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They attract, motivate and retain employees with both extrinsic and intrinsic outcomes. Google's packages along with recognition for hard word, are a highly valent outcome for both potential and existing employees.
Also when employees ideas are accepted by the company, Google rewards them by making them managers of the project. Such recognition gives employees a lot of motivation and increases productivity.
Hertzbergs Two Factor Theory (Herzberg, Mausner & Snyderman 1959)
Fredrick Hertzberg claims that "The motivators" were the source of motivation and job satisfaction while "hygienes" affect dissatisfaction...
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