Google's 10% Pay Raise

Google has announced a 10% across-the-board pay raise for all employees. CEO Eric Schmidt explained that the firm is concerned about retention as the labor market begins to heat up in Silicon Valley. Moreover, we have been reading numerous reports of defections to Facebook, whose COO Sheryl Sanberg is ex-Google.

I'm intrigued by this move given that it's not clear if this raise will improve retention substantially. Job satisfaction, motivation, and retention are driven by many intrinsic factors, not just extrinsic factors such as salary and bonus. In fact, Google has attracted incredible talent over the years because it has created a work environment that enhances intrinsic motivation. Could things have changed? As Google has grown and matured, could the challenges and excitement and potential for growth and development at other firms now exceed those at Google? If so, a 10% pay raise won't have a long term substantial impact. Clearly,a pay raise can be very helpful if coupled with a series of other moves designed to motivate talented young folks.