November 24, 2005

Google's Growth Helps Ignite Silicon Valley Hiring Frenzy

Google's Growth Helps Ignite
Silicon Valley Hiring Frenzy

Tech Firm Battles Big Rivals
To Nab Top Engineers;
Bidding Wars Are Back
Math Problem on a Billboard
November 23, 2005; Page A1

In June, as engineer Anselm Baird-Smith mulled leaving eBay Inc. for another job, he received a call from Google Inc. Within days, Google executives had interviewed him and dangled before him an enticing offer: a six-figure salary and restricted stock then valued at several million dollars, to be distributed over several years.

"Google was really aggressive and they moved fast," says Mr. Baird-Smith, who holds a doctorate in computer science and is known for his work as the developer of Jigsaw, software used in computer servers. As a bidding war escalated, Google Chief Executive Eric Schmidt telephoned to urge him to defect.

In the 15 months since Google went public, the Mountain View, Calif., company has galvanized the technology world with its innovative Internet search technology, its rapidly broadening business plan, and its soaring stock price. In the office parks of Silicon Valley, Google also has helped fuel something else -- a hiring frenzy reminiscent of the dot-com boom.

To accomplish its current pace of hiring about 10 new employees a day, Google has assembled a formidable hiring machine. Its recruitment department includes as many as 300 free-lance recruiters who are helping it to identify who's who in software engineering, according to three people involved in the effort.

To locate new talent, Google has held software-code-writing contests. It has plastered billboards with math problems, such as one on U.S. 101 in Silicon Valley that asked drivers to identify "the first 10-digit prime found in consecutive digits of e." It has paid to insert an "aptitude test" into tech magazines, encouraging engineers to submit their answers to 21 questions, along with their résumés. And it has upped the stakes in competing with other companies to draw attention from engineering students, handing out free pizza and raffling off gadgets to boost university recruitment.

One top-notch engineer is worth "300 times or more than the average," explains Alan Eustace, a Google vice president of engineering. He says he would rather lose an entire incoming class of engineering graduates than one exceptional technologist. Many Google services, such as Gmail and Google News, were started by a single person, he says.

Other top tech firms are fighting back. Google's play for Mr. Baird-Smith prompted eBay to offer him cash incentives to stay. Bill Nguyen, a Silicon Valley entrepreneur who also had been talking with Mr. Baird-Smith, offered the engineer $1 million over three years to work on a start-up, plus a substantial equity stake in any resulting project. In the end, Mr. Baird-Smith accepted Mr. Nguyen's offer.

"This is what you have to do if you want to beat Google," says Mr. Nguyen.

Although Mr. Baird-Smith got away, Google has succeeded in snaring other top talent. Its high-profile hires include Adam Bosworth from BEA Systems Inc., Kai-Fu Lee from Microsoft Corp., Louis Monier from eBay, and Vinton Cerf, who is often cited as a founding father of the Internet, from MCI Inc. Google declined to comment on any specific recruiting cases.

Over the years, Silicon Valley has seen other hiring booms, as companies such as Apple Computer Inc., Cisco Systems Inc. and Netscape Communications Inc. wrestled for brainpower while staffing up during their fast-growth phases. When the dot-com bubble burst earlier this decade, however, demand for tech talent dried up, and many workers left the area altogether.

Google, which saw its revenue increase more than sixfold to $3.2 billion between 2002 and 2004, is helping lead the latest charge. Its hiring drive began not long after its initial public offering in August 2004. At that time, the company had about 2,600 employees, a fraction of Microsoft's 60,000 employees and Hewlett-Packard Co.'s 150,000. Google grew to more than 3,000 by year end, to nearly 3,500 by March 31, and to just over 4,100 by June 30. As of Sept. 30, the company had 4,989 full-time employees, 87% more than when it went public.

"We definitely continue to experience the giant sucking sound that is Google," says Joe Kraus, chief executive of start-up JotSpot Inc. and a former executive at onetime Internet darling Excite Inc. He says he has recently battled Google for technology talent.

Google executives say their efforts to snare top programmers, engineers and other technology experts are not unique. "We're working hard to get [talent], but other companies across Silicon Valley are doing that as well," says Arnnon Geshuri, Google's staffing director.

Indeed, competition for high-tech employees appears to be rising across the board as demand for high-tech products has recovered. The number of job postings on, a tech-employment site, more than doubled to 77,600 since October 2003. Average salaries for tech consultants are up 6.2% in the first six months of 2005 to $87,100, the company estimates.

Microsoft acknowledges trying to hire some employees from Google and snagged the head of Yahoo Inc.'s research labs earlier this year. Yahoo has aggressively beefed up its research staff with high-profile hires from Inc. and International Business Machines Corp., among others.

Google hired away Microsoft's Mr. Lee in July by offering the speech-recognition expert a pay package valued at some $10 million over four years, according to documents in a court case over the matter. Microsoft Chief Executive Steve Ballmer tried to hold on to Mr. Lee by offering him a new job and higher pay, according to Mr. Lee's sworn declarations in the case. When Mr. Lee said he planned to leave anyway, Chairman Bill Gates told him to expect a lawsuit. "We need to do this to stop Google," said Mr. Gates, according to the declarations.

The result is a legal battle reminiscent of the recruiting wars of the late 1990s. Microsoft filed suit against Mr. Lee and Google in July in Washington State Superior Court in King County, alleging that Mr. Lee violated a noncompete agreement when he defected to Google. Google and Mr. Lee have disputed the claim. The case is scheduled for trial in January.

Grueling Process

Google's typical hiring process is regarded as one of the industry's most grueling and extensive. Candidates are often subjected to weeks of interviews, with hiring decisions often made by large committees of executives.

"Google is super active and they're one of the most visible companies" on campus, says Jitendra Malik, a computer-science professor at the University of California at Berkeley. Google held 179 interviews with UC Berkeley's electrical-engineering and computer-science students this fall, up from just 10 job interviews in the same period a year ago, says the university. UC Berkeley says demand from other tech companies hasn't increased as much over the past year.

Google's Mr. Eustace maintains that the salaries it offers for top talent are generally on par with its competitors, or slightly lower. But the offers are often accompanied by hefty grants of restricted stock known as "Google Stock Units." Unlike stock options, which can become worthless if a stock falls below a certain price, restricted stock usually retains value. If employees stay long enough for shares to vest, they receive actual Google shares.

Google began offering restricted stock to all new hires earlier this year. In a recent regulatory filing, it said it had 498,000 such shares outstanding, with a current total market value of around $200 million. According to some Google rivals, if Google discovers that a top job candidate has competing offers, it sometimes doubles its restricted stock offer. Mr. Eustace says Google has engaged in heated competition in only "a tiny fraction" of recruiting situations and generally makes offers in the same range as rival tech companies.

To compete against its larger rivals, Google beefed up its recruiting effort, retaining veterans like Shally Steckerl, a contract recruiter who runs a consulting firm called JobMachine, and Eric Jaquith, a free-lance recruiter who runs Recruiting Choices. Both began working as in-house consultants for Google in September 2004, when the company had more than 80 full-time and contract recruiters in-house, says Mr. Jaquith.

Messrs. Steckerl and Jaquith say they were instructed to diversify Google's engineering pool by hiring more female engineers. They called their team "Zion," after the underground city of humans in "The Matrix" movies. Mr. Jaquith says he was assigned to track down all women from the top 50 universities world-wide who had graduated after 1980 with Ph.D.s or master's degrees in physics, math or computer science. By last December, the end of his stint at Google, he had made thousands of phone calls to female engineers, he says.

Jim Stroud, a contract recruiter involved in the effort between December 2004 and June, says he unearthed several hundred names of female engineers. He estimates that fewer than 10 of those were hired during his tenure. Google's job-interview process is "like a Senate committee hearing," says Mr. Stroud. "You have to get approved by 14 people at least before you get hired."

Mr. Steckerl says the Zion group hired more than 45 engineers during the last quarter of 2004, and increased the total to more than 100 in the first quarter of 2005. Google declines to comment on Messrs. Steckerl, Stroud and Jaquith or the percentage of engineers who are female. Google says it doesn't have 300 recruiters, but declined to elaborate.

'They Went After Us'

Other tech companies have made runs at Google employees. Mr. Steckerl says Microsoft approached him earlier this year. In April, he joined Microsoft as a full-time employee. Within weeks, he says, Microsoft had hired away three other Google contract recruiters from the Zion team, including Mr. Stroud. "They knew who they wanted and they went after us," says Mr. Steckerl.

Abilio Gonzales, Microsoft's general manager of staffing, says the software maker has stepped up recruiting in the past year, telling prospective hires that it works on a wider array of technologies than Google. He says Microsoft's staffing department has grown to 355, up 15% from a year ago.

Yahoo has also expanded its recruiting team. Its executive committee discussed Google's hiring push at meetings earlier this year, says Usama Fayyad, Yahoo's chief data officer. "We believe the [compensation] levels they are willing to go to are unreasonable," says Mr. Fayyad. "It has gotten nuts over the last six months."

Nevertheless, Prabhakar Raghavan, Yahoo's head of research, contends Yahoo has won a majority of the head-to-head hiring battles against Google that he has been involved with. But he says it may become harder to compete if Google continues with what he contends are inflated compensation packages. Earlier this year, he says, Google offered one job candidate much more money than Yahoo was willing to pay. When the engineer decided to join Yahoo anyway, Google doubled the amount of stock it was offering, to no avail, he says.

Mr. Raghavan, who says he was wooed by Google and Microsoft before joining Yahoo in July, argues that such "irrational" offers are bad for the tech industry because they distort compensation expectations and sow resentment among lower-paid employees.

Allan Brown, Google's director of recognition and human-resources systems, disputes that the company is bidding too aggressively for talent. He estimates that Google wins only about half of its hiring showdowns with Yahoo. He says Yahoo also engages in bidding wars, and that Google would consider doubling a restricted stock offer only if there was a strong argument for doing so. Mr. Eustace adds that Google sometimes offers compensation of up to about 15% more than other tech companies, but generally stays within the same range as its rivals.

EBay spokesman Hani Durzy says the San Jose, Calif., Internet auctioneer has lost 10 to 20 technologists to Google since the start of the year. But Mr. Durzy says eBay hired 1,300 people during that period, including 800 technologists.

Google may need to assemble an engineering brain trust to hedge against a potential talent drain. With its stock closing yesterday at $416.47 a share, many of its earliest employees have become multimillionaires. At other successful tech companies such as Microsoft, some wealthy veterans have retired young. Earlier this year, a Google vice president of engineering, Wayne Rosing, retired to pursue his passion for astronomy. Google says there is no mass exodus and that its annualized attrition rate is in the low single-digits, below average for a tech firm.

The industry is watching closely the legal dispute over Google's hiring of Mr. Lee from Microsoft, which sheds light on how Google courts top talent. In an email disclosed in the litigation, Mr. Eustace wrote that he "pursued [Mr. Lee] very hard because he has incredible hiring ability," which might help "shake a few more people loose."

Google Vice President Jonathan Rosenberg wrote in an email to colleagues: "I all but insist that we pull out all the stops and close him like wolves."

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