On day care, Google makes a rare fumble

Two months ago, Google held a series of secret focus groups with employees who have children in Google's day care facilities.

The purpose was to gauge their reaction to the company's plan to raise the amount it charged for in-house day care by 75 percent.

Parents who had been paying $1,425 a month for infant care would see their costs rise to nearly $2,500--well above the market rate. For parents with toddlers and preschoolers, who were charged less, the price increases were equally eye-popping. Under the new plan, parents with two kids in Google day care would most likely see their annual day care bill grow to more than $57,000 from around $33,000.

At the first of the three focus groups, parents wept openly. As word leaked out about the company's plan, the Google parents began to fight back. They came up with ideas to save money, used the company's TGIF sessions--a weekly meeting for anyone who wanted to ask questions of Google's top executives--to plead their case, and conducted surveys showing that most parents with children in Google day care would have to leave Google's facilities and find less expensive child care.

Do you think you know how this story ends? You're probably guessing that because it involves "do no evil" Google, Fortune magazine's "Best Company to Work For" the past two years, this is a heart-warming tale of a good company reversing a dumb decision.

If only. Although Google is rolling back its price increase slightly and is phasing in the higher price over five quarters, the outline of the original decision remains largely unchanged. At a TGIF in June, the Google co-founder Sergey Brin said he had no sympathy for the parents, and that he was tired of "Googlers" who felt entitled to perks like "bottled water and M&Ms," according to several people in the meeting. (A Google spokesman denies that Brin made that comment.) On Monday, Google began the first phase of its new day care plan, letting go of the outside day care firm it had been using.

In recent months, Google has hit the first rough patch in its short, magical life as a public company. From November to April, Google's once high-flying stock dropped 44 percent, to $412 from $744. (It has since gained some of that back, closing on Thursday at $537.) It may be a stretch to equate the day care fiasco with the fall in Google's stock. But maybe not.

When a stock was rising as fast as Google's once was, it was easy to buy the view that there was something truly special about Google. But when the stock is falling, overlooked problems start to loom large. Having discovered that Google is not, in fact, the promised land, a number of Googlers have left recently to join start-ups, hotter companies like Facebook--and even Microsoft.

"There are many things about Google that are not great, and merit improvement," blogged Sergey Solyanik, who recently returned to Microsoft after a stint at Google. "There are plenty of silly politics, underperformance, inefficiencies and ineffectiveness, and things that are plain stupid." Starting, it would appear, with day care.

Baby steps
Google first began offering day care three and a half years ago, and perhaps it is only coincidence that this occurred not long after a woman named Susan Wojcicki returned to the company from maternity leave. Ms. Wojcicki is a figure of significant stature at Google; hers was the garage that Brin and Google's other founder, Larry Page, rented while starting up Google. Today she is the company's vice president for product measurement, though as I discovered in talking to unhappy Google parents this week, not many Googlers seem to know what her exact duties entail. Everybody, however, knows that she's Brin's sister-in-law.

From the start, Wojcicki has been a passionate advocate for Google's day care efforts, though there is some dispute about how much decision-making authority she has. Parents who know her point out that the company's day care approach is very much aligned with her views; for its part, a Google spokesman insists that "these decisions were not made by her; they were made by the executive management team."

Google's first facility, called the Kinderplex, was run by the Childrens' Creative Learning Centers, or CCLC, which, according to its Web site, offers "learning in a play-based, developmentally appropriate environment that incorporates a variety of activities and multicultural aspects in a thematic style." That sounds perfect for Silicon Valley, doesn't it? One of CCLC's longtime Silicon Valley clients, Electronic Arts, sent me an e-mail statement telling me how happy it has been with CCLC's services.

According to Google, there were numerous complains about CCLC, but the Google parents I spoke to disagree. They say that at the Kinderplex, teacher-child ratios were low, teachers were first-rate, the facility was clean and upbeat, and the food--organic, naturally--was terrific.

But at least one parent wasn't happy: Wojcicki. She is a proponent of a preschool philosophy called Reggio Emilia, the hot kiddie philosophy of the moment, which stresses even small children's ability to chart their own learning paths.

A year after the Kinderplex opened, Google opened its second day care center, called the Woods, which Google ran itself. The Woods was an expensive undertaking; in terms of the square footage per child, the aesthetics of its toys, and the college degrees of its teachers, it put the Kinderplex to shame. It also used the Reggio Emilia philosophy.

With the Woods open, Google decided to upgrade the Kinderplex to match the salaries and the teacher-student ratios of the Woods. Google now had 200 day care spots--and such wonderful day care at that!--and was promoting this new perk as a recruiting tool. The company was growing like crazy--its work force now numbers 19,000--its young employees were starting to have babies, and well, you can just picture what happened next. The wait list ballooned insanely, finally reaching over 700 people. New employees who arrived at Google thinking they were getting in-house day care were stunned to discover that it could take up to two years to land a coveted spot.

Meanwhile, someone at Google woke up one day and realized that the company was subsidizing each child to the tune of $37,000 a year--which nobody had noticed up until then--compared with the $12,000-a-year average subsidy of other big Silicon Valley companies like Cisco Systems and Oracle.

Wait list vs. subsidy
Faced with this dilemma, Google decided that the way to solve the dual problems of a too-long wait list and a too-large subsidy was--are you sitting down for this?--to get rid of CCLC and make the Kinderplex more like the Woods. (Google says it was always planning to replace CCLC.) Given that decision, the only possible way to reduce the subsidy was to raise prices through the roof.

If you are shaking your head at this point, that's because you lack the proper understanding of Google's culture. Having conquered the Internet, Google's executives tend to believe that they can do pretty much everything better than everybody else--even day care. When I spoke to Laszlo Bock, the company's vice president for "people operations" (aka human relations), he told me that "what is really driving the cost is eliminating the two-year wait list while focusing on providing really high quality."

Google can't just have low teacher-child ratios--it has to have the lowest of anybody. Its teachers have to be the best. Its toys have to be the most advanced. If it costs a lot of money to provide the Greatest Day Care on Earth, well, that's life.

Plus, the high price of Google day care solves the waiting list problem. Indeed, getting the waiting list down was a huge priority for Google; the spokesman told me that forcing people to wait two years for day care was "inequitable." And maybe it is.

But parents who talked to me said that several times during the six-week-long day care brouhaha, Brin made comments indicating that he viewed the whole thing as a giant economics experiment. "This is a supply-and-demand issue," he told one group of parents--adding that Google needed to charge what the market would bear. (Through a Google spokesman, Brin denies making such a statement.) Given that Google has lots of pre-IPO millionaires, it can clearly charge a lot.

Indeed, at one meeting, Wojcicki, a multimillionaire herself, told the parents that she planned to keep her own children in Google day care, despite the higher cost. "I've had firsthand experience with the great care provided by these centers and I want as many other parents as possible to have access to it," Wojcicki noted in an e-mail message.

Google has also started charging people several hundred dollars to stay on the waiting list; as a result the list has dropped to around 300 parents. By next fall, Google plans to open new facilities with another 300 places. See? No more waiting list.

Objects strongly to criticism
Google, I should note, believes that it has handled the day care issue in a "Googly" way and objects strongly to the criticism by the parents. The company points out that the prices are somewhat lower than originally planned, that it is expanding its day care operation, that its facilities will be state of the art and that it will be giving scholarships to parents who can't afford to keep their children in Google day care. (Although yet to release the details of the scholarship plan, the company says that employees will have to show proof of household income to qualify.)

But here's the real problem: providing day care isn't an economics experiment, nor should it be just another Google perk, alongside organic food and free M&Ms.

Day care matters to people's lives in a way that few other perks do. There are many people in this country--including, I'll bet, many Googlers--who believe that employer-provided day care, at affordable prices, ought to be like health insurance, a benefit that every company provides as a matter of course. Yet as the technology blog Valleywag noted recently, Google doesn't even advertise day care as a benefit for its employees anymore. That's the real shame.

Google may be providing the greatest day care ever, but so what? It doesn't matter how good the day care is if only its wealthiest employees can afford to use it. If Google had really wanted to do something path-breaking about its day care crisis, it would have spent less time creating elitist day care centers and more time figuring out how to "scale" day care for everybody no matter what their salaries.

Instead, Google has shown that it thinks about day care the same way every other company does--as a luxury, not a benefit. Judging by what's transpired, that's what Google is fast becoming: just another company.

Entire contents, Copyright © 2008 The New York Times. All rights reserved.

[Anthony, from Rivernet Communi]

Perhaps Google should just close down it's internal day-care and share the cost per child on an outside source. Like cost-sharing, or some cost matching plan. Sadly, Google _is_ just turning into just another company.

[nachurboy]

When you're dealing with a public company, it will ALWAYS be "just another company" because it is beholden to the shareholders now. Unless you own 51%, your wants mean diddly squat.

[WhuzYoDaddy]

A mesage to Google employees:

Welcome to the REAL world.

[azcomicgeek]

Why not just outsource the day-care and ship the kiddies to India.

[rrod182]

Google is a fascist corporation that cares very little for people. Employees are merely variables in an algorithm. I am surprised they don't have an entrance exam or IQ requirement for the kids yet. Certainly only the best and brightest kids "deserve" the best toys and teachers.

[solrosenberg]

If ya can't afford to feed 'em, don't breed 'em. Just like many purchased houses they can't afford, it seems many have popped out little ones they can't really afford.

[rapier1]

Hey Sol, who are you and what planet did you evolve on? I'm just curious because I thought all the troglodytes vanished centuries ago. All issues of evolutionary throwbacks aside, I really don't think most of the google employees can't afford to raise kids - I think its that a lot of them are outraged that google wants $57,000 a year for day care (which is far higher than average day care costs and definitely exceeds my take home) because some woman with a very iffy position at the company decided that this hyper expensive option was the only one they'd offer.

Google, internally, is a very odd company with weird dysfunctionalities that end up excluding all the people that don't want to drink the kool-aid. Its not so bad at the satellite offices but I understand main campus is getting all kinds of Jim Jones.

[WhuzYoDaddy]

It's not about "affording" kids. These employees can more than afford them. It's just that they're whining because all of a sudden they're having to explore other alternatives than an employer-subsidized daycare.

Quite frankly, GOOG shareholders should be royally pissed that the company was spending this much money on benefits. Apparently Brin and his lemmings learned nothing from the dot com bust of 2000.

[natis--2008]

And were the individuals that chose to not have kids been given something of equivalent worth when it was a free service?

[pmfjoe]

Wow, I am rather stunned at the cost of their daycare, perhaps here in FL our costs are just that much lower but it would be hard to find a daycare that charges more than 1k a month. Heck even the private schools are only 1-1.5k a month.

[rcrusoe]

"There are many people in this country ... who believe that employer-provided day care, at affordable prices, ought to be like health insurance, a benefit that every company provides as a matter of course."

Salaries, health care, day care, etc. all come out of the same bucket of money. When health care costs go up, the money available for raises, etc. goes down. When employee cost gets too high then something has to go. One only has to look at Detroit to see what happens when that occurs.

My economics professor taught us that a company exists for only one purpose - to make money for its owners (i.e. stockholders). And if it doesn't make enough they will invest their money elsewhere.

[Xtoo]

These employees will soon ask google to walk their dogs as well. Just suck it up and deal with your child expenses but not at any company's cost whether is google or the family own coffee shop down the street. Ridiculous!!! If you want to have kids make sure you can pay for them on your own. And if you don't like to work 12 hour day, go look for work somewhere else.

[bassboat8]

what a fiasco! Google is stupid in the way they handled the situation from its inception, the employees are a bunch of whiners and both should be spanked.

[tlite722]

and since when is a published employee benefit a first come first serve type of thing. you don't find a waiting list for health coverage or dental. You don't have 401k matching on the first 1,000 employees that sign up. why is this benefit different and why...if i'm one of those on the waiting list...not outraged that i am being denied an offered benefit because i wasn't employee #3 and i have to wait until their kids can stop crapping in their pants for mine to get in? if i were google, i'd scrap the whole thing and give everyone that qualifies a credit for an outside third party daycare and leave it at that. even better is if google (or every employer) would give each employer a bucket of benefits in which they can pick and choose what they want. if the employee wants to blow it on child care then OK. for the childless employee let them get new cars each year with the $30k or whatever that the company blows on child care for each employee now. that is truly fair.

[JImmyDoDing]

Aye Aye Aye can you say Daddy Day Care? /www.an0n.mirrorz.com/

[radjpat]

Rcrusoe... your economics professor is living in fantasyland. Currently corporations exist to make money for the corporate officers... the stockholders are considered an obstacle to be gotten around to plunder the companies assets.

[LibertyVista]

I assume that the New York Times provides stellar childcare subsidies for it's employees, while cutting jobs like crazy, and criticizing Google's policies.

[fokkwp]

It's no secret what happens at Apple or Google or any other hot company. Somehow - and it may be luck or great leadership or whatever (more likely being in the right place at the right time, with some people ready to take advantage of it) - it begins to attract the youngest, brightest talent, who attract more of the same. Once it is going, 90% of the company's luster and success is this self-fulfilling wheel of attraction, not some great new operational philosophy or whatever. When the wheel begins to slow down, loss of momentum leads to more loss of momentum. There's nothing particularly magnanimous about creating great working conditions for the most productive people on the planet - it's just good business. One of the ways Microsoft dealt with its slowdown was to outsource all of the "ordinary" people - front office staff, etc. - and to exclude them from the "great working conditions" so that those conditions could continue to be focussed on the talented few. It seems like a great idea to have your employees eat, breath, do their laundry, raise their kids, even sleep at the company as long as they are the 5% cream of the crop (educated and raised at public expense, of course, and in the few prime years of their lives, ready to work 70 hour weeks, etc.), but as they attract fewer of those and more "ordinary" folks, it's time to cut back to ordinary benefits, and to outsource so that all the non-benefited folks are not really part of the "great company" any more.

[jbssnc]

If they'd force the kids to watch TV commercials 8 hours a day, or click AdWords, they could probably offer childcare for free! And it'd boost their revenues at the same time.

[thesanemarketer]

This article is fascinating in its small insight into the near mythical Google culture. It seems that there are some ****** in the highly polished armor. But it comes down to simple economics. Even if you're a billionaire like the founders, you still must cut costs in the organization. And subsidizing each child $37K is simply insane. If I'm a Google employee without a child, why should I pay for the overhead of giving children the best care on earth? That money could be deployed in another way that benefits me as well.

On-sight day care is a benefit, a luxury, a recruiting tool, a convenience, etc... but it's not a "right." Googlers it seems, and Americans in general, have this outrageous sense of entitlement, and apparently parents of small children particularly so. Google doesn't have to provide the best day care on earth. If you want that for your child, you must pay for it yourself. Not expect your company to do so.

The Sane Marketer, marketingsanity.blogspot.com