Microsofts Success as the Most Dominant Software Company - Case Study Example

Microsoft Introduction Microsoft's success as the most dominant software company has been attributed both by company founders and outsiders to the extraordinary talent and drive of its employees. From its early days when Bill Gates, Paul Allen and Steve Ballmer instituted the policy of only recruiting the best, the most ambitious and creative and not necessarily those with experience, hiring was tied with never settling for mediocrity (protected by its n minus 1 staffing formula, where n is the actual number of people needed and 1 a default no-hire decision for a just good but not outstanding job candidate). Hiring was also tied with how the company chose to compensate employees, not only with salaries but with stock options with the long view that employees will perform at their very best if they are also owners of the company. However, with Microsoft's explosive growth especially starting during the 1990s, the company found itself in a dilemma of how to protect its human resource policies that were behind its success and how to adapt to new practices to stay competitive and retain talent within its ranks. Critical challenges and their causes One of the critical challenges that faced the company in the 80s was developing a career track for those who were individual contributors at best and those who were managers or had potential to be managers. This arose due to the fact the company being an IT company, technical people were mostly hired who may or may not be managers. The solution was to allow people to remain technical experts and get the same opportunity to advance in terms of compensation, promotion and recognition as those in the management track. Ladder levels for determining vertical movement were based on an individual's job nature, together with his experience, skill and performance. In addition, growth was also made possible with horizontal transfers from one job to another. New hires were also encouraged to learn from mentoring from those who were company seniors. The second critical challenge was when due to Microsoft's and the IT industry's explosive growth, thousands of job positions were created, outpacing the capacity of college campuses as the primary source of the company's talented staff. The company had to hire from within the industry and by the mid-1990s, this had become the poaching ground for 75% of new hires. When the company reached its 20,000th employee mark, Bill Gates viewed this as an important challenge facing the company where the values at its inception responsible for its success were at stake. As a response, the HR group started measuring employee attitudes. A finding in the late 1990s was that even if attrition rates or voluntary resignations were half those of industry levels, at the higher positions, resignations were closer to industry rates. With "Organizational Health Index" (OHI), a part of the annual employee survey, the focus was turned on the work environment as a tool for retention and on a more fundamental level, "keeping the entrepreneurial spirit alive" that made Microsoft what it was. Ballmer's two priorities was to accomplish this was first to change Microsoft's vision from "a computer on every desk and in every home running on Microsoft software" to "to empower people to do anything they want, any place they want, and on any device". The second strategy was to empower leaders within the company to clear obstacles, make decisions quickly and clearly define goals. Another challenge was how to identify managers and leaders who are capable of developing people. In order to meet this challenge, Microsoft embarked on a series of programs to identify potential leaders and it became the priority of Steve Ballmer, Microsoft president to develop leaders within the company. As a result of these programs, it was found out that the sources of leadership development were primarily from the jobs currently held at 70%, from mentoring at 20% and from training at 10%. With its maturity as a large-scale organization, a top concern emerged in the 1990s to develop mechanisms that would provide feedback on what people perceive were the keys in what it took to succeed at Microsoft. This in turn was tied to compensations and rewards so that people's attitudes and valued were tied to company goals. The results were a competency model that zeroed on six core values of what it takes to succeed: "taking a long-term approach to people and technology, getting results, individual excellence, a passion for products and technology, customer feedback, and teamwork". Furthermore, the six core values became the basis for the development of 29 individual competencies. The competency model were used both used a tool for recruiting and the review process of employees and their salary adjustments and compensations. In May 1999, Microsoft in recognition of the competitive nature of recruiting in the industry modified its salary compensation for new hires, which rose from the 50th percentile to the 65% percentile in the industry. With stock options still an important part of the whole compensation, more cash was added into the mix. Also, the ladder levels for promotion were increased from 12 to 22, allowing for quicker and more visible opportunities for promotion. While most of the challenges were met by Microsoft throughout the years, the critical challenge that faces Microsoft presently is whether to concede to changes in its competitive culture that was in the first place what made the company predominantly successful, i.e. its pressure cooker atmosphere. Yet, most employees expect hard work and going beyond work hours as part of the package of working atmosphere. The challenge essentially lies in the ability of the company to preserve its work ethic and values and at the same time retain its top talent by adapting to business realities, i.e. that employees may succumb to job burnout. Conclusion and recommendations Notwithstanding the facts that turnover rates at Microsoft are half that of the industry and that the company receives 15,000 applications a month, Microsoft needs to address the extra-work concerns of employees that go beyond fulfilling their jobs and being the superstars of the industry. The attrition rate has been notably high in the senior ranks, those ironically at the top of their game and with compensations (with their stock ownerships) that are more than satisfactory compared to their peers. The fact that some people had left to seek challenges outside the company (one executive left to establish a start-up IT company, another one left to return as a part-time consultant) points to the possibility that the company is not fulfilling a certain professional hunger in its people. Moreover, at a certain point, working long hours could become counter-productive, with competitive concerns overshadowing important aspects such as quality time with families and devoting time to personal hobbies that are important to psychological well-being. Microsoft as a company has also come under attack from other firms in the industry for allowing its super- competitive nature to demolish competitors, anti-trust and anti-monopolist laws notwithstanding. What its insiders and employees think of these charges and whether they in fact match with practices in reality could be used to assess whether they are a cause for concern among employees. The business environment has also come to be more open to developments in corporate citizenship which takes into account the role of companies in giving back to societies a part of their earning. An action plan to address the concerns named above would involve the top brass of the company, the employees, probably consultants or outsiders, with the HR on top of it implementation. First, the six core values of the company may be expanded, with a new survey not only including senior management, but also all employees contributing to what they think makes Microsoft successful and what will make it stay and become even more successful in the future, not just as a company, but a player in the greater society (incorporating corporate citizenship values). The time line for this could be stretched from a period one to three years, with an annual survey incorporating new thoughts and perceptions. At the end of three year-duration, another survey, this time with only leaders and managers contributing could be used as a basis to possible changes in the company's vision and mission statement. The annual survey takes into account that the technology sector is very dynamic and in which the reality is that what worked before is almost always rendered obsolete at a faster pace than ever before. Second, a more personal human resource policy could delve into how each employee sees himself within Microsoft, with a view to incorporating other goals, both work-related that are not being addressed and the balance between personal commitments such as family and other personal goals (hobbies, etc.). This could be done every year, in time with each annual review, with findings being instituted and carried out after a 6-month deliberation of their merits. And finally in keeping with the tradition of recruiting from the young and super-talented and respecting their inputs and creativity, recruitment could include such questions as "what do you think of Microsoft" "Is it going in the right direction" and the like - comparing the answers from current employees. This way, perceptions from the outside and reality could be examined if they match. It is also one way the company can always keep a foot in the future, without losing sight of its values and traditions. Read More