Why Google Pays “Unfairly”— And Why You Should Too (If You Want to Keep Your Best People)
Operating by John Brewton - Scaling Down the Big Ideas: Work Rules! Laszlo Bock (Free Edition)
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In Chapter 12 of Work Rules!, Laszlo Bock makes an argument that violates every HR textbook: you should pay people unfairly.
Not unfairly as in discriminatorily. Unfairly as in: one engineer received a $10,000 stock grant. Another in the same department received $1,000,000.
Same job. 100x difference in pay.
Most operators dismiss this as “that’s Google money.”
This dismissal costs you talent.
Bock’s core insight, backed by 85 years of hiring research, is that productivity in knowledge work follows a power law, not a bell curve. Your best engineer doesn’t produce 10% more output than your median engineer. They produce 5-10x more. Yet most companies pay them 1.5x.
That’s unfair: paying someone 1.5x when they’re worth 5x.
- j -
Inescapable Economics
Here’s the data: Schmidt and Hunter’s meta-analysis of American hiring practices found that top-quartile performers produce 300-500% more output than median performers in complex cognitive roles.
Structured interviews predict job performance at 26% accuracy—dramatically superior to unstructured interviews at 7%. Yet most hiring remains unstructured, representing a straightforward arbitrage opportunity.
Yet most organizations compress compensation around “fairness”—typically 1.5x to 2x variation between bottom and top performers at the same level. Senior engineer makes $150K. Junior makes $100K.
The outcome is predictable: your best people leave. You hire replacements at market rates, typically producing less than your departed employee. Turnover costs compound: 6-12 months of lost productivity, hiring costs, cultural disruption.
One bad retention decision at a 20-person company can become a strategic problem that delays your entire company by a year.
The Power Law Is Everything
Bock’s insights extend beyond compensation. Performance management, development, transparency, the entire operating system rests on one uncomfortable truth: people aren’t normally distributed.
Performance distribution in knowledge work follows a power law: the top 20% generate roughly 50% of output, while the bottom 20% consume disproportionate management time. Focus development on the extremes, not the middle
For paid subscribers, I’ve created a complete 10,000-word playbook covering (goes live at 8:00 PM EST on 1.13.2025):
The Five-Principle System Architecture (how they interconnect and compound)
Hiring Deep Dive (structured interviews, hiring committees, the Rule of Four)
Performance Management (two-tails strategy, behavioral playbooks)
Separated Conversations (how to structure development vs. compensation)
Transparency at Scale (even at 20 people)
Three Real Case Studies with specific metrics (retention %, hiring velocity, engagement scores)
90-Day Implementation Roadmap (exactly how to sequence this)
ROI Analysis (100 hours of implementation = $950K-$1.2M in annual value)
Plus 10 professional charts, templates you can use Monday morning, and a complete framework you can adapt to your company’s context.
In a 20-person team, your top 3-4 performers likely generate 40-50% of value. Your bottom 2-3 consume 30-40% of your management time and demoralize adjacent team members through demonstrated underperformance with minimal consequence.
Most companies respond by spreading development efforts evenly. This is a fundamental error. Bock advocates concentrating on extremes: intensively study what your top performers do differently, replicate those behaviors, and help them teach others. For your bottom performers, offer 60-90 days of intensive support, then move to either dramatic improvement or compassionate exit.
The math is brutal: one bad performer at small scale creates compounding damage that investing in top performers would have prevented.
Hot Take: Your Compensation Bands Are a Lie
Here’s where Bock’s argument becomes uncomfortable: most companies already practice pay inequality. They just don’t admit it.
The person you’re willing to replace tomorrow gets paid less than the person you can’t afford to lose. The difference is usually 1.5-2x. Bock’s argument: it should be 3-5x, made explicit, and rationalized systematically.
This requires tolerance for internal inequality that most HR professionals find deeply uncomfortable. But Bock’s rebuttal is simple: the question isn’t whether your best performer is worth more than five median performers. If true—and the data suggests it is—they should be paid accordingly.
If the gap doesn’t exist, your compensation bands are correct. If it does exist and you’re not reflecting it, your bands are irrational. You’re actively incentivizing your best people to leave.
The uncomfortable truth: You can pay people differently. You just can’t pay them differently and lie about it. Dishonesty kills culture. Transparency builds it.
Compound Effects
These aren’t isolated practices. They form a coherent operating model:
You hire exceptional people (structured interviews dramatically outperform gut-based hiring). You develop them systematically by studying what makes your top performers exceptional. You separate development conversations from compensation conversations so employees can hear feedback without defensiveness. You pay them based on impact rather than tenure. And you share strategic information so they understand the logic.
Independently, each practice is valuable, but in aggregate, they compound.
Get hiring right → you have exceptional people to develop → develop them → they warrant higher compensation → pay them fairly → they stay when treated with transparency → they mentor others → you attract better talent
Miss any link and the chain breaks. Compress compensation and your best people leave, no matter how good the development or transparency. Hide information and people feel like executors, not stakeholders, no matter how well you pay them.
The Real Insight from Work Rules
Bock spent a decade building this system at Google. The book’s five core principles are:
Hire only people better than you (structured interviews + hiring committees)
Focus development on two tails (top and bottom performers)
Separate development from compensation (different conversations, different dynamics)
Pay based on impact, not tenure (accept internal inequality)
Default to open (share information most companies restrict)
Each rests on a foundational belief: if you believe people are fundamentally good, you build systems based on trust. If you believe they need managing, you build systems based on control.
At 25 people, this belief becomes visible. Your actual beliefs about people shape every conversation.
What This Means for You
If you’re losing people to competitors paying 3x what you do, the problem isn’t that you can’t afford to pay more. It’s that you’ve decided to compress compensation around fairness while your best people figure out what they’re worth elsewhere.
If your hiring success rate is below 80% (people still there after 18 months), the problem isn’t talent scarcity, it’s that you’re optimizing for hiring speed instead of hiring quality. You’re probably also optimizing for the avoidance of difficult conversations, or to be surrounded by people who only say ‘yes.’
If your development conversations feel defensive, the problem isn’t that people aren’t motivated. It’s that you’re tying feedback to compensation and they’re protecting themselves.
If you feel disconnected from your team, the problem isn’t that they’re not invested. It’s that you’re hoarding information and they don’t see themselves as stakeholders.
Bock’s argument throughout Work Rules! is that these problems aren’t inevitable. They’re choices. Change the choice, and you change the outcome.
Go Deeper: The Complete Work Rules System
The “pay unfairly” principle is the most controversial chapter. But it’s the capstone of a much larger operating system.
For paid subscribers, I’ve created a complete 10,000-word playbook covering, it publishes tonight at 8:00 PM):
The Five-Principle System Architecture (how they interconnect and compound)
Hiring Deep Dive (structured interviews, hiring committees, the Rule of Four)
Performance Management (two-tails strategy, behavioral playbooks)
Separated Conversations (how to structure development vs. compensation)
Transparency at Scale (even at 20 people)
Three Real Case Studies with specific metrics (retention %, hiring velocity, engagement scores)
90-Day Implementation Roadmap (exactly how to sequence this)
ROI Analysis (100 hours of implementation = $950K-$1.2M in annual value)
Plus 10 professional charts, templates you can use Monday morning, and a complete framework you can adapt to your company’s context.
The question isn’t whether these principles work. The data proves they do. The question is whether you implement them before your competitors do, and before your best people figure out what they’re actually worth.
[UNLOCK THE COMPLETE PLAYBOOK FOR PAID SUBSCRIBERS]
John Brewton documents the history and future of operating companies at Operating by John Brewton. He is a graduate of Harvard University and began his career as a Phd. student in economics at the University of Chicago. After selling his family’s B2B industrial distribution company in 2021, he has been helping business owners, founders and investors optimize their operations ever since. He is the founder of 6A East Partners, a research and advisory firm asking the question: What is the future of companies? He still cringes at his early LinkedIn posts and loves making content each and everyday, despite the protestations of his beloved wife, Fabiola, at times.
Invest where it matters, be explicit, and treat people as the high-leverage assets they truly are