Do very high monetary benefits equal lower loyalty for #startup employees? The debacle at Google’s self-driving adventure, Waymo, hints so.
An ongoing debate in the global startup ecosystem – or let’s say a renewed idea – is that too much money for employees could lead to lower loyalty for the startup that they are hired for, especially when not tied to the company’s realizable financial performance. This thought has gained traction because of Google’s self-driving car project, which is supposedly left in disarray due to a lot of their leadership leaving too soon.
The salaries and bonus payouts to Waymo’s key employees seemed to be based on project value on paper. This increased their pay by 1600 percent and did so without a significant time cliff period or legal clauses. This, many believe, has led to an across-the-board talent outflow – at a time when Waymo needed their key employees the most.
Closer to home, similar questions are starting to be asked of the top brass of Flipkart and Snapdeal.
A direct comparison would be unjust, simply because these are very early employees in entrepreneurial roles who helped build Flipkart and Snapdeal, with significantly higher risks than at extraordinary projects like Waymo. Also, the Indian media that today looks down upon these salary figures has in the past created positive hullabaloo about the very same.
This increased their pay by 1600 percent.
Nonetheless, compensation structuring at the top echelons of major Indian startups is sure to be a hotly debated topic this year, especially in the face of lower valuation and worse financial performance.
At Waymo, the outflow has been further aided by the fact that the sector is super hot right now, and therefore Waymo’s competitors have been heavily hiring. Additionally, key people have themselves turned entrepreneurs in the same field.
Anthony Levandowski left and started Otto, an autonomous trucking company, which was later bought by Uber for US$680 million. Brian Salesky, Waymo Google Car Executive, exited and founded Argo.ai, an AI startup dealing with autonomous cars, was recently funded by Ford.
Waymo’s CTO Chris Urmson also left the company and is reportedly also working on an autonomous vehicle startup of his own. Jiajun Zhu and Dave Ferguson, two senior engineers at Waymo, left at the same time as Chris to found Nuro.ai, which will also work with autonomous cars.
The payment figures that were supposed to keep the employees of this key Google moonshot project intact and loyal actually worked against the very same idea: the employees got too much money to need the job itself, and were left to either start up, or take the risk and leave for other offers for higher salaries. Google’s Alphabet CFO, Ruth Porat, has hinted at restructuring these incentives at Alphabet projects, especially at Waymo.
So the question is: should startups pay humongous amounts of cash compensation for executives or not? In reality, the west faces less of a problem simply because of the fact that the ecosystem there is more developed to be able to take such hits. A Google has way more talent pool to tide over such problems versus let’s say a Flipkart, not to mention way more robust revenue streams.
Double whammy in India?
In India, it’s a double-edged sword. Firstly, India has an acute talent crunch for senior roles, which are very hard to fill. Secondly, the current scenario of business viability, depleting equity pool, and funding scene leaves the founders of major startups with no choice but to offer enticing high cash components to senior employees.
This leaves the founders of major startups with no choice but to offer high cash components.
In the past, Mukesh Bansal, Ankit Nagori, Mekin Maheshwari, Sameer Nigam, Amod Malaviya, Punit Soni, and Ashish Vikram have quit Flipkart to start up. Swaminathan Seetharaman, Ganesh Subramaniam, Nitin Agarwal, and Rashmi Daga quit Ola to do the same. Amitabh Mishra and Idi Srinivas Murthy also quit Snapdeal to start up on their own. Alok Jain quit Zomato for similar reasons. The list is long and daunting. But a lot of these are also very successful entrepreneurs in their own right.
The silver lining is that these senior executives from companies like Flipkart, Snapdeal, and Ola – at least partly because of their big monetary rewards and the associated financial freedom – have ended up opening many more startups and businesses, which will ultimately lead to more growth for the overall startup ecosystem in India.
Whether the gamble to hire hotshots at super hotshot prices pays off for their former Indian unicorn employers is a debate that rages on. It is ultimately for VC funds to mull over.
This is an opinion piece.