Organisation, People and Performance in Microsoft Corporation - Case Study Example

ORGANISATIONS, PEOPLE AND PERFORMANCE Table of Contents Overview 4 Question 4 1 Background of the Company 4 2 External Business Forces 4 3 Internal Strategic Responses 6 1.4 Current Human Resource Management (HRM) Issues 7 1.5 HRM Strategy 7 1.6 Strategic Framework 9 1.7 Conclusion 9 Question 2 10 2.1 Microsoft Challenges 10 2.2 Tackling the Challenges with the Psychological Contacts 10 2.2.1 Psychological Contact Framework 11 2.2.2 Psychological Contacts and its Effects on Employee Relationship 13 2.2.3 Steps of Applying Psychological Contact to the Employee Relationship 14 2.3 Tackling the Challenges with Employee Engagement 15 2.4 Steps of Employee Engagement in Organisations 15 2.5 Conclusion 16 References 18 List of Figures Figure 1:Strategic Framework of Microsoft Corp. 9 Figure 2: Psychological Contract Framework in Organisations 12 Figure 3: Relationship between Psychological Contract of Employees and organisational strategy 13 Figure 4: Framework for Applying Psychological Contract to the Employment Relationship 14 Overview This report aims at discussing HRM theories and tools in order to analyse the case study of Microsoft Corporation, which is an American software company. The first question in this report would be focusing on the company’s background, its strategic framework, external business factors, human resource issues, and the internal strategic response of the company. The second question would totally focus on the challenges faced by the company in management of the psychological contracts and employee engagement and in case of recruitment and selection practices. IT will also include the theories the company utilised to address these challenges. Question 1 Prepare a Strategic Framework (as developed by Sparrow and Pettigrew) for Microsoft, showing some of the important external influences and pressures facing Microsoft now and in the future, recommend the most appropriate strategic responses and consider the key Human Resource issues that the company might need to consider. Briefly explain the main points and linkages. 1.1 Background of the Company Microsoft Corporation is a computer software company, which was started by Bill Gates and Paul Allen in the year 1975. The company offers products like Microsoft Windows, the most used operating system in the world, Microsoft office, servers, dynamics, Window Phone software, video games such as Xbox, etc. The company is operated by board of directors, who are mainly outsiders. The company became public and launched its first Initial Public Offer (IPO) in the year 1986. It traded at a stock price of $21 then (Microsoft Corporation, 2013). The organisation culture of Microsoft is competitive, flexible and knowledge friendly. 1.2 External Business Forces External factors such as political, economical, social, technological, environmental and legal factors of the country support the abrupt changes in the organisation. These may be related to increase of interest rates, change in preference of the customers, policies of the government, tax rates, etc. The macro environmental factors are explained in details below: Political Government: Microsoft being a giant company creates monopoly around the world. This is the reason why US government is trying to break Microsoft in several companies. This will equalise the level of competition. Another reason is that Microsoft in itself has become so powerful because of its size and contribution in the national wealth, that it has become a threat for the government. This is because the government of USA consider that Microsoft can also affect the government decision-making in future (Argyris, 1960). Economical Unemployment: Due to global recession, Microsoft had cut-down around 5000 of its international jobs. The company’s view was that this downsizing was mainly due to the economic conditions that prevailed in the country. The job cuts were assumed to save around $1.5 billion of operating cost of the company. However, this will affect all its departments such as human resource, IT, sales, R&D, marketing, and finance as well. Fiscal Condition: The fiscal condition of USA was badly affected by the housing bubble followed by a credit crunch and recession. In order to attract customers like software leasing companies, Microsoft offered lease of software at a discount of 26 percent. The company has also cut down its support and maintenance contracts. However, Microsoft is always said to have supported the economies of countries it does business in. It can be said the company plays a versatile role in the macro business environment (Arthur, and Rousseau, 1996). Social Social Responsibility: It is an obvious factor that economic conditions have direct effect on the society. The increasing job loss has led o decrease in the purchasing power of the customers. Microsoft as a company has high level of goodwill in the market. The company being an industry leader considers itself to be an excellent corporate citizen, which complies with the regulations and laws. It is also committed towards being a global leader in terms of corporate social responsibility. Technological Competitive Software Market: The technology industry is ruled by companies like Microsoft, IBM, Apple, Google, Yahoo, etc. Though due to innovation and cutting edge technological advantage, companies in this industry has survived the recession, but this has been at the cost of severe job-cuts. ‘Windows’ of Microsoft enjoyed a monopoly market around the world. Though now Microsoft is given tough competition by Apple’s Macintosh, Linux, or in case of smart phones, Android is a tough competitor of Windows 8. Microsoft office is still the most user-friendly office tool around the world (Schein, 1978). Environmental Carbon Footprint Policies: The US government has not set any legal bindings or targets for reduction of GHG emission in the past but President Barack Obama has introduced the policy of US to reduce the emission by 14 percent below 2005 levels by 2020. The US government is mainly focusing on the reduction of fuel emission by regularly reviewing the number of vehicle and the emission of GHG gases. Microsoft has made commitments to achieve carbon neutrality in 2013. This is also regarded as the carbon fee which would be based on the latest market price for the projects related to off-set carbon footprint and renewable energy. The organisation has moved towards cloud based applications to reduce the use of energy and carbon footprints by 30 percent. The small companies can save up to 90 percent if this procedure followed by Microsoft is implemented. Microsoft welcomes customers to donate them their used hardware, so that it can be recycled. Legal Intellectual Property Rights: There are strict regulations for the software industry in USA. There are special acts for protecting the software innovations. Apart from this, intellectual property acts like patent are also applicable in software industry. Microsoft plays vital role in this aspect because the software designed by Microsoft such as Windows is the most pirated software. In order to reduce the use of pirated software, Microsoft has taken several measures, such as filing law suits, making their software less available online for free trail, etc (Schein,1965). Microsoft claims that around 84 percent of pirated software of Microsoft is used in China. 1.3 Internal Strategic Responses Microsoft Corporation is a market leader in the software and information technology segment globally. This is only possible when a company formulates its strategic responses on the basis of the prevailing market condition. In order to answer the external business pressure, Microsoft has considered certain business goals which would be in line with the factors of the macro environment. Customer satisfaction, generation of new products to identify new revenue generation means, maintain the quality index, innovative products, etc are the desired outcomes of the company. In this regard the company’s mission was to establish the IT managers as the strategic advisors. The relationship and the process of information exchange had to be improved with the senior management (Sims, 1994). Excessive maintenance of hierarchy within the organisation hindered the flow of innovative ideas, manages these changes in a better manner, and for all these strategic changes, proactivity would be the thumb rule. Other than this, Microsoft has also downsized 1800 employees instantly during recession and the rest 3200 gradually within a span of few years to as to cut down cost. The company also plans to legally fight for the piracy issues in order to protect its software from piracy (Torrington, Hall. and Taylor, 2008.). 1.4 Current Human Resource Management (HRM) Issues Microsoft is the dream recruiter of students and professionals around the world, still its faces the challenge of developing effective HRM policies and proper organizational culture. The current challenge that the company is facing, is mainly related to the organisational culture. The problem lies since the time Bill Gates recruited employees for the company. Firstly, they went through a rigorous interview process, and secondly Bill Gates himself supported the fact that employees work for long hours (Simons, 2002). These practices have brought huge profits and fame for the company in the past. However, with the changing environment, it is becoming difficult for the company to move on with similar organisational culture, as this is leading to inefficiency. The size of the organisation is also an important issue (Schalk, and Rousseau, 2001). Microsoft has grown enormously in last few years in terms of employee strength, and it was not possible for Bill Gates to maintain the “caffeine culture.” The other problem is that the organisation is facing problems in developing and fostering effective leadership. There is a lack of managerial experience and leadership skill in the middle-level and senior level managers in the company (Tichy, 1983). The increasing size also led to escalation of internal politics and bureaucracy. 1.5 HRM Strategy Recruitment and Selection: Microsoft follows different strategies for their recruitment and selection process too, which is followed by many companies in the industry. They focus on recruiting the right person for the right job based on the skill level required. They are regarded as aggressive head hunters in the industry. The recruitment at Microsoft deals with testing the negative aspects of the candidate, by putting them under similar pressure as they will have to undergo in the job. Loyalty and Employee Engagement: One of the new methods that is being utilised in Microsoft is empowering the employees, as this would be also reflected on the culture on the organisation. In case of Microsoft the reason behind this cultural change is due to empowerment. Employee satisfaction and loyalty is also considered by Microsoft and its employees (Robinson, Kraatz, and Rousseau, 1994). In early days, the company recruited young graduates who were enthusiastic, so they moulded themselves in the existing organisational culture, but the scenario is changing, so for the experienced employees it is difficult to mould themselves to a new culture. Employee Reward Policies: Bill gates recognised the employees were the most important resource in his company, and this is the reason why he made sure that the best minds were recruited in his company. In Microsoft titles like Most Valuable Professional (MVP) is awarded to those who have contributed in community and promotion works of Microsoft. Employee Motivation: At Microsoft they take interest at hiring those individuals who will get motivated to work in the organisation culture the company offers. They do not have the tendency to recruit skilled individuals and motivate them, but they employ smart people, who can adjust themselves to the environment. Basically this reveals that Microsoft has a rigid organisational culture and they want their employees to work according to the organisation (Robinson, and Morrison, 2000.). The employee work utterly hard in the organisation to dream for a good appraisal. 1.6 Strategic Framework Figure 1: Strategic Framework of Microsoft Corporation 1.7 Conclusion It can be concluded that the strategic framework of Microsoft involves the external business pressures and the internal strategic reactions of the company. The strategic responses or reaction would influence the HRM issues prevailing in the current scenario and the strategies required to mitigate them. It was found that most of the business pressure on Microsoft was due to its HRM issues, increasing size of the company, downsizing, and organisational culture. The company tried to remove barriers and support the free flow of communication between the seniors and subordinates. There has been effective leadership within the organisation along, so that employees get motivated and get satisfied with what they are doing, rather than simply working like robots. Question1) Word Count: 1879 Question 2 Discuss how Microsoft can tackle its challenges in strategic people management by considering one of the following areas. 2.1 Microsoft Challenges Based on the current situation and the problem areas discussed in question 1, it is clear that Microsoft was facing various issues related to HRM. The organisational culture was extremely competitive right from the inception of Microsoft. During the time of Bill Gates the external forces and pressure were less compared to today’s external environment, so the extreme competition was spreading a negative effect within the organisation. When any product of Microsoft is launched in the market and it turns out to be a huge success, the teams do not gather to enjoy, rather they gather to find flaws in them, so as to remove them in the next version. Bill gates himself did not mail the employees appreciating them for their good work; rather he made a list of loop holes that the product or service contains, which the competitor might take advantage of. The company has always maintained their competitive nature. Employees were slashed during recession for reducing the cost, which was a reason of dissatisfaction and anger for the employees, who lost their jobs. This low level of satisfaction, and anger in the employees led to low level of employee engagement. This in turn affected the performance of the whole organisation. Further, Microsoft’s abnormally huge size was also a cause for its inefficient HRM policies, bureaucracy, and internal politics. The employees were exploited in the name of hard-work for performance appraisal. Long working hours and exceptionally heavy work pressure psychologically affected the employees which is also a reason employees switch jobs frequently from the company. 2.2 Tackling the Challenges with the Psychological Contacts The relationship between an employer and its employees is considered to be psychological contracts. This involves a mutual expectation of outcomes, and inputs. Psychological contract is the fairness or balance that can be understood by the treatment of the employer towards their employees, and the engagement or interest of the employee towards his/ her job (Morrison, and Robinson, 1997). The employer holds the responsibility to motivate employees to work efficiently and derive satisfaction from the achievements at workplace. In turn it is the responsibility of the employees to work effectively, concentrate toward the group goals of the company and work for the profitability of the company (Rousseau, 1989). The decision by companies, like job cuts or downsizing violates such psychological contracts. Microsoft is a huge company and is doing profitable business in the world market (Guest, 2008). Slashing 5000 employees just for the sake of cost reduction was not a strategic move and was unwelcomed by their human resource. It has a negative impact on the employees leading to the decrease of involvement and lack of enthusiasm in the good performance or betterment of the organisation (Conway, and Briner, 2005). 2.2.1 Psychological Contact Framework The psychological contract framework, as can be seen in Figure 1 describes two major categories, such as the relational and transactional contracts. In case of transactional psychological contracts, the employer has to appraise the employees in form of benefits or pay. On the other hand in case of relational psychological contracts, the HRM’s approach towards the employees play a significant role, and the interaction or communication of the senior managers with the subordinates is necessary. In Microsoft too, the management as a part of their internal strategic response to deal with HRM problems has decided to support the smooth information sharing and communication process from the senior managers to the teams below. The company has also planned to establish their IT managers as strategic advisors, keeping in mind the side effects of psychological contract violation (De Vos, De Stobbeleir, and Meganck, 2009). Figure 2: Psychological Contract Framework in Organisations Source: (Nelson, Tonks and Weymouth, 2006, p. 18-33) According to Rousseau (1995), organisational strategy, in Figure 2, is linked to the strategic responses, stated in question 1. This is the reaction that has been derived because of the macro environment pressure and the human resource practice and policies that the company followed or is following. It is the task of the HRM department to understand these implications and establish a framework which suffices the Psychological contract requirements for the organisation. In terms of pay and benefits the employees at Microsoft are considerably well-treated, but the problem lies in the relational front. Figure 3: Relationship between Psychological Contract of Employees and organisational strategy Source: (Maguire, n.d.) 2.2.2 Psychological Contacts and its Effects on Employee Relationship Psychological contact theory is based on this concept. It is regarded as an exchange agreement between the organisation and the individuals. This term may vary as some contracts are transactional, which means they are close-ended, short, and formal. This usually happens in case of employees recruited on the basis of contracts (Guest, and Conway, 2002). On the other hand relational contracts are expected to be for a long-term, and it involves recognition, encouragement, and stimulation. The social exchange theory is stated as the theoretical basis for the psychological contract. It states that all the human relationships are developed by the utilisation of subjective cost-benefit analysis and by the comparison of the alternatives. The foundation of this theory is based on structuralism, and rational choice theory (Guest, and Conway, 2000). The difficulties that the individuals encounter in the organisation impact their psychological contract. The imposition of the cultural differences and the variations in policies affect the employees’ productivity. Microsoft received considerable success in the employee survey of ‘best company to work for’ in 2003. They were at the number one position in 2003, in top 20 in 2004, and among the top 100 in 2005 (Herriot, Manning, and Kidd, 1997). In the year 2003, around 93 percent of the staffs at Microsoft felt proud to work in such an organisation. 89 percent of them stated that they loved working for the company. This is the effect of psychological contract which makes a positive difference among the companies working for other organisations. It is said that Microsoft philosophy to recruit the best individuals has assisted it to meet its aspirations (Herriot, and Pemberton, 1997). 2.2.3 Steps of Applying Psychological Contact to the Employee Relationship Guest (2004) has taken the trend of research on psychological contract further by stating the individual and also the organisation’s perspective in the same framework. As can be seen from Figure 3, there are five steps in Guest’s Psychological Contract Framework; they are contextual and background factor, policy and practice, psychological contract, state of the psychological contract, and the outcomes or results. The first stage is segregated at individual and organisational level. At the individual level, education, age, gender, employment contract, income and tenure are included, as they are the contextual factors that would have to be included to shape the responses and psychological responses. In case of organisations size, ownership, etc are important (Robinson, 1996). All the stated contextual factors form the human resource policies, organisational culture, builds employee relationship, etc. This further affects in reciprocal promises, obligation, and inducement, which form the psychological contract. The state of psychological contract is achieved when the deal is delivered with fairness and trust is developed (Kanter, and Mirvis, 1989). The outcomes can be also regarded as consequences in this case. The attitudinal consequence reveals job satisfaction, balance between work and life, commitment towards organisation, while the behavioural consequence reveals regular attendance, and intention of the employee to work in same organisation for a longer period of time. Figure 4: Framework for Applying Psychological Contract to the Employment Relationship Source: (Guest, 2004) 2.3 Tackling the Challenges with Employee Engagement Employee engagement is a concept in business management, which signifies that one who can involve themselves fully in the fulfilling the objectives of the organisation, with ample enthusiasm. Employee engagement is also regarded as a modern version of job satisfaction. It has been a proven fact that the engaged employee take interest in the future of the organisation and are always ready to invest time and effort for it. Employees have a strong emotional bond with the company which employs them. This makes the employee retention level of the company high. It has been seen that only around 31 percent of the employees are actively engaged in their duties. These are employees who feel proud to work in such organisation. The theories of commitment are based on creation of such conditions. In case of general situations employees are compelled to work, which in case of employee engagement they are in such a situation that they are free by their own choice to work. Microsoft has developed top five employee engagement practices for themselves. It includes increasing awareness, drive engagement, make things easy, be strategic, and report the progress (Kotter, 1973). In order to increase the awareness among employees, the company’s commitment has to be discussed with the employees, which will also include the prospect of growth for the employees undertaking the projects. This will act as a catalyst and amplify the effect of efficiency on the company and on the people. Secondly, driving the engagement signifies that the company should directly involve the people in the sustainable work, such as voluntary services, so that they can feel good and also be proud of the work they are engaged in. Thirdly, making things easy for the employees involves giving opportunity to employees to work smartly rather than just handle pressure and work hard. Online association tools like Skype and Lync are used by employees to share information and conduct meetings online. Fourthly, excessive pressure does not increase efficiency, but it increases dissatisfaction among the employees, so strategic move to handle projects will remove excessive pressure. Finally regular review of progress in the company keeps everyone updated regarding the work done and to be done (Levinson, Price, Munden, and Solley, 1962). A transparent approach in the company increases the speed of work done by employees. 2.4 Steps of Employee Engagement in Organisations Various steps have been stated by different human resource experts and authors to engage employees in the most appropriate ways. However, in order to engage employees, firstly attention needs to be paid toward four specific levels, such as culture, taking responsibility and cooperation. The culture of the organisation is made up of the vision, leadership, and effective communication. The employees in higher levels have to willingly take initiative to motivate subordinates. They have to take the responsibility to be the part of this engagement process, and assist each other in empowering themselves. This will further result in cooperation and co-ordination. In this regards four steps can be stated for employee engagement: First: The organisation has to know the factors or drivers that lead to employee engagement. They have to understand the pulse of the employees. In Microsoft the employees have to adjust with the environment, but the environment is not flexible enough to make the new employees feel comfortable. This includes decision-making, development of opportunities for the employees, and concern for the well-being of the employees (Mabey, Clark, and Daniels, 1996). Second: The seniors have to be good leaders and create the culture of employee engagement that is build by trust and efficiency. They have to assist their subordinates in increasing efficiency and productivity. Third: Communication with the human resource is significant because it assist in eliminating semantic barriers. The employees should be involved in the decision making, and they should be appreciated regularly for their hard work or achievements. Microsoft being the market leader in the technology segment should utilise technology to its fullest to integrate these practices. Last: The results derived through implementation of employee engagement theories and policies should be acted on. Just laying down norms would not help if the results are not evaluated and amended from time to time (Menninger, 1958). The strategic responses of Microsoft for the HRM issues are the proof of such a move. 2.5 Conclusion It can be concluded that by implementing both employee engagement and psychological contract, Microsoft would be able to respond to its external business pressure better, as the strategic responses can be formulated in a better manner. The human resource framework would be such that the employees would be engaged towards their work and be satisfied and proud of their workplace. The employees at Microsoft are indeed proud to work in the company because it is one of the best companies in software industry, but they are in a highly pressurised job and in an extremely competitive environment which after a point of time becomes monotonous. The steps mentioned for establishing the psychological contracts and employee engagement would support Microsoft in establishing solid strategic response for the HRM issues and other external business pressures. Question 2) Word count: 2108 References Argyris, C., 1960. Understanding organisational behaviour. Human resource management, 7(1), pp.45-56. Arthur, M. B., and Rousseau, D. M., 1996. The boundaryless career: A new employment principle for a new organizational era. Oxford: Oxford University Press. Conway, N., and Briner, R. B., 2005. Understanding psychological contracts at work: A critical evaluation of theory and research. Oxford: Oxford University Press. De Vos, A., De Stobbeleir, K., and Meganck, A., 2009. The relationship between career-related antecedents and graduates’ anticipatory psychological contracts. Journal of business and psychology, 24(3), pp.289-298. Guest, D. E. and Conway, N., 2000. Can an organization have a psychological contract? A conceptual and empirical analysis. Human resource management journal, 12(2), p.26. Guest, D. E., 2004. The psychology of the employment relationship: An analysis based on the psychological contract. Applied Psychology: An international review, 53(4), pp.541-555. Guest, D. E., and Conway, N., 2002. Communicating the psychological contract: An employer perspective. Human resource management journal, 12(2), p.26. Guest, D., 2008. HRM and the worker: Towards a new psychological contract? The oxford handbook of human resource management. Oxford: Oxford University Press, pp.128-146. Herriot, P., and Pemberton, C., 1997. Facilitating new deals. Human resource management journal, 7(1), pp.45-56. Herriot, P., Manning, W. E. G., and Kidd, J. M., 1997. The content of the psychological contract. British journal of management, 8(2), pp.151-162. Kanter, D. L., and Mirvis, P. H., 1989. The cynical Americans. Administrative Science Quarterly. 41(4), pp.574-599. Kotter, J. P., 1973. The psychological contract. British journal of management, 8(2), pp.151-162. Levinson, H., Price, C. R., Munden, K. J., and Solley, C. M., 1962. Men, management, and mental health. Cambridge, MA: Harvard University Press. Mabey, C., Clark, T., and Daniels, K., 1996. A six year longitudinal study of graduate expectations: the implications for company recruitment and selection strategies. Journal of business and psychology, 24(3), pp.289-298. Maguire, H., no date. The changing psychological contract: challenges and implications for HRM, organisations and employees. [Pdf]. Available at: < http://eprints.usq.edu.au/3749/1/Maguire_Book_chapter.pdf > [Accessed 15 march 2013]. Menninger, K., 1958. Theory of psychoanalytic technique. Understanding Psychological Contract at Work: A Critical Evaluation of Theory and Research. Oxford: Oxford University Press, p.7. Microsoft Corporation, 2013. About Microsoft. [online]. Available at: Morrison, E. W., and Robinson, S. L., 1997. When employees feel betrayed: A model of how psychological contract violation develops. Academy of management review, 22(1), pp.226-256. Morrison, E. W., and Robinson, S. L., 1997. When employees feel betrayed: A model of how psychological contract violation develops. Academy of management review, 22(1), pp.226-256. Nelson, L., Tonks, G., and Weymouth, J., 2006. The psychological contract and job satisfaction: experiences of a group of casual workers. Research and practice in human resource management, 14(2), pp. 18-33. Robinson, S. L., 1996. Trust and breach of the psychological contract. Administrative science quarterly, 41(4), pp.574-599. Robinson, S. L., and Morrison, E. W., 2000. The development of psychological contract breach and violation: A longitudinal study. Journal of organizational behavior, 21(5), pp.525-546. Robinson, S. L., Kraatz, M. S., and Rousseau, D. M., 1994. Changing obligations and the psychological contract: a longitudinal study. Oxford: Oxford University Press, Rousseau, D. M., 1989. Psychological and Implied Contracts in Organizations. Employee Responsibilities and Rights Journal, 2, pp.121-139. Rousseau, D. M., 1989. Psychological and implied contracts in organizations. Employee responsibilities and rights journal, 2, pp.121-139. Rousseau, D. M., 1995. Psychological contracts in organizations: Understanding written and unwritten agreements. London: Sage Publications. Rousseau, D. M., 1995. Psychological contracts in organizations: Understanding written and unwritten agreements. London: Sage Publications. Schalk, R., and Rousseau, D. M., 2001. Psychological contracts in employment: Theory, methods and application. Human resource management journal, 12(2), p.35. Schein, E. H., 1965. Organizational psychology. Oxford: Prentice-Hall. Schein, E. H., 1978. Career dynamics. London: Addison-Wesley Publishing Company Inc. Simons, T., 2002. The high cost of lost trust. Harvard business review, 80(9), pp.18-19. Sims, R. R., 1994. Human resources management’s role in clarifying the new psychological contract. Administrative science quarterly, 41(4), p.574. Tichy, N. M., 1983. Managing strategic change. Administrative science quarterly, 41(4). Torrington, D., Hall. L, and Taylor, S., 2008. Human resource management. Harlow: Financial Times Prentice Hall, p.20. Read More