An interesting article about the backlash with Google increasing its day care costs (via Alex).

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 T.G.I.F. 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 T.G.I.F. 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 Mr. Brin made that comment.)

If true, that quote from Sergey is particularly striking to me. Then again, it should come as no surprise. In the earlier days of Google, it was important for them to create this culture to attract top talent. The benefits and perks were an important selling point for coming to Google – but as you can see they just don’t scale. Maybe now there’s also the attitude that Googlers should feel lucky to work at there, as opposed to having to sell it.

But the same high-upside financial incentives are gone now compared to the pre-IPO days – you’re probably not going to get rich on Google options with a strike price of $500-600. This would be the time to increase perks to stem the outflow of talent to places like Facebook (or, even as the article points out, Microsoft) – but the economics don’t work. Those economics all of a sudden really matter when you’re a public company, especially in tougher market conditions.

As the article closes, “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.”

In some ways, this is classic Innovator’s Dilemma – Google is no longer the entrant, and it’s having done to it exactly what it did to the previously established companies.

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