In a strategic move aimed at enhancing employee performance, Google has announced significant changes to its compensation structure. The tech giant shared this news on Tuesday, detailing adjustments to performance ratings that are expected to incentivize staff to achieve higher results. This initiative reflects Google's commitment to fostering a culture of excellence and rewarding high achievers.

The announcement came in an internal email from John Casey, Googles Vice President of Global Compensation and Benefits. In the email, which was obtained by Business Insider, Casey informed employees that managers will now have the flexibility to allocate the coveted Outstanding Impact score to a greater number of employees during their annual reviews. This is a notable shift, as it opens the door for more Googlers to attain one of the highest performance ratings, thereby enhancing their potential bonuses and equity awards.

This means more Googlers will have the opportunity to achieve that rating during annual reviews, and their bonus and equity award will be modeled using the O's individual multiplier in 2026, Casey wrote, signaling a more inclusive approach to performance evaluation.

Performance reviews at Google are conducted annually through a system known as Googler Reviews and Development, or GRAD. Under this system, employees are rated on a scale ranging from Not Enough Impact, which denotes a lack of significant contribution, to Transformative Impact, a designation reserved for the companys top performers. Most employees typically find themselves categorized under the Significant Impact bracket, which is the third-highest rating. The Outstanding Impact category, while still limited in scope, recognizes a select number of employees who exceed expectations, whereas Moderate Impact is positioned between Significant and Not Enough.

To accompany the adjustments in performance ratings, Casey also mentioned an increase in the discretionary budget allocated to managers. This change is designed to empower them to provide additional rewards to those who fall within the Significant Impact category. However, it is important to note that these changes are budget-neutral. This means that while higher achievers may receive enhanced bonuses, those in lower performance brackets may see a decrease in their compensation as the budget is redistributed.

We want to be upfront that to fund this we will be slightly reducing the bonus and equity individual multipliers for Significant Impact and Moderate Impact ratings, Casey explained in the email. It's important to note that Significant Impact will remain a strong rating achieving it will still get you more than your target bonus.

In a statement provided to Business Insider, Google spokesperson Courtenay Mencini emphasized the rationale behind these changes. We're making these changes to further reward top performers and continue our momentum across the company, Mencini stated, highlighting the goal of maintaining competitive compensation standards amid growing industry pressures.

The adjustments at Google come amidst a broader trend among major tech companies to optimize operational efficiency and elevate performance standards. Microsoft, for instance, has recently implemented new policies designed to heighten performance expectations among its workforce. Similarly, in January, Meta (formerly Facebook) announced it would be cutting approximately 5% of its workforce, targeting low performers as part of its restructuring efforts.

While Google has not resorted to such drastic measures, the modifications to its performance ratings system indicate a clear intention to motivate employees to enhance their productivity and strive for excellence. Casey concluded his communication by reaffirming the importance of high performance in achieving the ambitious goals set by the company. High performance is more important than ever to achieve the goals we've set, he stated, emphasizing the companys direction and commitment to rewarding its top contributors.

For those interested in reading the full email sent to Google employees, Casey elaborated on the companys performance-driven culture and the exciting developments within teams, particularly in light of recent product launches such as Gemini 2.5 Pro and Cloud Next.

In summary, these changes reflect a significant shift in how Google approaches employee performance management, aiming to create a more dynamic and motivated workforce as it navigates its ambitious future.

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Correction: As of April 30, 2025, an earlier version of this story incorrectly described the position of Google's Significant Impact bracket; it is indeed the third-highest bracket, not the second-highest.