Google's Daycare Fumble

The New York Times describes how Google's experiment in child care, and decision to substantially reduce subsidies for its extremely high-end daycare program, has resulted in massive increases in the cost of daycare.

Two months ago, Google held a series of secret focus groups with employees who have children in Google’s day care facilities. The purpose was to gauge their reaction to the company’s plan to raise the amount it charged for in-house day care by 75 percent.

Parents who had been paying $1,425 a month for infant care would see their costs rise to nearly $2,500 — well above the market rate. For parents with toddlers and preschoolers, who were charged less, the price increases were equally eye-popping. Under the new plan, parents with two kids in Google day care would most likely see their annual day care bill grow to more than $57,000 from around $33,000.

The back story? A Google executive and champion of on-site daycare, Susan Wojcicki (who also happens to be Sergey Brin's sister-in-law, and the daughter of the woman who rented them garage space for their start-up days), decided that the services of an outside contractor, C.C.L.C., didn't follow her preferred educational philosophy, resulting in Google's opening its own cutting edge facility at a much higher cost per child.

According to Google, there were numerous complains about C.C.L.C., but the Google parents I spoke to disagree. They say that at the Kinderplex, child-teacher ratios were low, teachers were first-rate, the facility was clean and upbeat, and the food - organic, naturally - was terrific.

But at least one parent wasn’t happy: Ms. Wojcicki. She is a proponent of a preschool philosophy called Reggio Emilia, the hot kiddie philosophy of the moment, which stresses even small children’s ability to chart their own learning paths.

Google ended up with 200 daycare spots, and a 700 person waiting list, with waits of up to two years for a child care spot.

Meanwhile, someone at Google woke up one day and realized that the company was subsidizing each child to the tune of $37,000 a year — which nobody had noticed up until then — compared with the $12,000-a-year average subsidy of other big Silicon Valley companies like Cisco Systems and Oracle. Faced with this dilemma, Google decided that the way to solve the dual problems of a too-long wait list and a too-large subsidy was - are you sitting down for this? - to get rid of C.C.L.C. and make the Kinderplex more like the Woods! (Google says it was always planning to replace C.C.L.C.) Given that decision, the only possible way to reduce the subsidy was to raise prices through the roof.

The New York Tmes sees Google's actions this way:

If you are shaking your head at this point, that’s because you lack the proper understanding of Google’s culture. Having conquered the Internet, Google’s executives tend to believe that they can do pretty much everything better than everybody else — even day care. When I spoke to Laszlo Bock, the company’s vice president for “people operations” (a k a human relations), he told me that “what is really driving the cost is eliminating the two-year wait list while focusing on providing really high quality.”

The Times suggests that under Google's corporate culture it has to have the greatest daycare on earth, whatever the cost, and that the high cost of the new program was seen as ending the "inequitable" waiting list. They also recite an allegation from parents, denied by Google, that Sergey Brin described the daycare situation as "a supply-and-demand issue" to be resolved by charging what the market would bear. The Times concludes,

Google may be providing the greatest day care ever, but so what? It doesn’t matter how good the day care is if only its wealthiest employees can afford to use it. If Google had really wanted to do something path-breaking about its day care crisis, it would have spent less time creating elitist day care centers and more time figuring out how to “scale” day care for everybody no matter what their salaries.

I suspect that something a bit different was going on. To reduce the subsidy, Google could have offered "mere" excellent daycare, and probably could have expanded its program to eliminate the waiting list. The problem is that if you eliminate "excellent" child care in favor of "the best in the world", you either have to continue the extraordinary subsidies or price most employees out of the program. But if you give employees a choice, you risk that they will sign up for the merely "excellent" care and that you won't have sufficient enrollment in "the best daycare in the world" to keep that program economically viable - you might get back to a mere $12,000 (or lower) annual subsidy for most employees, but you might see the subsidy for your "best in the world" program increase as people choose the cheaper program. The choice becomes, coddle the executives and millionaires, or serve the larger population of employees.

I am not one to Google bash, and I have a great deal of respect for the company and the opportunities it offers not just to its employees, but also to web publishers through its AdSense program. And I'll give them credit for this - I am presently using a free Google service to post this comment. How many companies make it free and easy to exercise your speech rights - even when you're criticizing them. But I see glimmers in this story of the type of hubris that can make a great workplace mediocre, or a great company falter. The New York Times describes this as a "rare fumble", and let's hope Google is sufficiently introspective to keep this type of fumble as rare as possible.
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Update: This seems to be an example of Google doing things the right way - identifying a problem (cumbersome procedures for certain ad buys), giving the program for its correction a slightly self-depracating (and honest) name ("operation spaghetti"), and setting about fixing the problem.