Google’s recent move to recalibrate its performance-based compensation system made headlines and spurred a discussion on social media — and for good reason. By allowing more employees to earn the coveted “Outstanding Impact” rating and rebalancing rewards away from average performers, Google is doubling down on a culture of high performance. But this shift carries broader implications — especially for startups and scaling companies navigating how to build resilient, high-performing teams without creating long-term imbalances.
As a founder, I’ve learned firsthand: equity and compensation are not “set it and forget it” systems. They’re dynamic levers that need to be revisited often — especially in fast-moving environments where responsibilities and performance trajectories evolve constantly.
Equity Doesn’t Have to be Static
Many companies treat equity like a one-time event: grant it early, let it vest over time, and hope it’s enough to retain top talent.
But increasingly, that model is falling short. We’re observing several clients are incorporating performance-based vesting, not just time-based vesting. The idea is simple: reward outcomes, not just presence. Equity, in this sense, becomes a performance lever, not just a retention tool.
It’s okay — and often best — to combine both time- and performance-based vesting. It may sound painful to manage manually, but modern cap table platforms (such as Mantle) make this kind of structure seamless to administer.
A Word of Caution: Shifts Like Google’s Can Have Ripple Effects
One of the quieter undercurrents of Google’s recent move — and a broader trend in tech — is the potential for a widening skills and wage gap between junior and senior employees. As more experienced staff harness tools like AI to drive outsized results, they’re increasingly recognized and rewarded at much higher levels. This isn’t inherently problematic — but it does surface complex questions around how organizations value different types of contributions.
If rewards consistently tilt toward seniority, there’s a risk that emerging talent may feel overlooked, which can subtly impact morale, growth, and team dynamics over time. Some companies are exploring ways to evaluate performance more holistically — considering impact, not just experience — and recognizing standout contributions at all levels. It’s a shift that reflects an evolving understanding of what high performance looks like in modern teams.
Beware the Peter Principle
Google’s new approach echoes the long-standing “up or out” model made famous by consulting firms — if you’re not climbing, you’re coasting. But not every high performer wants to become a manager or climb a traditional ladder.
It’s worth asking: are we pushing people into roles they don’t want, just to justify a raise or grant? Or are we taking time to understand what truly motivates them? Not everyone needs (or wants) a promotion to stay engaged. Discovery conversations with top performers are essential — especially before making changes that could inadvertently diminish their impact.
Build for a Win-Win Performance Culture That Goes Beyond Rewarding Talent—It Attracts Top Talent
The goal shouldn’t be to split the company into winners and losers — it’s to build a win-win culture where everyone has a shot at being rewarded for excellence.
Performance-based compensation is complex, but it doesn’t need to be chaotic. With the right systems, startups can recognize high performers without undermining team cohesion or morale.
Google’s compensation overhaul may be designed for a company of 180,000+ employees, but the core takeaway applies just as much to a team of 18: your compensation strategy is a reflection of your values and those values help you attract and retain talent.
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