Pay Unfairly is chapter 10 of Laszlo Bock’s Work Rules! Ever provocative, this book shares the thinking behind Google’s people strategy.

It is 24 times harder to get a job at Google than to get a place at Harvard University. Three million people a year apply for jobs there.

Bock is Google’s senior vice-president of people operations. The most important rule is to hire great people and people who are better at your job than you are. He devotes two chapters to this subject.

Later on we get to the Pay Unfairly chapter, where Bock offers four pieces of advice:

  1. Swallow hard and pay unfairly. Have wide variations in pay the reflect the power law distribution of performance
  2. Celebrate accomplishment not compensation
  3. Make it easy to spread the love
  4. Reward thoughtful failure.

Bock knows that many of his readers will simply not believe that rules that work for hoodie-wearing millionaire software engineers can work in their businesses. But he is adamant that they will work for you too.

Part of the reason to believe him is his personal backstory where his family fled persecution in Romania to find success in America.

“I realise that Google is in a privileged position. I remember working for $3.35 an hour and how liberating it felt when I found a job paying $4.25 an hour. And when I got a salaried job that paid $34,000 a year I felt like I’d never have a financial worry again. After my first paycheck I went out to dinner and for the first time felt flush enough to order an appetizer and a drink with my meal.”

And part is the evidence. For a retail example, Costco pays 55% higher wages than Sam’s Club but each employee generates 88% more profit per hour.

At Google, Bock found that the best people are better than you think and worth more than you pay them. He advocates that people be paid unequally because top performers deliver more than average performers. The top 1% of workers generate 10% of productivity; the top 5% deliver 26% of output.

This does not apply everywhere. In organisations that rely on manual labour, have limited technology and place strict standards for both minimum and maximum production there is little opportunity for exceptional achievement.

Getting the compensation right is hard work. But it is better to do that than to lose your best people, Bock argues.

The second rule is to offer experiences as a reward rather than cash. Even though Google people said that cash would make them happier, team trips and blowout team dinners were far more rewarding. “The joy of money is fleeting but memories last forever.”

The third rule is to make it easy for employees to praise other employees. Bock has a “Wall of Happy” outside his office where praise is displayed. Something easy to do in your staff room.

Finally, he says you should sometimes reward people when they fail. It is important that they respond to failure rather than just giving up.

Work Rules! is a remarkable book. Read it to be inspired. There are plenty of business tips that you can adopt even if you don’t employ a band of millionaires.