, so feel free to explain which parts of this story I’m overlooking—or to share how much you’d need to have in the bank before you “didn’t need the job security anymore.”