The stunning news that Google was paying upwards of $150 million in retention bonuses to keep a couple of “indispensible” employees is just the latest sign of a Silicon Valley hiring scene that’s getting pretty intense. Salaries and other costs are rising so quickly that, as Marketwatch reports, shareholders and investors in some of the leading Valley high flyers are starting to take note, and not in a good way.
The problem is that people make up most of the costs in brain-driven companies like Google, Facebook and Twitter. Intellectual capital is expensive to grow, preserve and protect — especially when patent battles require legions of attorneys to fight out. In fact, legal wins and losses over patents can move stocks significantly in an instant.
Last year’s 10 percent across-the-board raise at Google was worth slightly less than $850 million. “That’s great for the Silicon Valley housing market, but bad for Google investors,” notes MarketWatch. As tech salaries rise across the country, so do the costs of benefits and health insurance, adding to the fiscal pressure.
Then there’s the issue of keeping R&D racing ahead when positions for top engineers go unfilled for months. With innovation at risk of slowing, employers are even more likely to throw money at the problem, hiking up salaries and signing bonuses even more.
That tactic may work for a cash-rich public company like Google, but VC-backed innovators like Facebook and Twitter — or those who want to grow up to become like Facebook and Twitter — must be wondering how much finding and keeping the best talent is going to pressure their bottom lines.