Google Mountain View, California

Founded in 1998, Google just had its most dominant year, with its search market share rising from 77 percent to 83 percent and revenues jumping 25 percent. Because most of the revenue came from search, Google is trying to diversify. But it faces intense competition in every market.

In traditional search, Microsofts Bing search engine and Facebook, which passed Google as the most popular website in the world, pose threats as people desire more personalized and social media-related search information. Searches for local information, such as restaurant reviews or directions, are 20 percent of all Google searches and half of all mobile or smartphone searches. Yet, local-related search advertising is a weakness for Google, but a strength for Groupon, Facebook Places, Living Social, Foursquare, and Bing. Although Googles Android smartphones have more market share than Apples iPhone, the Android software is open source, so Google makes no money except for built-in Google Ads and services. Likewise, Google trails Apple and Amazon in the number of publishers who use their software, devices (i.e., smartphones, tablets, book readers), and online stores to sell electronic versions of newspapers, magazines, books, music, TV shows, and movies. Finally, Googles Chrome web browser (13 percent market share) competes with Microsofts Internet Explorer (55 percent), Mozillas Firefox (22 percent), and Apples Safari (7 percent).

In short, Google is trying to position itself for the day when people wont automatically use a Google search box to find information. Keith Woolcock, founder of 5thColumnIdeas, a technology research firm, doubts Google is up to the task, saying, The problem for me as an investor is that Google looks a little too [much] like last year's model. Its the chicken in the sandwichApple and Facebook are on the opposing sides. Google is in the middle. Really, it looks to me as though it has become the Microsoft of its generation: big, bad and quickly becoming irrelevant.

Unfortunately, you fear that Woolcock might be right, which is why you replaced CEO, Eric Schmidt, who becomes executive chairman. When Google started, you were CEO for three years. But, as an introvert who prefers technology challenges to management issues, you were relieved to hire Schmidt from Sun Microsystems because of his extensive leadership experience. When Schmidt became CEO, Google was much smaller and still in start-up mode, so he focused on management and financial systems, while you and Sergey Brin focused on technology and product development. Googles philosophy was to hire really smart people and then let them do whatever they wanted. It was the norm for Google engineers to have 20 percent of their time to work on whatever they wanted to. This approach worked well until Google hit 10,000 employees. But at Googles current size, 24,000 employees, with plans to hire another 6,000, it leads to confusion, poor coordination, and a lack of focus.

Today, Google is a much larger, more complicated company. But the biggest problem is that paralyzing bureaucracy has slowed the company. As technology companies grow, this happens. IBM, Apple, Microsoft, and HP werent immune, and neither is Google. In fact, the key reason you became CEO again was to streamline decision making and communication, and create clearer lines of responsibility and accountability. But how do you do that in a company of 30,000 people? A related problem is that top management is increasingly isolated from middle- and lower-level managers and employees who are responsible for the research and project management that is key to Googles success. So, what might you do to improve upward communication within the company? Finally, what can Google do to communicate effectively on an organization-wide basis in an organization that has dozens of product lines and hundreds of research projects and that will soon have 30,000 employees?

If you were the new CEO at Google, what would you do?

What Really Happened? Solution

In the case, students learned that while Googles revenues jumped 25 percent and it share of the search market rose from 77 to 83 percent, co-founder Larry Page, who had been Googles CEO for 3 years at startup, returned to the CEO position, replacing Eric Schmidt, who had been CEO the last 10 years. While Google is increasingly dominant in web-based search, it finds itself behind in local and social-media search, as well as web browsers, and online publishing and sales of newspapers, magazine, books, music, TV shoes, and movies. Lets see what happened and find out what steps CEO Larry Page, an admitted introvert, is taking to combat paralyzing bureaucracy, increase upward communication, and improve company-wide communication at Google.

Today, Google is a much larger, more complicated company. But, the biggest problem is that paralyzing bureaucracy has slowed the company. As technology companies grow, this happens. IBM, Apple, Microsoft, and H-P werent immune, and neither is Google. In fact, the key reason you became CEO again was to streamline decision-making and communication, and create clearer lines of responsibility and accountability. But how do you do that in a company of 30,000 people?

As students learned in Chapter 1, managers fulfill three major roles while performing their jobs, interpersonal roles, informational roles, and decisional roles. Managers talk to people, gather and give information, and make decisions. However, the time spent talking to and obtaining and sharing information with people inside and outside the company is useful to managers because it helps them make good decisions. In other words, communication is central to good decision making. Without good communication, managers dont have information, subordinates arent listened to, and the ability to make good, timely decisions is paralyzed, as it eventually was at Google.

As Google grew, CEO Larry Page became frustrated with the difficulty that Googles product managers and engineers had trying to launch new Google products and services. Page would give mid-level engineers approval to make changes to improve Googles search engine, but Googles internal processes took weeks before the changes were even considered or approved by other parts of Googles management structure. For example, one of the reasons that Google trails Amazon and Apple at online storage for consumers music and personal data is that Google didnt follow Pages advice to develop what he called the G Drive, that is, cloud-based services that similar to Amazons Cloud Drive, Microsofts SkyDrive and Apples extensive iCloud. Despite Pages support, Googles G Drive project was never started.

One of the ways in which Page hopes to jumpstart decision making at Google is through a commitment to using data in the decision making process. Heres how it would work. When Sean Knapp was a software engineer at Google, he said, Why dont we put five ads on the top of the search-results page? At the time, Google used just two and Knapp figured that Google could get more advertising revenue per page by displaying more ads. The risk, however, was that it would anger advertisers whose ads would be less prominent. So Knapp and product manager Marissa Mayer ran an experiment for several months in which some ad pages would display three, four, or five ads at the top of the search results. Google found that users were less likely to click through when four or more ads were displayed, but it also found that three ads were better than its previous practice of two ads. Said Knapp, at Google, No idea is a bad idea until the data prove so.

While answering questions and making decisions by data is a key part of Googles culture, its likely to become even more important with Page as CEO because of his track record of reversing his opinions and when data show that hes been wrong. Doug Merrill, formerly Googles chief information officer, says, Larry would wander around the engineers and he would see a product being developed, and sometimes he would say, Oh, I don't like that. But the engineers would get some data to back up their idea, and the amazing thing was that Larry was fine to be wrong. As long as the data supported them, he was okay with it. And that was such an incredibly morale-boosting interaction for engineers.

If page consistently does this as CEO, several good things will happen to Googles communication and decision making. First, Page will demonstrate that hes willing to listen, which as Doug Merrill suggests, will be incredibly motivating for Googles software engineers. Second, while it might take just as long to make decisions, especially with the emphasis on collecting and analyzing data, Pages use of data to drive his decision making will let others in Google know that they cant duck or delay making decisions when the data indicate what to do. When the data are clear, he expects decisions to be made and actions to follow. Finally, the use of data, rather than rank, will melt resistance to change, and help Google keep up with its competitors, just as Page desires.

A related problem is that top management is increasingly isolated from middle and lower level managers and employees who are responsible for the research and project management that is key to Googles success. So, what might you do to improve upward communication within the company?

Upward communication flows from lower levels to higher levels in an organization. Upward communication is used to give higher-level managers feedback about operations, issues, and problems; to help higher-level managers assess organizational performance and effectiveness; to encourage lower-level managers and employees to participate in organizational decision making; and to give those at lower levels the chance to share their concerns with higher-level authorities.

When Google was a startup, upward communication wasnt a problem. Access to founders and top managers was easy to come by because Google was small. Also, top managers had easy access to informal communication channels, or the grapevine. Furthermore, until it reached 10,000 employees, Google relied heavily on self-designing and self-managing teams that would coalesce around interesting product ideas and then develop them on their own. While chaotic, this worked well until Google tripled in size.

Today, with 24,000 employees and 6,000 more to be hired, Googles top management suffers from the same communication problems found at similar sized companies, namely, that it infrequently interacts with lower level managers. As the number of managers and levels increase in a fast-growing company, it becomes increasingly difficult to communicate directly with those in the lower and middle ranks.

To overcome this problem, and to unfreeze Googles paralyzed decision making, CEO Larry Page emailed Googles engineering and product managers asking them to write to him, in 60 words or less, about the projects theyre working on. The idea, according to Page, was for them to pitch their project ideas to him. This doesnt mean, however, that Page will support every project idea sent his way. In fact, hes likely to eliminate or reduce resources for projects that he considers less important, such as Google Health, which lets people securely store medical records online.

A second, but not often used, method of increasing upward communication is giving more authority, responsibility and independence to managers at lower levels in the company. In other words, if its difficult for top managers to hear what they need to hear from those at lower levels, then give the people and managers at lower levels the ability to make key decisions for themselves. For example, Google bought Android 2005 (it had 8 people at the time), because it wanted to develop a stable, flexible, smartphone to compete with Apples iPhone, and to encourage more people to buy and use smartphones (and hopefully make greater use of Googles mobile search and services). CEO Larry Page realized that for Android to succeed, it would have to be protected from Googles growing bureaucracy. So Page helped Androids chief, Andy Rubin, turn Android into an autonomous unit within Google. And with that freedom, Rubin and his team made the smart decision to abandon plans for making a Google phone and to instead focus on building the Android operating system that could be used by smartphone manufacturers throughout the world. Today, as a result of that decision, Android phones have a larger market share than Apples iPhone. Page has used the same approach with Salar Kamangar, YouTubes CEO.

Page is doing this so Googles key managers can move quickly to improve performance and remove barriers to action and innovation. In short, he wants more parts of Google to act like startups, that is, the way Google used to before it got big. For instance, when Google paid $228 million for Slide, which builds social-networking applications, it was supposed to be folded into one of Googles existing social-networking divisions. But after the purchase, it became clear that Slide was approaching social-networking very differently. So rather than force Slide to change its approach (which is why Google bought it), Page decided that Slide should, like Android and YouTube, run as an independent, standalone unit within Google.

Finally, what can Google do to communicate effectively on an organization-wide basis in an organization that has dozens of product lines, hundreds of research projects, and will soon have 30,000 employees?

What you should do:

1. Intro of the case and business situation/dilemma.

2. What would you do as a manager to make decisions under the circumstance?