Google paid car unit too much

Google has been hemorrhaging talent from its self-driving car project mostly because it paid workers too much.

According to Bloomberg early staffers had an unusual compensation system that awarded supersized payouts based on the project’s value. By late 2015, the numbers were so big that several veteran members didn’t need the job security anymore, making them more open to other opportunities.

In December Google created a standalone business called Waymo, and the system was replaced with a more uniform pay structure that treats all employees the same. However it looks like that the previous system did a lot of damage to the entire project.

In 2010, soon after Google unveiled its first self-driving vehicle, the search engine hit on a wizard wheeze to tie employees’ fortunes to the project’s performance rather than Google’s advertising money machine.

In addition to cash salaries, some staffers were given bonuses and equity in the business and these awards were set aside in a special entity. After several years, Google applied a multiplier to the value of the awards and paid some or all of it out. The multiplier was based on periodic valuations of the division, the people said.

However, the bonuses started to get out of control as the project matured. Some found themselves collecting multi-million dollar payments.

One member of the team had a multiplier of 16 applied to bonuses and equity amassed over four years, one of the people said.

The payouts increased after key milestones were reached, even though the ultimate goal of the project was years from being finished.

Chief Financial Officer Ruth Porat told analysts last year that operating expenses in the fourth quarter of 2015 rose 14 percent to $6.6 billion, “primarily driven by R&D expense, particularly affected by expenses resulting from project milestones in Other Bets established several years ago.”

But people were not sticking around. Staff departures from the car division actually increased in 2016. Some were frustrated with the pace of progress and had doubts about new leader John Krafcik, while others wanted to start their own autonomous vehicle companies.

The fact Google had given them pots of money made things worse because team members had less financial incentive to stay instead they had cash to go off and form their own dream start-up.