By Melissa J. Anderson

Last month, we discussed Google’s surprise 10% raise to all staff, plus bonuses. A raise? For all 230,000 employees? Wow! We said it sent a message to competitors that Google values its employees.

Google is consistently ranked among the top places to work, with lots of great benefits, as well as its famous 20% time policy, allowing employees to utilize 20% of their day for personal projects and research.

What the company has indicated to its employees over the years is that innovation counts, and that their ideas and values matter. In terms of innovation and values, however, this has been a rough year or two for Google.

As we’ve discussed here, raises aren’t always the best way to retain staff. In fact, a number of bloggers have pointed out that the raise may be a last ditch effort to appeal to staff who, after the past couple of years at Google, may be feeling a bit demoralized.

As Bnet’s Erik Sherman writes:

“[The pay increase] means that you’ve no longer got the juice that people really want, and that’s happening now at Google. This isn’t a stray incident. Rather, when you look at the company’s past, it’s an extension of business as usual and an indicator of Google’s fundamental weakness.”

Underwhelming Innovation Backing

Google places an emphasis on being a marketplace innovator – and in many ways, it is. Gmail is a best in class webmail service. Google Search is widely recognized as the best web browser available. Other services like Google Docs, Adsense, and Analytics are all top products, not to mention the success of Google’s Android platform for mobile phones.

But the last couple of years have also marked the launch of duds like Google Wave and Google Buzz, which began with great fanfare, only to fizzle out after a few months of use. Both products seemed like great ideas, but they lacked the marketing, ease of use, or market necessity to give them sticking power.

If Google’s innovation-driven staff starts to feel that the company is rushing to market or underpromoting new projects, causing their hard work to go by the wayside, then perhaps they will be motivated to strike out on their own or join other firms where they feel their work will be more appreciated. Software engineers have a host of employment options, so feeling that work is appreciated (as opposed to simply compensated for) is key to their retention.

Bnet’s Scherman writes:

“People want to feel useful and that their work matters. At Google, by contrast, anything you do today may well get abruptly jettisoned, since the company is unfocused and truly terrible at bringing concepts to market.”

Values-Motivated Employees and Not Being Evil

As Google gets larger and larger, the company’s values based mantra “don’t be evil” has faced some challenges. For example, last year, Google came under fire when it was announced that the company’s Street View cars (“Googlemobiles”) had recorded a large amount of data transmitted by home wireless routers while making rounds in Europe. Google says the data collection was inadvertent and made quick steps to delete the data.

But it is just one drop in the bucket of growing concerns regarding the amount of personal information the company is retaining on individuals – whether they are consumers who are actively using Google’s products, or in the Street View kerfluffle, people who aren’t actively using Google at all.

How much right does Google have to own so much information about a person? The company has long maintained that it the data it collects is not personally identifiable. And, offering so many free products, it has to make money somehow – and data collection and sales is a major part of the company’s business plan.

But for Google’s high performers, who want to work for a company with values matching their own, how much is too much? When does privacy-stewardship become a value that employees are willing to leave a company over? Or any other value, for that matter?

If the pay increase is any indicator, Google may be about to find out.