When G.M. Was Google

Every brilliantly successful corporation spawns books relating its success to management methods that you, too, can follow.Illustration by Adam Simpson

One Friday afternoon a dozen years ago, Larry Page, one of the founders of Google, posted on the wall of the office kitchen a printed-out screenshot of Google ad results, with “These Ads Suck!” scrawled on it. Google’s AdWords engine was supposed to serve up ads that were relevant to your search terms. He was finding that if you searched for Kawasaki H1B, the vintage motorcycle, you’d get ads for lawyers who would help you with your H-1B visa. That sort of thing. By Monday morning, five engineers who weren’t even on the advertising team had, acting on their own, devised a software solution to the problem—a solution that proved to be worth billions of dollars. “It wasn’t Google’s culture that turned those five engineers into problem-solving ninjas who changed the course of the company over the weekend,” Eric Schmidt and Jonathan Rosenberg—the company’s former C.E.O. and its former head of product development, respectively—write in “How Google Works” (Grand Central). “Rather it was the culture that attracted the ninjas to the company in the first place.”

What’s Google’s secret? This is an irresistible question, because Google is the most successful new business corporation of the twenty-first century. Still only fifteen years old, it is worth about three hundred and eighty billion dollars; its revenues are more than fifty billion dollars a year, and around a quarter of that is profit. More than a billion people perform a Google search every month. It’s natural to wonder whether there’s something each of us can do to emulate Google, with directionally similar, if perhaps more modest, results. What makes the Google model especially alluring is that, as Page and Sergey Brin put it in the statement that accompanied their initial public offering, ten years ago, “Google is not a conventional company.” Getting very rich is always fascinating, but getting very rich while proclaiming that you’re breaking the rules about how to run a business is even more so. Every publishing season seems to bring books about how to capture some of the Google magic. The new crop includes not just “How Google Works” but also “Think and Grow Digital” (McGraw-Hill), by Joris Merks-Benjaminsen, a Google executive who holds the title of Benelux Head of Branding Solutions & Innovation, and, coming soon, “Work Rules! Insights from Inside Google That Will Transform How You Live and Lead” (Twelve), by Laszlo Bock, Google’s senior vice-president of people operations.

“Think and Grow Digital” is presented as a guide for “millennials” to finding their way in the beginning and middle stages of a business career, so it’s filled with references to its intended audience’s youth and technological savvy—their “brains are different”—and to the bother of having to work with people who are middle-aged. Merks-Benjaminsen confesses that he used to see such people as “old, gray, resistant guys, stuck in their old-fashioned business thinking,” but he has learned to become more compassionate: “Place yourself in the position of those who had limited access to the Internet and computers during the first 20 to 50 years of their lives and try to imagine how much new stuff they have to digest in order to understand what you are saying.” But the book is filled with maxims, slogans, charts, and other catchy ways of imparting lessons that even a non-millennial can apply. We learn Google-isms like “moonshot thinking” and “the funnel of focus.” And we get a closing proclamation: “Greatness is for everyone.”

Books like these obviously have some debt to the old and well-established tradition of American success literature; Merks-Benjaminsen’s title echoes Napoleon Hill’s 1937 “Think and Grow Rich,” which is still very much in print. And, for at least a few readers, the burnished tale of Larry Page’s scrawled protest and the “problem-solving ninjas” who dealt with it may bring to mind Elbert Hubbard’s 1899 essay “A Message to Garcia,” which for decades was an inescapable part of the national culture. Hubbard’s “preachment” took off from a possibly apocryphal incident during the Spanish-American War: the President must get a message to General Garcia, the leader of our insurgent friends, who is somewhere in the mountains of Cuba. When a fellow named Rowan is given this daunting charge, well, by God, he carries it out. He doesn’t ask why; he doesn’t ask for Garcia’s exact location; he doesn’t look for someone else who might do the task instead. Hubbard was celebrating success, and he was celebrating employees with the goodness and the gumption “to be loyal to a trust, to act promptly, concentrate their energies on a thing—‘Carry a message to Garcia.’ ” (Having grown up in the culturally lagging Deep South, I was raised on this sacred text. The director of my summer camp read “A Message to Garcia” to us every year, in front of a mystically flickering bonfire, and we went away properly awed.)

The inevitably inspirational character of many business books can easily take off into quasi-religious territory. “Don’t be evil” is Google’s famous mantra, and Larry Page is evidently so mesmerizing that he doesn’t even have to voice a request in order for his wishes to be granted by his employees. But such books are also grounded in real managerial aims and practices. “How Google Works,” though it’s written in a self-consciously breezy style, is in the main a serious attempt to identify Google’s distinctive way of operating. We’re told about the Friday sessions where any employee can ask Page and Brin anything, the policy of letting everyone spend twenty per cent of his or her time on a personal project, the willingness to invest in big, impracticable-seeming ideas like self-driving cars or the “interplanetary Internet.” The book’s larger argument is that the company depends on hiring what Schmidt and Rosenberg call “smart creatives,” and letting them work under circumstances that are unusual in a big company. Google likes messy, un-private offices and has a rule that all managers should have at least seven direct reports, which insures relatively loose supervision. The atmosphere is meant to encourage the smart creatives (who, of course, are mainly smart, creative computer programmers, not dance critics or sculptors) to experiment constantly and obsessively, not necessarily inside the official lines of authority, and thereby to come up with new kinds of software that might turn into “great products.” The company is built to launch new products very quickly and to cut bait right away if they aren’t working. A company motto is “Ship and iterate.”

Google doesn’t stress out about work-life balance among its employees: work this meaningful and fulfilling isn’t just “work.” Almost nobody is interested in working a mere forty-hour week. When Laszlo Bock talks about what he’s learned at Google, he isn’t just giving you career advice; he’s giving you life advice. (“People look for meaning in their work,” Bock has written. “Mission. Transparency. Voice. These three components of our culture create a virtuous cycle of attraction, community, engagement, and innovation.”) These books are corporate devotionals, generous in their use of the imperative mood. Don’t be evil. Don’t let things suck. It’s hard not to conclude that the company has it all figured out; as a glance at a quarterly report suggests, there are billions upon billions of reasons to think so.

If you imagine a very long shelf of business books with “How Google Works” at one end, you could start the other end with Alfred P. Sloan’s magisterial memoir, “My Years with General Motors,” first published half a century ago. Culturally, the two books couldn’t be more different. In Silicon Valley, a necktie is disqualifying; an informal photograph of Sloan would be one in which he’s wearing an impeccably tailored suit and tie but not a vest. Sloan refers to the intimate business associates of a lifetime as Mr. Pratt, Mr. Kettering, and Mr. Mott; for even the lowliest new hire at Google, it’s Larry and Sergey. Schmidt and Rosenberg, who occasionally refer pityingly to “incumbents”—business organizations that already existed when Google began—are proud to proclaim that Google is a “flat organization” that began with “no concept of an org chart.” Sloan finds it useful, in telling his story, to include densely detailed organization charts (including an appendix entirely made up of them).

“There can be no peace until they renounce their Rabbit God and accept our Duck God.”

Like Google and other big Silicon Valley companies, General Motors was, in its early days, an aggressive acquirer of small companies that looked as if they might usefully be folded into the larger business. Sloan had been running a roller-bearing manufacturer that G.M. acquired in the late nineteen-tens. G.M.’s first president was William C. Durant, a product visionary and salesman of Steve Jobsian charisma, who was incapable of coloring inside the lines. As Sloan put it, “Mr. Durant was a great man with a great weakness—he could create but not administer.” G.M.’s shareholders forced Durant out in 1910, because of his indiscriminate spending and borrowing. Durant devoted his exile to elaborately and successfully plotting his return, which he accomplished mainly by founding Chevrolet and selling it to G.M. on terms that made him a major shareholder. He was back as president of G.M. in 1916, but out again, because of another bout of financial imprudence, in 1920. Sloan, by then the head of all of G.M.’s auto-parts businesses, became president in 1923.

Sloan’s breakthrough was a memorandum he wrote in 1919 called the “Organization Study,” which was meant to impose order on the company’s Durant-era administrative and financial chaos. G.M. had by then grown so big that if every decision had to be made at headquarters nothing would ever get done. Sloan’s solution was to create autonomous divisions organized around product lines (Chevrolet, Buick, Cadillac, and so on), each with its own president and its own budget. Headquarters would monitor performance and provide specialized services like finance and research.

The result was a quiet earthquake in the realm of big business. William Durant and Henry Ford were, in Sloan’s view, “of a generation of what I might call personal types of industrialists; that is, they injected their personalities, their ‘genius,’ so to speak, as a subjective factor into their operations without the discipline of management by method and objective facts.” Sloan believed that managing a corporation was a profession—and, as if to prove his point, General Motors quickly zoomed past Ford in market share. As early as 1927, a G.M. executive made a speech to a management association holding up the “Organization Study” as a model for all corporations. In the current atmosphere, it’s easy to forget that “bureaucracy,” at least for Max Weber, an early user of the word, was supposed to represent a step forward from “charisma”: having rules was better than having a ruler. That was part of how G.M. worked.

For many years, management consulting meant travelling the world and teaching corporations how to be more like G.M. Alfred D. Chandler, Jr., the leading historian of American business, published a book called “Strategy and Structure” (1962), which said that G.M.’s organizational form “became, more than that of any other company, the model for similar structural changes in other large American industrial enterprises.” Mid-century antitrust legislation made it difficult for corporations to acquire their competitors—but, because G.M. had established the independent-division structure as the ideal form of management, corporations were inclined to grow by acquiring unrelated businesses and applying the G.M. method. And the G.M. model reached beyond business, narrowly construed. As Sloan’s company became a paragon of American success, his organizational approach acquired the status of social gospel. In 1946, Peter Drucker, then in career transition from young scholar to the dominant management guru of the twentieth century, published a book about General Motors called “Concept of the Corporation,” in which he called the rise of the corporation “the most important event in the recent social history of the Western world” and argued that G.M.-style decentralization “is the condition for the conversion of bigness from a social liability into a social asset.”

Drucker, who had left his native Austria in time to watch the Anschluss from a safe distance, was understandably focussed on the danger of an all-powerful state; he was disposed to think that the American corporation could become a bearer of the nation’s “social” functions. G.M. and many other corporations—because of government pressure, labor shortages, and unusually propitious economic conditions after the Second World War—did wind up adopting something like his model. They were heavily unionized, and they offered their white-collar employees de-facto lifetime tenure. Employees got steady raises during their working years and pensions after retirement. When Sloan’s book was published, he was able to report that G.M. had six hundred thousand employees, more than half of them union members.

That was G.M.: a vast number of employees, who were deployed within an archipelago of specific product lines in a way that was meant to maintain flexibility and agility, all trained and directed by professional managers to be as productive as possible, and treated as valued contributors to a larger endeavor. Year after year—for almost eight consecutive decades—G.M. was the planet’s No. 1 carmaker. It was hard not to conclude, at the height of the American century, that the company had it all figured out; as a glance at a quarterly report would demonstrate, there were billions upon billions of reasons to think so.

General Motors went bankrupt five years ago—merely intoning its name connotes failure in the same way that intoning Google’s connotes success—and its reputation had already become badly tarnished back in the seventies and eighties, when Toyota and other Japanese auto companies came out of nowhere to be significant competitors in the American market. A God That Fails, however, does not bring an end to the devotional genre. There are always new gods, new doctrines, and new lessons. Between G.M.’s decline and Google’s ascent, there was, in computing technology, I.B.M., of course, and then Microsoft; in the industrial realm, there was, in the nineteen-eighties and nineties, the radiant example of Jack Welch’s General Electric. Best-seller lists came to welcome books like Robert Slater’s “Jack Welch & the G.E. Way,” or Welch’s own “Jack: Straight from the Gut.”

Sloan’s disciples revered his “Organization Study”; Welch was a devotee of the Six Sigma system, an elaborate method of reducing manufacturing defects. Welch also used most of the other leading management tools of his age, including making hundreds of acquisitions, ruthlessly eliminating the social aspects of the corporation, and orienting managers’ pay toward the performance of G.E.’s stock. He drew from the package known as Total Quality Management, which had earlier transformed Japanese car manufacturing. He had other dictums, too: If you’re not No. 1 or No. 2 in a market, get out of the market. Welch’s wisdom was widely emulated, like Sloan’s in his day, but it had the same move-like-Jagger limitations: the playbook written by the wildly successful didn’t necessarily work for the rest.

For that matter, some of Google’s management mantras have been in circulation for decades. Tom Peters and Robert Waterman, Jr.,’s “In Search of Excellence” (1982) offered a list of eight qualities of successful companies, none of which would be out of place in “How Google Works”—innovative culture, employee autonomy, a bias toward action, obsession with the customer, and so on. (Some of the exemplary companies that Peters and Waterman mentioned, like Atari and Wang Labs, ran aground.) Randall Stross’s “The Microsoft Way” (1996) offered a formula that was strikingly similar to Schmidt and Rosenberg’s: “Gates recruited smart people, put them to work on a campus well suited for intense concentration, and maintained their allegiance with stock options whose value made millionaires of mere foot soldiers in the product-development groups. The organization, even as it grew large, was deliberately fashioned to perpetuate the identity of small groups, and communication, up and down, was frequent and voluminous.” Again, market-dominant companies had plenty of managerial lessons to dispense, and these lessons had plenty of enthusiastic adherents. Drawing grand lessons from especially vivid and close-at-hand examples is always tempting. Using the corporation of the moment as a model seems so obviously right—how could it go wrong?

In 1940, a young sociologist named Robert K. Merton published an essay called “Bureaucratic Structure and Personality,” in which he coined the phrase “displacement of goals.” Bureaucracy develops, Merton wrote, because large organizations require rules and procedures, lest they fall into the administrative and financial chaos and governance-by-whim of the kind that brought down William Durant. But eventually the rules and procedures devised to help the organization achieve its goals take on a life of their own, and become “an immediate value in the life-organization of the bureaucrat.” In other words, when people orient their lives around the rules, the purpose of the organization gets lost.

“Your daddy had all the trimmings, son, our nation’s highest honor.”

As early as 1957, in a later version of his essay, Merton reported that “bureaucracy” had become a word that nobody was using positively. Organizations in general were declining in prestige. Alfred Sloan’s memoir was published just at the moment when polls began to show a growing loss of trust in American institutions, a trend that has continued for half a century. Within the realm of corporate management, the very large company divided into autonomous divisions was under general attack by the mid-nineteen-seventies. The last half-century of management wisdom can be understood as a long series of attempts to find a way around the ineluctable logic of displacement of goals. It would be hard to find any popular business advice book since Sloan’s that isn’t premised on the notion that the American corporation needs to be made less sclerotic. Bureaucratic processes had become their own reward: that was goal displacement. A related shift in management since Sloan’s time has been to drop the social vision of the corporation—more goal displacement—in the name of economic efficiency. This has happened in many older corporations, like G.M., which now has just over two hundred thousand employees. Google was designed never to have unions or pensions; the expectation was that most employees wouldn’t plan to stay at the company for decades. Abandoning the social mission of the corporation is a management technique that’s seldom openly celebrated in business books, but it has been significant.

As Merton would have predicted, though, every new strategy for reforming bureaucracy (developing “loose-tight” organizations, “flattening hierarchy,” “reëngineering”: the formulas are countless) can itself lead to new forms of goal displacement. What managers consider a problem is typically what their predecessor considered a solution. Sloan had characterized Henry Ford as a charismatic, overly personal manager, but Ford’s invention of the assembly line was a breakthrough in process improvement that, with modifications, persists to this day. Sloan’s multidivisional (“M-form”) structure was meant to be an antidote to the very bureaucratic gumminess it was later taken to exemplify. One should be wary of the argument that any new company, no matter how brilliantly successful, has figured it out in a way that no previous company ever could have.

There are striking points of affinity between the old G.M. way and the new Google way. Among Sloan’s achievements was to be more attuned to what in Silicon Valley would be called “the user” than his main rival, Ford, by offering a range of styles and prices that more closely followed the subtleties of demand than did the one-color, one-style, one-price Model T. It’s notable that Page, Brin, and Schmidt are all engineers; “Google is and always will be an engineering company” is the corporate assurance. Sloan, also an engineer, declared, “General Motors is an engineering organization.” Page and Brin announced, “We will not shy away from high-risk, high-reward projects because of short-term earnings pressure.” Sloan, in the “Organization Study,” wrote, “The profit resulting from any business considered abstractly, is no real measure of the merits of that particular business.” Sloan built a modern, suburban, low-slung, campuslike Technical Center that wouldn’t look out of place in Silicon Valley. He tied managers’ compensation to the performance of G.M.’s stock. He even boasted about G.M.’s “fine cafeterias.” (Add a few foosball tables and beanbag chairs, and who knows what could have happened?)

Schmidt and Rosenberg, as you’d expect, firmly disagree with Sloan’s central organization idea: “We believe in staying functionally organized—with separate departments such as engineering, products, finance, and sales reporting directly to the C.E.O.—as long as possible, because organizing around business divisions or product lines can lead to the formation of silos, which usually stifle the free flow of information and people.” Is that part of the reason that Google has become a world-bestriding colossus? Was Sloan simply wrong (and wrongly celebrated for decades), or has his big idea become inappropriate, now that we’re in what Schmidt and Rosenberg call the Internet Century?

“After the industrial revolution, the definitive twentieth-century institution became The Corporation,” Schmidt and Rosenberg write. “Think General Motors, an automobile company where mass production was happening at plants, thanks to a confluence of factors, including access to power, water, and a blue-collar labor force. Meanwhile, both union members on factory floors and white-collar workers in headquarters enjoyed safe careers and comfortable middle-class lifestyles.” Now, they write, “The Corporation as a hub of economic activity is being challenged by The Platform.” That’s the logic under which Google’s success is generalizable.

In all sorts of critical ways, however, Google’s success isn’t generalizable. Here’s a company that enjoys market dominance because of its intellectual property; Schmidt and Rosenberg cheerfully admit in their book that Google’s “default to open” ethos does not extend to its invaluable search and ad algorithms—revealing them, they say, might degrade the user experience. Google does not, for the most part, make physical products; we can’t buy the self-driving car yet. Instead, it produces and distributes coded machine instructions. The nature of Google’s business explains a number of its odd-seeming practices, like its insistence on not charging users and, most of the time, on not creating the information it purveys; its preoccupation with big ideas; and its rapid and relentless introduction of new products. The main way that Google makes money is through its ad delivery system, which uses the information that Google gets about its users while they are getting information from Google to let advertisers target potential customers with an efficiency that old media could never offer. The richness of the data and the size of the network have made Google crushingly ascendant in online advertising: it harvests roughly half of all digital advertising revenue worldwide, which leaves the thousands of other companies trying to make their living from online advertising scrambling for a share of what remains.

Google’s business model explains why it has to keep its audience as large as possible—which means constantly adding more users, more information, and more search features (five hundred improvements every year, according to Schmidt and Rosenberg). It’s also why Google, like Facebook, keeps acquiring unprofitable or barely profitable startups at gasp-inducing prices: these companies have invented some application, or amassed some audience, that seems to have the potential to increase the size of the acquirer’s network significantly. As Schmidt and Rosenberg repeatedly assure us, growth and scale, not revenue, are the determining factors in the way they make decisions.

What about the emphasis on that ninja-attracting culture? That’s especially difficult to transport outside a tight radius from Mountain View. One of the ironies of the tech economy, duly noted by Schmidt and Rosenberg, is that while the products and the users are geographically untethered, the businesses that supply them are increasingly clustered in one physical location, Silicon Valley. That’s because of the unusual, and apparently non-replicable, infrastructure of support there: the Stanford engineering school, the Sand Hill Road venture-capital firms, the angel investors, the talent pool of coders and engineers, the technical-infrastructure providers. First-rate coders are in high demand, and employers, including Google, have to deliver special working conditions and high-performing stock options in order to keep them. The ability to attract talent has a much bigger economic payoff in Silicon Valley than it does in most industries; conversely, the rest of the world is littered with the remains of attempts to create the next Silicon Valley, complete with smart creatives.

Given the psychic power of Silicon Valley at this moment, it’s possible to forget that most companies still operate in the physical world of manufacturing goods and providing in-person services. Amazon, for all its digital prowess, has warehouses filled with merchandise and employees to handle it. Google itself, which now has fifty thousand employees, can’t operate as fluidly and creatively as it used to. It has never internally developed a product as wildly successful as the mega-hits of its startup days, Page Rank and AdWords; YouTube, Google Maps, the Android operating system, and most of its other popular newer offerings are based on acquisitions. The company is an inescapably ever larger, ever more established, ever more heavily regulated organization whose management is now middle-aged. Google may be able to navigate this phase more adeptly than have some of its older Silicon Valley neighbors, like H.P. and Yahoo, but it won’t be by studying its own playbook. The idea that you can govern a company through genius leaders, genius followers, and as few rules as possible is at the heart of “How Google Works”; but, over the long haul, it isn’t how Google will be able to work. There isn’t one fix to the problem of human organization that functions in all situations at all times. Schmidt and Rosenberg end their book by claiming to find it “inspiring” that one day another, more innovative company will come along and drive Google out of business. That’s unlikely to happen in our lifetime. Being big and established confers amazing powers of survival. General Motors is still one of the world’s top companies. But the time is coming when, if Google’s C.E.O. wants to get a message to Garcia, he’ll actually have to ask someone. ♦