Google is implementing significant changes to its employee performance evaluation and compensation system, effective from 2026. The company aims to better reward top performers while maintaining a balanced budget.

📊 Key Changes in Google's Performance Appraisal System

Enhanced Ratings for High Performers: Google is expanding the "Outstanding Impact" category in its annual performance review process, known as GRAD (Googler Reviews and Development). This adjustment allows more employees to qualify for higher ratings, leading to larger bonuses and equity awards.

Increased Managerial Discretion: The discretionary bonus budgets for managers will be boosted, enabling them to reward employees in the "Significant Impact" category more generously.

Slight Reduction for Lower Tiers: To fund these enhancements, bonuses and equity for employees in the "Significant Impact" and "Moderate Impact" categories will be slightly reduced. 

💬 Employee Reactions and Company Response

Despite the company's strong financial performance, many employees have expressed dissatisfaction with the smaller-than-expected pay increases and equity grants. Some employees, particularly in non-technical roles, received base salary increases under 3%, a significant decrease from previous years. During a company-wide meeting, employees questioned leadership about these reductions. John Casey, Google's VP of Global Compensation and Benefits, explained that compensation adjustments were made based on job role and location, with non-technical positions and employees in certain regions receiving smaller equity packages to align with market conditions.

🔍 Implications for Employees

While Google continues to reward high performers with larger bonuses and equity awards, employees in lower performance tiers may see a slight decrease in their compensation. This shift reflects a broader trend in the tech industry, where companies are emphasizing performance-driven cultures and aligning rewards with individual contributions.

📈 Stock Performance

As of May 5, 2025, Alphabet Inc. (GOOGL) is trading at $164.03, with a market capitalization of approximately $1.88 trillion. The company maintains a price-to-earnings ratio of 16.91, indicating a relatively stable valuation amidst these internal changes.

In summary, Google's revised performance appraisal system aims to better recognize and reward top performers, while also aligning compensation with market conditions. Employees in higher performance tiers can expect enhanced bonuses and equity awards, whereas those in lower tiers may experience slight reductions. These changes are part of a broader industry trend towards performance-based compensation models.