Tuesday, September 13, 2005

Forbes - Microsoft's Midlife Crisis

Just a quick post regarding the below Forbes article - it makes for a very good read and is on-target with the issues I've posted about and especially with the comments that folks have added to this blog:

Microsoft's Midlife Crisis by Victoria Murphy.

(http://www.forbes.com/home/technology/2005/09/12/microsoft-management-software_cz_vm_0913microsoft.html )

Snippet:

What has gone wrong? Microsoft, with $40 billion in sales and 60,000 employees, has grown musclebound and bureaucratic. Some current and former employees describe a stultifying world of 14-hour strategy sessions, endless business reviews and a preoccupation with PowerPoint slides; of laborious job evaluations, hundreds of e-mails a day and infighting among divisions so fierce that it hobbles design and delays product releases.

I've been asking some folks what it would take for them to consider coming back to Microsoft, to understand the level of change they are looking for. The two big responses I get:

  1. Get rid of the process-ridden bureaucracy that inhibits our productivity and passion.
  2. Throw out the stack ranking and replace it with something intelligent and fair (e.g., peer reviews or such). No curve.

91 comments:

Anonymous said...

Was there ever any other performance review mechanism at MS apart from stack ranking? Was it a source of problems/complaints 10 years ago, or just recently now that there are other general malaise issues?

Anonymous said...

Sounds like the reporter has read your blog and comments

Anonymous said...

Ten years ago it didn't matter. Reviews were pretty much a job if you were making money and shipping (which everyone but MSTV was doing).

Anonymous said...

er, a JOKE, not a JOB. Freudian slip I guess.

Anonymous said...

I think you meant MSFT, not MSTV (which didn't exist 10 years ago).

Anonymous said...

"Microsoft (nasdaq: MSFT - news - people ) is slowing down. It is bigger, more lumbering and less profitable than it was five years ago. Its sales are up 73% in five years, but profits are up only 30%. Payroll has doubled in the last six years. In the fiscal year just ended, sales rose only 8%, the first time the company has ever reported less than double-digit growth.

In the dog years of Silicon Valley, Microsoft, at 30, is in advanced middle age. The company relies on Windows and a suite of desktop applications--products released a decade ago--for 80% of sales and 140% of profits. Newer products--the Xbox videogame machine, the MSN online service, the wireless and small-business software--collectively have racked up $7 billion in losses in four years."

This nicely sums up Ballmer's contribution during his tenure as CEO. And timely too, since he's apparently searching for feedback on how's he's doing:

"In jobs like this you get very little feedback from anybody else. People might tell you whether things are good or bad, but really, how are you doing in aggregate? I get a little help from my board of directors once a year. It's mostly me."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/09/11/ccprof11.xml&menuId=242&sSheet=/money/2005/09/11/ixcoms.html

Of course, if he's looking for consistent/objective feeback, he might just look at the stock where for more than THREE years now, THOUSANDS of people (many of whom assess companies professionally for a living) have been telling him with no uncertainty that he's doing a FAR BELOW AVERAGE job:

http://finance.yahoo.com/q/bc?s=MSFT&t=2y&l=on&z=m&q=l&c=%5EGSPC,%5EIXIC,%5EDJI

Anonymous said...

The process-riden bureaucracy is in large part a function of size. Lots of large companies have similar issues but manage to succeed (i.e. GE). Stack ranking has always been there and again, exists at most companies including numerous successful ones.

What MSFT really needs to do is:

1) Replace Ballmer with a competent outsider a la Mark Hurd (bagholder posted this and I agree)

2) Have Gates step down and be replaced by someone not invested in the past and creative.

3) Fire Alchin, Burgum, Raikes and about a dozen other non-performing/overpaid senior execs that only add to the group think.

4) Double the dividend immediately. A stock that's underperformed for years, can't continue to attract investors with a way below average dividend.

5) Liquidate the $15B strategic pool of investments and plow it immediately back into share repurchases. Nothing's going to happen with 10B+ shares outstanding.

6) Ideally, use the above to buy out some of Gates and Ballmer's positions which will limit their control (a very good thing) and lessen the negative impact of the new S&P index rules regarding insider-owned shares.

7) Review all various industry projects and reduce the number by at least 50% along with the execs in charge. MSFT is spread over far too many fields with far too much disparity on potential payback even if successful.

8) Give all emerging businesses 1 more year to reach sustained profitability - or else.

9) Use the huge cash pool to make some large, smart, accretive acqs. Current mgt is scared too and sucks at integrating companies anyway. But that should be a mandatory criteria for choosing the new CEO. As we're seeing with Oracle, it can be done successfully and with a much shorter timeline and payback than most of MSFT's failed bets.

10) Implement a royalty sharing arrangement whereby developers can submit innovative new apps/code and if selected by MSFT, earn a piece of the action. How many open source devs would switch to a model where they could get paid for their creativity?

11) Create a Web 2.0 group and pit it against the legacy [thick- client] groups and give them full authority to go head to head. The market will decide which is better and either way, MSFT will win. Better to obsolete yourself than have someone else do it - which is happening. Note that the Web 2.0 group isn't necessarily synonymous with MSN - who at only 15% ad growth in a 50%+ growth market and with declining revenue is still an industry joke.

12) Implement real accountability across all groups. Minimum expectations being 10% YOY growth and at least equaivalent profitability. Failure should result in dismissal and replacement. Can you say Bus Sol's?

13) Put all senior mgt on options vs stock grants or at least make the grants dependent on the stock's performance. If shareholders win, mgt should too. But if shareholders are losing or getting nothing - as they have been for years now - then the only thing mgt should be getting is a severance cheque.

14) Bring back some sense of fairness between execs and rank and file. 320,000 shares for Kevin Turner? Is Kevin really worth 320X+ more than the average good employee? Should a grossly underperforming exex like Burgum not only retian his job but cash a couple $M every Q? I don't think so.

15) Seriously consider spinning off all the emerging businesses into a seperate tracking stock to unlock shareholder value. Currently, this entire group is effectively valued at zero in the share price and is detracting hugely from overall profitability. That would be the worst of both worlds Ballmer in case you fail to understand that.

16) Rationalize R&D. Today, this HUGE investment is mostly being pissed away. R&D spending should be reduced significantly and tied directly to performance. For example, at least 5% of MSFT's revenue in any one year, should have to come from an R&D created project that didn't exist say 3 years previously. If not, then figure out why and fix it or cut back the investment further and send these guys back to academia.

17) Underpromise and overdeliver for a change.

18) Fund no new projects unless they have a 3-5 year payback max.

Anonymous said...

Wow, I didn't think anyone could come up with a *worse* business plan than what MSFT is currently engaged in, yet you've managed to do it. If they followed your advice, there would be absolutely zero risk-taking happening. Good luck with that.

Anonymous said...

While not all of those 16 items are EXACTLY what MS should do - I have agree with sentiment and the details of most of them.

No think - how do you influence such a change?

Anonymous said...

"Wow, I didn't think anyone could come up with a *worse* business plan than what MSFT is currently engaged in, yet you've managed to do it. If they followed your advice, there would be absolutely zero risk-taking happening. Good luck with that."

Wow, I didn't think anyone could up with a *more vacuous* response while of course offering no specific rebuttals or - god forbid - alternative suggestions. You have a bright future writing MSFT's anti-Open Source literature. FYI, accountability and risk taking are not mutually exclusive. Ditto, pay for performance and risk taking. Indeed, both can act as a catalyst for said. What is clear is that MSFT's current structure/rewards process has resulted in one of the least innovative, most risk-averse cultures in the entire industry. Unless of course you count reckless multi-billion dollar bets like the failed cable investments (or the currently suspect Xbox and Bus Sol ones) which imo any proper accountability process would have negated at inception and/or ensured a much more efficient implementation. In any event, I'm all ears for your superior insights...

Anonymous said...

>Today, this HUGE investment is mostly being pissed away.

The cynic would say this is an investment in tying up good people, preventing them from working at other companies. Hence, minimal pressure to "deliver" anything... just keep it out of other's hands.

Anonymous said...

Some factual disputes regarding the Anonymous poster's business plan.

1. Do not be fooled by Microsoft's huge "R&D" number. Gates likes to cite that number as an example of innovation, but that's bullshit. R&D is mostly D. That is, salaries of devs, testers, and PMs throughout the company, including Client (80%+ margins, 10B in rev) and Info Worker (70%+ margins 10B in rev) and Server & Tools (30% margins, approaching 10B in rev). Microsoft Research has about 600 employees, and an annual budget around $250 million. Which is beans for a company with $40B in revenue and $14m in profit.

2. What basis do you have to say that Microsoft's traditional software businesses are being obsoleted by Web 2.0? Google? Lots of hype, a business model stolen from Overture, and a bunch of free beta projects that earn no revenue but demo really well. Salesforce.com, eBay? One-trick ponies. Yahoo? Struggling along.

3. Whatever you think "Web 2.0" might be (selling hosted subscriptoin services? selling server software? selling advertising?...can we have a business model rather than a buzzword, please?), it's a much lower-margin business than selling packaged software...especially when you have two monopolies. Why would you be in any rush at all to replace your high-margin business with lower-margin businesses? Why not instead try and leverage those two monopolies into a third area--server software--that potentially has very high margins...especially if you can establish one or more monopolies (Exchange will be there in 5 years, SQL maybe never but still has lots of growth). In other words, MSN has been and always will be defense. Reactive. "First do no harm."

All this said, I agree that they've let some bad execs fester way too long, that they should pay a much bigger regular dividend, that the equity investments have been a disaster (perhaps defensive, though...that interactive TV thing sure never took off), and that some of the emerging businesses (MBS...what an abortion) need a hard 2nd look.

But that would presume that Gates, Ballmer, and other execs care about moving the stock price. Do they? Should they? I think they care more about creating cool new stuff and changing the world. I don't necessarily mean that in a nice hippie-dippie way either. But they're done. They've made billions. They'll play for as long as the shareholders let them. And as long as they've got the two cash cows and one solid growing business, enough investors will turn to MSFT as safe harbor to let them. Not enough to move the share price up, but a safe place to park.

Hey, I'm very sorry that people who work for Microsoft are disappointed, but being a Company Man has always had both drawbacks and rewards. Doug Coupland wrote Microserfs back in 1995! Eastern Washington and Port Townshend and the San Juans are full of lifestyle dropouts.

If you hate it, get out. But telling your immensely wealthy bosses that change is needed? Please. They're laughing at you, if they think of you at all.

Anonymous said...

To pick up on a couple of the comments with respect to the complaints about stack ranking: I think commenter #3 hit the nail on the head. If everybody is actually making tangible, easily pointed-to contributions (eg writing code, for a dev) and there's more than enough real work (ie not slideware for exec reviews) to go around, it's easy to get an accurate picture of how much people are producing and then stack ranking is a reasonable way of spreading out the rewards.

However, when most people's time is spent on nebulous crap like "representing (my) team at the weekly cross-group triage meeting" or "adding SAL annotations to 10-year old code", it's much harder to make that kind of determination. Couple that with the issues around (lack of) growth and the ballooning headcount leading to there being less money to spread around and you end up with the current situation:
a political process where whoever can kiss more ass and be more "visible" to management is seen as being more productive and hence gets rewarded better.

(My comments, btw, are based on doing stack rankings for several years. It was always much easier to fit the curve and feel good about the ratings assigned to people when my team had actually produced something than when they'd spent most of the review period flailing around because upper management couldn't make up their damn minds about what they wanted.)

Mark said...

I wonder if Steve Ballmer needs to be shown the door. It sounds like he's had at least one good idea that Microsoft's customers like: greater transparency, however, as I've read Mini-Microsoft (MM) complain about the bureaucracy that's been in place "for the last five years" it makes me wonder. Ballmer became CEO 5 years ago. Hmmmm. Coincidence?

I think part of what MM is complaining about is the structure that Ballmer says is part of his strategy.

I don't know if it's time for Bill Gates, or perhaps one of his young protoges to take the reigns. He may still be needed where he is, at least until Vista comes out, but it seems like Gates brought a different spirit to the place when he was leading it. I think Gates had more of a sense of the retail market--keep it simple, yet effective, and low-priced. Ballmer sounds like a friend of executives and salespeople. The strategy that Microsoft has taken since he took the reigns is targeted more towards big business. I've noticed this throughout their product line. Secondly, up until recently it seems they've abandoned the low-end market, where small business likes to get its software (because it's cheaper). This isn't bad in and of itself, but perhaps it's not what Microsoft needs.

In terms of getting rid of the bureaucracy and making the place exciting, traditionally the way businesses have done this is spun off independent divisions, giving them almost complete independence, and the ability to compete with the established product line. That may be the only way to do it. Doing it any other way is top-down, for one, and slow, due to bureaucratic resistance. Nothing shapes up, or destroys, a company better than competition, because you can't argue with success.

Anonymous said...

But that would presume that Gates, Ballmer, and other execs care about moving the stock price. Do they? Should they? I think they care more about creating cool new stuff and changing the world. I don't necessarily mean that in a nice hippie-dippie way either. But they're done. They've made billions. They'll play for as long as the shareholders let them. And as long as they've got the two cash cows and one solid growing business, enough investors will turn to MSFT as safe harbor to let them. Not enough to move the share price up, but a safe place to park.

While I'm not so sure they really care about making "creating cool new stuff and changing the world" I think your points about them not really caring about the stock price are right on! They probably care about stock price, but it’s not a priority.

Microsoft is a cash generating miracle that is unsurpassed in the history of the modern economy! Microsoft has a monopoly with the desktop OS, productivity applications, and is well on the way to extend that into the server space. They pretty much have the consumer desktop space locked up and are simply defending market position while aggressively positioning MSFT as a serious enterprise player.

My guess is that Gates and Ballmer understand the dynamics of the software market and are focused on creating new monopoly positions and just not too worried about the short term stock price.

Anonymous said...

1) So they're just lying about their leadership R&D and grossly misrepresenting their true operating costs to investors? Wow, I feel better now. NOT.

2) Yup, who wants growth in revenue and earnings like GOOG and YHOO. Oh right...MSFT.

3) Web-based services. The web offers an audience much broader than even Windows and with a muhc faster growth rate. To those who fully embrace it and innovate will go the resulting spoils. As regards why you do it given high margin proprietary businesses, because you have no choice. Either you obsolete your products or others will. IT history is filled with folks who failed to embrace the new because they had a dominant and lucrative position in the old (DEC, WANG, etc. etc). And who knows, along the way you just may discover and even more lucrative business as HP did when it bit the bullet on Lasers, embraced inkjets and discovered the wonderful margins of frequent consumables replenishment.

"All this said, I agree that they've let some bad execs fester way too long, that they should pay a much bigger regular dividend, that the equity investments have been a disaster (perhaps defensive, though...that interactive TV thing sure never took off), and that some of the emerging businesses (MBS...what an abortion) need a hard 2nd look."

You think? :-) And add $10B of written off cable investments to your conclusion on interactive TV -though I'm sure those made sense if only we could see the bigger picture or took a long enough timeframe. Right.

"And as long as they've got the two cash cows and one solid growing business, enough investors will turn to MSFT as safe harbor to let them. Not enough to move the share price up, but a safe place to park."

Safe? The stock has badly underperformed even the indexes for 3 years now. Hardly safe. Additionally, no stock goes sideways forever. Either MSFT rev and earnings pick up and this stock breaks out or else it's going to implode even more than it already has. When/if the stock goes to the teens, I think shareholders will definitely be calling for Ballmer's removal and the employee recrutiment/retention problems already evident given a a "flat" stock will be totally unmanageable. Net net. Ballmer and Gates better start caring about the stock and asap.

Anonymous said...

They're not misrepresenting operating costs at all. The 10Qs are there for all to see. Gates never lies when he says their spending on R&D is high. But that's because of MS's unique business model, which is creating low-cost, horizontal software. That requires huge up-front development costs (high "D"...not "R"!) but once you've recouped, it's all profit...COGS are nonexistent. The only better business is dealing illicit drugs!

Sure, Yahoo and Google are growing faster--from a much smaller base. What, they've each got 10% of MSFT's revenues? They'll reach their growth limit soon enough. All MSN has to do is suck out enough air from the Web advertising market to make their jobs a little harder. In other words, MSN doesn't have to win...it just has to make sure that everybody else loses.

When I read things like "The web offers an audience much broader than even Windows and with a muhc faster growth rate. To those who fully embrace it and innovate will go the resulting spoils", I feel like I'm back in 1997.

From a business perspective, the Web is a channel, not a revolution. (Socially, that's something else.)

I mean, Google and Yahoo: advertising. Wow, that's innovative. It's only been a big business since, oh, about the 1930s. The only difference is the channel--not magazines, not TV, not radio, but Web sites (particularly Web search). When the audience tops out, the ad dollars top out.

eBay: online auctions. Nice idea. Wish I'd thought of it. A one-player market.

Amazon, et al: e-commerce, which is just a fancy word for "retail"....great margins there...just ask Wal-Mart.

So you go on and describe the great "Web services" business model to me there's a blog in Brooklyn I'd like to sell you. In fact, I'll raise you a podcast. Whatever.

Meanwhile, about 180 million new PCs sold last year. 95% of them had Windows on them. Microsoft earns about $60 of pure profit for each one. Another 50% (maybe?) of them had Office on them. Microsoft earns between $50 and $400 of pure profit on each of those PCs.

Anonymous said...

Then again, Microsoft is so vehemently competitive that it could yet prevail in videogames, searching and servers. Microsoft is "the world's largest startup," says star programmer Ray Ozzie, who wrote Lotus Notes and joined Microsoft in April when it acquired his startup, Groove. "No one seems to feel comfortable in their own skin here. It's weird. They still need to succeed."

He observes what Ballmer is too proud to say: "The top executives get the potential Microsoft has. But the next tier of employees doesn't because of the stock price."


http://www.forbes.com/home/technology/2005/09/12/microsoft-management-software_cz_vm_0913microsoft.html

Anonymous said...

Also, regarding the $10B in written off cable investments, that sure looks bad. But affordable. And in the meantime, you and hundreds of millions of others are accessing the "information superhighway" from a PC running Windows...not from your TV.

That's what I meant about defensive.

Hmm, what about Xbox. Sure would have been a shame if people had started accessing the "information superhighway" from a game console. Can't let that happen. Ergo, consoles. And while we're at it, let's build an alternate Internet (Xbox Live) for which we're the exclusvie ISP and collector of all e-commerce transactions.

Anonymous said...

I'm looking for an interesting group to work for at Microsoft. What are the good groups working on interesting projects. I hear MSN is doing some cool things.

Anonymous said...

"...but it seems like Gates brought a different spirit to the place when he was leading it. I think Gates had more of a sense of the retail market--keep it simple, yet effective, and low-priced."

Yes, keep it simple so that the dev teams can sling code that looks like it was put together by a bunch of monkeys. You guys seem to want to go back to the type of company where each group does their own thing, re-creates the wheel each time, and cranks out very low quality feature rich code. This is the mentality that helped to create products that were so full of security holes that it took an entire division to stand-down and spend almost a year to try and patch the crap together.

Anonymous said...

from the article:

"MSN e-mail should talk to Office Calendar contacts and share appointments from Office with friends and family on the Web. But then MSN could cannibalize Office."

So Microsoft suppress something users would like because it threatens its monopolies. Well, that is how corporations get fat and slow, and eventually get overthrown by some lean, new company that just goes for it.

Anonymous said...

You guys seem to want to go back to the type of company where each group does their own thing, re-creates the wheel each time, and cranks out very low quality feature rich code.

I'm sorry, but, how is that any different from today?

Anonymous said...

"So Microsoft suppress something users would like because it threatens its monopolies."

Nothing new here. Talk to those poor OWA guys about how badly they got screwed over for their transgressions of Outlook's turf.

Anonymous said...

Stack ranking has always been there and again, exists at most companies including numerous successful ones.

Several successful companies like Dow Chemical and Ford had forced ranking systems and dropped it.

Did anyone notice a change in profits in either direction?

Does anyone believe there is a strong correlation between forced ranking and profits or stock price?

http://finance.yahoo.com/q/bc?s=KMB&t=5y&l=on&z=m&q=l&c=msft,dow,ge,f

Post Internet bubble, companies that sell sulfur and adult diapers have given investors a better return on investment than Microsoft and their bundled innovation.

http://finance.yahoo.com/q/bc?t=my&s=SBUX&l=on&z=m&q=l&c=msft%2Camzn

Even companies that sell coffee and books have given a better return on investment than Microsoft.

Why would any billionaire investor want to take on Microsoft's problems when there are easier ways to make a lot of money?

http://www.workindex.com/editorial/hre/hre0312-16.asp

In 2002, Ford settled two class-action lawsuits for $10.5 million. The automaker said it needed the grading system because its corporate culture discouraged candor in performance evaluations. But some employees claimed the system disproportionately affected older, white workers. Eventually, Ford eliminated its forced-ranking system.


Microsoft recently settled lawsuits with three plaintiffs who claimed the software giant's appraisal system racially discriminated. One of the lawsuits alleges that the grading system allows managers who are "predominately white males" to rate employees based on their own biases.

What has changed since then?


"Conoco, meanwhile, settled a lawsuit filed by the U.S. Department of Justice. The lawsuit contended that the oil company's forced rankings favored foreign workers over domestic ones.

Microsoft would never do something that sneaky to move jobs off-shore. Hah!


"Dow Chemical Global, based in Midland, Mich., in one form or another, had a forced rankings system from the 1960s until the mid-1990s. "The label changed over the years, but we always had a forced ranking system," says Steve Constantin, Dow's director of HR development and workforce planning."


"He says the study identified yet another problem with forced rankings. "Dow recruits the cream of the crop," Constantin says. "To then say that a certain percentage of [them] are poor performers, even if the department and the company are meeting goals, did not make a lot of sense for us."

Microsoft HR must not have a lot of confidence in their ability to hire the "cream of the crop" if forced ranking makes sense to them.

Anonymous said...

Speaking of management failure: why exactly did we choose to do the japanese market again, after we failed miserably with a technically superior console against a local vendor? Hope? We could have attempted a survey. Like this one. Can anyone explain to me why we don't simply cede that market?

Anonymous said...

"Sure, Yahoo and Google are growing faster--from a much smaller base. What, they've each got 10% of MSFT's revenues? They'll reach their growth limit soon enough."

Meanwhile, they'll account for some $10B of revenue which is significant even in MSFT land esp where growth just hit a historical low. And MSFT will spend $B's trying to play catch up which of course will come out of earnings.

"From a business perspective, the Web is a channel, not a revolution. (Socially, that's something else.)"

Sure, tell that to traditional print media players for example.

"I mean, Google and Yahoo: advertising. Wow, that's innovative. It's only been a big business since, oh, about the 1930s"

Hmmm....computers have been around since the 1950's, I guess there's nothing innovative happening in the technology industry either?

"So you go on and describe the great "Web services" business model to me there's a blog in Brooklyn I'd like to sell you. In fact, I'll raise you a podcast. Whatever."

That's almost comical esp after you enumerate several web service based companies who alone are doing 10's B's in revenue and $B's in profits.

"Meanwhile, about 180 million new PCs sold last year. 95% of them had Windows on them. Microsoft earns about $60 of pure profit for each one. Another 50% (maybe?) of them had Office on them. Microsoft earns between $50 and $400 of pure profit on each of those PCs."

95% may end up with Windows on them but they certainly aren't shipping with it - which is why double-digit PC growth is now only resulting in single-digit Windows growth. Everyone knows MSFT's legacy businesses are hugely profitable. What the market cares about - and what the management team should too - is % growth rates and trajectories moving forward. Overall growth last year was the slowest in the company's history and dropped further in Q1. Only 1 of MSFT's three cash cow divisions can claim a >10% growth rate. In the all important, fast growing emerging markets, MSFT is increasingly getting its butt kicked by Open Source. Finally, in the most important market - the installed base - actual upgrade rates have slowed dramatically and show every indication of slowing further. Net net, mgt better get their heads out of their asses and start creating the company's future vs living off of its past.

Anonymous said...

I'm looking for an interesting group to work for at Microsoft. What are the good groups working on interesting projects. I hear MSN is doing some cool things.

The question you should be asking is if you would be doing some cool things (or things that would increase your skill set).

In a large company, there are a lot of people fighting for the plum assignments that make it easier for them to stand out come review season.

If your current knowledge gives you a competitive advantage over people with advanced degrees that have worked there for years and who know how to work the system, give it a try.

People with undergraduate degrees who have worked at smaller companies or even the Army are shocked with how little responsibility and control they have when they get a job at Microsoft.

It takes a while to get used to being someone's bitch.

Put on some Chap Stick and pucker up or work for a smaller company where you will get to do more.

Anonymous said...

The beauracracy, the infighting, and the inability to make progress comes largely from the change in the rewards system. Somebody said:

“If you hate it, get out. But telling your immensely wealthy bosses that change is needed? Please. They're laughing at you, if they think of you at all.”

There’s some truth to that. There is a massive chasm of wealth, not just between Bill and Steve and the current rank and file, but between folks who joined early enough to make millions on their stock options, and those who started afterwards. There are a lot of folks at all levels of management who already have more money than they can spend, but they stick around. What for? Sadly, for many, I think they stick around to fight ego battles. They don’t make decisions based on what’s best for the company, but instead on what’s best for their ego. It’s got to be their way, whatever it is they’re doing. Remaking the way Windows is developed and randomizing thousands of developers? Hey, who cares if it makes the product three years late and lacking all the important features, as long as the big wheel gets to “prove” himself right! Refusing to cooperate with another team (or insisting that the other team follow your rules and tie themselves to your product, even if it makes no sense)? Gotta do it, otherwise how can I show them all what a smart guy I am?

And on the other side of the issue, the current rewards structure for those of us who still care about making some coin encourages bad managerial decisions. There is such a stair-step function in rewards, that the urge to make it from GM to VP is massive. And we don’t really reward people for making good decisions, we reward them for making big splashes. So a GM isn’t going to shut down his project, even if it becomes painfully obvious it isn’t a good idea any longer, because good for the company or not, it ‘s his ticket to VP-hood and a big payoff. You can’t really get promoted for pulling the plug on a bad idea, and we don’t have a way to reward someone (very well) without promoting them.

At other levels it causes the same kind of problems. Somebody mentioned on another thread the bad behavior that comes from needing to seek “visibility” instead of just doing your damn job. This gives us the well-known Feature PM, who tries to cram more into a release than should be there, because that’s his ticket to GPM or PUM. I wonder if it’s also what drives people to keep changing shit that doesn’t need changing (Shell team, are you listening?). Again, nobody gets promoted for not breaking something, so the only way you get rewarded is by doing something big – even if it’s big and stupid.

-ShiftingRight

Anonymous said...

Hey, who cares if it makes the product three years late and lacking all the important features, as long as the big wheel gets to “prove” himself right!

Excluding research, will Microsoft ever fire all the employees (including managers) who have not shipped a product in the last five years?

Nope.

When HR has trouble finding new hires, the GM sends out an email asking employees to refer their friends to HR.

Who is going to fire their friends? Hell, even the GM hired one of his friends.

When you are stack ranking your friends, do you really believe the performance review process has any integrity?

When I was interviewing with other groups for an internal transfer, there were groups where the PM's have never worked on a shipping product -- and, no, they are not new hires.

Anonymous said...

The first commenter asked:

Was there ever any other performance review mechanism at MS apart from stack ranking? Was it a source of problems/complaints 10 years ago, or just recently now that there are other general malaise issues?

I was an MS manager ten years ago. The stack rank approach was indeed being used. From what I was told then, it had already been in use for many years.

What HAS changed in the way the money is distributed across the stack. It used to be that a 3.0 could get some raise, bonus and even some stock. Most of mine did. But now upper management forces most 3.0's into zero raise, zero bonus, zero stock. And there's pressure to turn repeat 3.0's into 2.5's and terminations.

Anonymous said...

It's not simply pressure. HR will ask a manager for a reason not to fire an employee if the employee has consecutive 3.0s.

Anonymous said...

What HAS changed in the way the money is distributed across the stack. It used to be that a 3.0 could get some raise, bonus and even some stock. Most of mine did. But now upper management forces most 3.0's into zero raise, zero bonus, zero stock. And there's pressure to turn repeat 3.0's into 2.5's and terminations.

Yup, and I definitely recall, immediately prior to that (unannounced) change in policy, my group manager telling everyone "it's OK to get a 3. That means you're doing your job as expected." Now doing your job as expected is the first step to being shown the door. Thanks.

A big problem with this philosophy is that, for some managers, it means your primary job is secondary to the "stretch" commitments that are going to get them a better review score. (And that, by extension, become my commitments, too.)

Last year I actually had to spend time convincing my boss that doing my group's primary job role should be a commitment with clearly stated execution and accountability points. Unbelievable that I had to even bring it up!

To comment on some points made in previous comments, R&D is an accounting and tax item that does not simply reflect pure research being done. As I understand it, my time spent researching or developing techniques that make doing my job more productive can be accounted for as R&D -- as opposed to simply a cost of doing business. The number is impressive to throw around, but it has very little real meaning about Microsoft's business as far as I'm concerned.

The comment about tying up smart folks just to keep them from working for competitors is also a good point. I don't disagree with this policy.

Anonymous said...

A big problem with this philosophy is that, for some managers, it means your primary job is secondary to the "stretch" commitments that are going to get them a better review score. (And that, by extension, become my commitments, too.)

It is even more fun when your manager gives you a "stretch" commitment that requires development work across two product groups in two different divisions and that "stretch" commitment does not have the same priority in the other product group.

So, now you have to work on your "stretch" commitments and your manager's and do your primary job responsibilities as expected.

They might tell you that they stack rank like levels so you aren't officially competing with your boss but your boss knows that all of the rewards for your group are coming out of the same budget. For some groups, stack ranking like levels is a recent development. HR had to remind some groups of the policy but a hiring manager told me that he would rather make someone with a higher level happy than someone with a lower level.

So, as others have said, if you want to work for Microsoft,try to get the highest level possible in your offer.

I would add try to find out what your manager's level is. HR is not going to tell you though.

Why? A VP told me that over the years the gap between your level and your manager's level has shrunk over the years.

Managers are given a lot of flexibility on what they actually do come review season.

Be sure to meet your "stretch" commitments in addition to your primary job responsibilities, or, your manager has an excuse to burn you with a 3.0.

Anonymous said...

To be clear- the reported did read your blog. I spoke with her and pointed her to this site.

Anonymous said...

"When I was interviewing with other groups for an internal transfer, there were groups where the PM's have never worked on a shipping product -- and, no, they are not new hires."

Which is exactly why MSFT needs to move to a culture of true accountability where people are judged and rewarded for making real contributions to the company's top and bottom lines, increasing share against competitors, real deployments within the installed base and thrilling customers. No more getting ahead w/o producing by simply playing the political or visibility game. No more getting ahead because you're someone's buddy or have been around a while. In other words, a performing meritocracy vs a struggling popularity circle-jerk.

Anonymous said...

From the article: "Ballmer, determined not to let deadwood accumulate in Redmond, Wash., lets go of 6.5% of the workforce every year for inadequate performance."

So given this, mini, your real beef is presumably with the amount of hiring MS is doing rather than the amount of people it is letting go?

Anonymous said...

One of the first things mentioned to me when I started at Microsoft was, "You need to increase your visibility." The way to do it was to produce a demonstration for a feature I was working on. I already knew that the feature was achievable because I had done something similar in the past, but that didn't matter because the point of the demo was visibility, not actually doing something useful. I came to Microsoft to get something *done*, not just do demos. What a fucking waste of time. I've since left the company.

Anonymous said...

Ballmer, determined not to let deadwood accumulate in Redmond, Wash., lets go of 6.5% of the workforce every year for inadequate performance

He might be determined to let the deadwood go but given the problems in getting an accurate reading when people are working on nebulous crap (as someone else pointed out) and the games people play to work the system, he isn't doing a very good job here either.

In jobs like this you get very little feedback from anybody else. People might tell you whether things are good or bad, but really, how are you doing in aggregate? I get a little help from my board of directors once a year. It's mostly me.

I know he doesn't consider the market a barometer of how well a CEO is doing. I've heard him say so.

He can look at the percentage increase in profit each year while he has been CEO to see how he is doing in aggregate compared to other CEO's of companies of a similar size.

However, he can rationalize any slow down on external factors beyond his control.

It's good to be king.

Anonymous said...

"I know he doesn't consider the market a barometer of how well a CEO is doing. I've heard him say so."

The market doesn't always get it right day to day, but over time it always does. More importantly, Ballmer's principle job is to enhance shareholder value. In the five years since he became CEO, $250B of that realized value has been wiped out, the stock has badly lagged even the indexes going on 3 years, earnings have failed to match revenue growth by a wide margin as Ballmer spent $B's on increasing headcount and the various emerging bets - none of which has so far shown a viable return. Now revenue growth is at the lowest levels since the company went public and the P/E is at the lowest level of the historical range. And let's not talk about the credibility loss between then and now and the increasing inability to ship core products in a timely manner. All in all, Ballmer might want to start paying attention to the market - it appears to have gotten it right.

Anonymous said...

Google has a new product to search Blogs.

http://www.google.com/blogsearch

A search on "stack ranking" turned this up:

A Sun employee helps a customer right after getting kicked in the head by a donkey because his manager asked him to and gets a "Meets Expectations" rating on his performance review.

http://headrush.typepad.com/creating_passionate_users/2005/01/giving_a_damn_a.html

While sitting in the hospital early on a Monday morning, waiting for my CAT scan (after a donkey kick to the head that sent me there unconscious the night before), I called in to explain why I wouldn't be showing up at the customer's site that day. I was told, "there's nobody in all of Sun's education division that can do this now, and we can't reschedule that customer's enterprise Java course for at least three months." Long Pause. "OK, I'll be there. But tell them I'll be late. Oh, and you better warn them I look like... well, I hope they aren't squeamish."

And of course my managers at Sun were deeply appreciative. Or so I imagined. Fast forward to my annual performance review a couple months later when I get my "Meets Expectations" rating.

Anonymous said...

"Ballmer, determined not to let deadwood accumulate in Redmond, Wash., lets go of 6.5% of the workforce every year for inadequate performance"

Great. Now all we need to do is get him to add his name to that list...

Anonymous said...

I just have to take issue with the current bullishness over "Web 2.0," which means nothing.

The only significant difference between GOOG and YHOO and traditional advertising-supported businesses is HOW they are reaching customers. They are not reaching any NEW customers. They are taking advantage of a shift in consumer time--less time in front of the tube, more time in front of the monitor. That's it. The overall ad spending pie will grow only as fast as the population grows. There's nothing NEW here!

Computing is a totally different story. Until the 1980s, there were a few big fat computers used in a few places (government, university, big business). Microsoft's stated business goal was a PC on every desktop and in every home. In other words, increasing the size of the pie a million-fold.

Show me how the Web fundamentally creates new business. It doesn't. (Except selling software to run all those Web sites...nice for MSFT, as well as open source vendors.) All it does is shift traditional business to a new channel. Every dollar spent at Amazon is a dollar that somebody has chosen NOT to spend in the equivalent retail outlet. Every dollar that BobCo spends advertising on Google Search is a dollar that Bob has chosen not to spend on a classified ad in the Seattle Times (talk to any newspaper guy about how the Web has impacted them), or a yellow pages listing, or, in the of GiantBobCo, on a $500,000 SuperBowl ad.

From a business perspective, the Web is a channel. Not a revolution.

GOOG, YHOO, AMZN--nice businesses, but they will never enjoy the sustained revenue and profit growth that MSFT had in the 1990s. Not even close. I'll even go out on a limb and say that GOOG's stock price will peak in 2006, and that a lot of investors will ride the damn thing all the way back down to a sensible P/E ratio of 15 or 20.

(GOOG P/E at 88? Come on. Are you people fucking high? Or is this just the institutional investors doing the pump and dump thing again, helped along as always by the gullible media and greedy individuals with short memories? Hmmm....)

I will give you eBay. The idea of a global flea market in which you take a vig is simply brilliant. Not all that new, but brilliant. I suppose online gambling might be another one--nice vig there, scale works for you. And p0rn--but again, a new channel (conveniently less encumbered by regulation). Not a new delivery model, unless you get into technodildonics.

None of these companies will be the next Microsoft. The next Microsoft will probably sell something completely different in a completely different field. Like, I dunno, individual home solar power generators so we can all get off the grid (same model as the PC--take something that's owned by a handful and spread it to the mases).

Anonymous said...

Seriously, the only way I can think of for Microsoft to automatically demoralize about 1/3 of it's employees (whether it's deserved or not) more efficiently than stack ranking would be to pick out 1/3 and kick them in the nuts once a year. Notice I said 'nuts', because women simply don't get kicked as hard (if at all) for being poor to mediocre at Microsoft because they want to portray diversity as being a priority.

Anonymous said...

Show me how the Web fundamentally creates new business.

While I agree with most of your points, especially the ridiculous over-valuation of Google...I take minor exception to this point. There are a number of businesses out there that sell specialty items/services that could not exist without the web. Products that could only be found in obscure places around the world(if at all) are now easily obtainable over the net. The web allows potential customers to find, evaluate, and order from these businesses. You could argue that this is simply changing the channel from mail-order or telephone ordering, but I submit that many of these places are so small/specialized that, without the searching and presentation capabilities that exist on the net, they couldn't survive. Scale allows things to exist that were financially infeasible in the past...I wouldn't let the current hype blind you to some of the potential (I'm not claiming a killer market here...I'm just saying don't throw the baby out yadda yadda).

As a parting shot, anyone who thinks GOOG will even come close to becoming the next MS just isn't paying attention. Look at their revenue model...look at the perpetually BETA software they deliver. They don't produce anything that isn't fundamentally replacable by technology from someone else. They need order-of-magnitue improvement in their products to displace others or become the dominant player in their niche, and I just don't see that. Their search engine got them pretty far back in the days of AltaVista and friends, but the giants and the hungry are all awake now and they no longer have that edge.

Anonymous said...

>> become the dominant player in their niche

Pass me some of what you're smoking, dude. They ARE dominant player in their niche. And, say, Gmail is orders of magnitude better than Hotmail.

Anonymous said...

>And, say, Gmail is orders of magnitude better than Hotmail.

I used to agree, but have begun noticing lots of time out errors recently. Hmm, maybe running a Web-based e-mail system isn't so simple when you actually get some scale.

Anonymous said...

>Scale allows things to exist that were financially infeasible in the past...

Good point, that's the Long Tail, right? Nonetheless, the $200 I just spent on a 1970s Danelectro guitar sold by a guy in Vancouver BC is $200 I would probably have spent on a new guitar pedal at my local Guitar Center or something. The $20 I spent buying two obscure bands' CDs that I heard on CD Baby would have been spent on one CD at Tower.

Displacement, not extra spend. In fact, choice of vendors, and global market, and realtively low barriers to entry for most online businesses brutalizes margins.

Just wait until MSN adCenter launches. It won't have to be any better than Google to take millions away JUST BY DRIVING AD RATES LOWER!!!

The Web doesn't create wealth, it redistributes it.

Anonymous said...

"While I agree with most of your points, especially the ridiculous over-valuation of Google"

Versus the non-ridiculous MSFT valuation of 23x earnings and 7X sales for a company not even growing at 10%?

Anonymous said...

As a parting shot, anyone who thinks GOOG will even come close to becoming the next MS just isn't paying attention. Look at their revenue model...look at the perpetually BETA software they deliver. They don't produce anything that isn't fundamentally replacable by technology from someone else.

By becoming the next Microsoft, what do you mean?

You can't be referring to stock growth because there are a number of companies that have already cleaned Microsoft's clock in that department.

http://finance.yahoo.com/q/bc?t=my&s=MSFT&l=on&z=m&q=l&c=goog%2Camzn%2Cebay%2Csbux

http://finance.yahoo.com/q/bc?t=my&s=MSFT&l=on&z=m&q=l&c=dell%2Ccsco%2Cyhoo

The companies that did this also produced something that is fundamentally replacable by someone else.

So what? They made investors more money.

Anonymous said...

How pitiful is this?

http://seattlepi.nwsource.com/business/240541_gates14ww.html

Q: Companies such as Google and Apple have taken the lead in some key areas. Are Windows Vista and Office 12 a chance for you to recapture some of that buzz, and show that Microsoft plans to remain a central figure in the software industry?

Gates: Well, if you look at software very broadly -- productivity software, software tools -- Microsoft is the leader in way more respects than anyone else. Driving the research that will give us speech recognition and vision, and all of those big hard things that you've got to take a long-term approach in.

At any point in our history, we've had competitors who were better at doing something. Novell was the best at file servers. Lotus was the best at spreadsheets. WordPerfect was the best at word processing.

Right now, because of the breadth of what we do, we have that in many areas. Nokia is way ahead of us in phones; we're closing the gap. Sony is ahead of us in video games. We're just on the verge of something (the Xbox 360) that will help us close the gap there. In Web search, Google is the far-away leader. Big honeymoon for them. Even if they do "me, too" type stuff, people think, "wow." And Apple in music has done a fantastic job.

We've got all these areas -- like tablet computing, this Internet connectivity, or taking presentation to a new level, office productivity -- where we're just out there in front and we just need to keep pushing the frontiers.

Maybe we really are losing it!

Anonymous said...

Recent layoffs at area technology companies

Friday, August 05, 2005

Microsoft Corp. is cutting 72 positions at customer-support centers in Issaquah; Charlotte, N.C.; and Los Colinas, Texas, and moving the work to operations in Canada and India.

Thirty-three people in Issaquah are losing their jobs, Microsoft spokesman Lou Gellos said. About 1,800 people work at the company's customer support center in Issaquah, he said. The company also is creating 16 new jobs in customer support.

The cuts are part of Microsoft's strategy to shift some customer support calls to third-party vendors. Gellos said about 95 percent of the company's "first-tier" calls are currently handled by third parties. About 80 percent of the work that was handled at the three U.S.-based call centers will be shifted to a company in Canada, with the remainder handled at Microsoft's facility in Bangalore, India.

Anonymous said...

"So what? They made investors more money."

Exactly.

Anonymous said...

http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20050914&ID=5113806

Steps in the right direction. Does anyone still believe he can deliver though?

Anonymous said...

The question that Microsoft employees should be asking themselves is, "do I really care how big and powerful the company is, or do I want to retire before I'm 50"? As was stated before, many companies are cleaning Microsoft's clock when it comes to the stock, and they have great innovative technology to work on. Currently the job market is pretty hot, after five years at MS I had no problem finding a job that made as much in terms of salary, but with a company that gave me stock options that may actually be worth something some day (and it's looking better every day, it would take an act of god to put me underwater). Plus I have about 1/10th the stress level because there is no stack ranking of employees. If I do my job well, I get paid for it. If I do better than expected, I get more money, more options and a bonus. My manager doesn't have to play politics with everyone's career. Many people here came from Microsoft. The only thing this company lacks is equivalent health care (it's okay, I may spend an extra $1000 a year or so on health care, but it's a good trade off for the lack of stress) and no company store (I have lots of friends who are happy to get me what I need though).

The real benefit to being at this company is that, unlike Microsoft, this company has a "startup" mentality. It's not some horrific, bloated bureaucracy. It's truly agile and adapts quickly. Microsoft used to be that way, but people who believe that now are just fooling themselves.

Most Microsoft employees are sheltered and scared to leave the nest. There's a lot of security in knowing that the company has so much money sitting in the bank. Personally, I like a little risk. Microsoft now has many employees who tend to play it safe, don't want to disturb what's going on in their group and pretend like they are working harder than they are. I would take a big pay cut to get out of that.

Anonymous said...

"Steps in the right direction. Does anyone still believe he can deliver though?"

No. Look how long it's taken for him to even begin to acknowledge there is a problem...er...I mean was a problem (wink).

Anonymous said...

"We attempted something that was beyond the planning and conceptualisation of the system," Mr Ballmer said of Windows Vista, the much-delayed version of the software that is now planned for late next year.

Steps in the right direction. Does anyone still believe he can deliver though?"

Valentine manages by lying to employees to reduce attrition and by cutting features until the product ships. He did the same thing on Exchange that got him the job on Windows.

Valentine was in charge of the "planning" that delayed Windows. You can see how his "planning" of modularizing everthing will turn out.

If they modularized everything, their favorite DOJ excuse would evaporate -- "if we took it out, it would break *everything*".

Anonymous said...

"...and no company store (I have lots of friends who are happy to get me what I need though)."

You can join the Microsoft Alumni Network to get access to the company store. I think the spending limit is $500.

Anonymous said...

"Microsoft Corp. and Time Warner Inc. have been discussing potential online partnerships that would help the two companies better compete against rivals Google Inc. and Yahoo Inc. (Nasdaq:YHOO - news), two people familiar with the talks said Thursday."

Sweet, MSN will be history. Hope everyone in MSN has a contingency plan. AOL has double the IM base that MSN does, do Messenger will be the first to go.

Anonymous said...

another similar read is the new cover story of Business Week here:
http://www.businessweek.com/magazine/content/05_39/b3952001.htm

having spent 10 years at ms (left 3 years ago), it's the loss of relevancy (thought leader in the industry) that's the killer. it's a much different company from the early 90's (defining the market) to the early 00's (following the market).

Anonymous said...

Well done Mini, you've hit the mainstream press!

Anonymous said...

"At the end of the day the proof is in the output. If you look at any of the critical dimensions, our company has performed well, and I'm bullish about how we will drive to continue."

Really Steve? How about earnings growth vs sales growth over the past 5 years? Or current overall growth? Or Office growth? Or Bus Solutions growth? Or MSN growth? How's the web server offering doing vs Apache? Or IE marketshare vs Firefox? Or Windows marketshare in the fastest growing markets like Brazil, India and China? What sort of return are we seeing on that Xbox after several years and more than $4B invested? Or how about our markertshare in search or cellular phones? How about profit margins now vs 00? And how long did the latest version of SQL take to ship? Vista? And of course, how about the stock? I guess none of those meet your definition of critical? Could you possibly be in a greater state of denial?

"And it could learn some lessons from others that have made the transition more gracefully. Take General Electric Co. (GE ) The conglomerate has long boasted an entrepreneurial culture, with hundreds of managers running fiercely independent businesses. Those leaders are given free rein yet are held accountable for their own results -- meaning they can get the boot if they don't perform. "The process is transparent and rigorous and constantly reinforced," says Noel M. Tichy, a University of Michigan professor and leadership guru."

Wow, accountability and innovation hand in hand. And some said it wasn't possible. Apparently it is -you just have to have the right leadership and culture.

Anonymous said...

Under the rating system, if a group works hard together to release a product, someone in the group has to get a low score for every high score a manager dishes out. "It creates competition in the ranks, when people really want community," says a former Microsoft vice-president. A company spokesman says managers don't have to apply the curve with smaller groups, where it's not statistically relevant.

B**L S**T -- Unless he was refering to group sizes smaller than 3.

Anonymous said...

"If they meet incentive goals, the 120 or so vice-presidents will receive an eye-popping $1 million in salary a year, and general managers, the next level down, will get $350,000 to $550,000, according to a high-ranking source. But the rest of the staff is paid at market rates."

Who says MSFT isn't innovative? How many other companies faced with growing employee resentment (in the bureaucracy, leadership, pay differentials and inability to ship) and growing shareholder resentment (with a flat-lined stock while mgt hands out Billions/year in stock compensation primarily to the top 20%), would turn around and actually INCREASE the rewards going [in too many cases] to the very same players ultimately responsible for these problems in the first place? I hope more details on this leak before the shareholders meeting. They're going to rip Steve a new one when they hear this latest stupidity.

Anonymous said...

"The company's performance even has some anonymous writers on the Mini-Microsoft Web site calling on Gates to ask Ballmer to step down"

Who said anything about asking Gates? Both should go.

"And board members say they stand firmly behind Ballmer. "I am fully supportive of the transformation that Steve is leading the company through," James I. Cash Sr., a director and former professor at Harvard Business School"

Surprise! And who gave Mr Cash Sr. the job? Oh right...Gates/Ballmer. You'd think a former Harvard Business School professor might recall that the primary job of a public-traded company's CEO and snr mgt is to grow shareholder value - not oversee a 50% decrease in just 5 years, pretend it hasn't happened and try to argue that everything's swell. While he's at it, he might also refresh his knowledge of his own role which is to ensure that happens - not provide unreserved support in light of the obvious failure to drive the stock and hence shareholder return for going on 3 years now. Just the fact that enough metrics exist to support this article's overall very negative assessment, should be concerning to Mr Cash and stop him from giving Steve an effective 4.0 especially publicly.

Anonymous said...

Nothing to worry about. All we have to do to save the stock is rebranding MSN . Now, that is innovation! After all, innovation was never about software, is about brand. That's why GOOG is winning. They do better marketing.

Anonymous said...

I just got my rating - a 3.0. I was told that it was always difficult / impossible for newbies to get higher ratings in their first year. Particularly if it happened to correspond with the last stages of a release. Is that really true?

Anonymous said...

I just started at Ms, we'll say recently (less than 3 months). I've already put in my two weeks notice. I don't so much have a problem with the things you're mentioning, my biggest issue is arrogance. People at MS really DO think they're smarter, better, and mroe creative than everyone else in the world. (not everyone, but the vast majority). I've got news for you: GM used to think the same way, look at them now.

Anonymous said...

"I just got my rating - a 3.0. I was told that it was always difficult / impossible for newbies to get higher ratings in their first year. Particularly if it happened to correspond with the last stages of a release. Is that really true?"

No! That's a load of crap. If they wanted to give you any incentive to stay they would have given you a better review score. My advice is to get under another manager, your manager is sacrificing you and playing politics with your career. If, relative to your peers, you performed in the middle or top third you should have gotten a 3.5 or 4.0. I would run for the hills. You'll find that if you stay with this loser manager you will get another 3.0 and then you'll get pushed out (yet your manager will still be there, fat and happy).

Anonymous said...

You'll find that if you stay with this loser manager you will get another 3.0 and then you'll get pushed out (yet your manager will still be there, fat and happy).

Based on what evidence? Maybe the guy DID underperform everyone else. It is rare that someone new to a well-functioning team is able to add more value than the current members (not impossible, but rare in my experience). You have no data on his performance level relative to that of his peers, yet you immediately condem his manager.

To the original 3.0 poster: The answer is "maybe". Your manager may be sacrificing you to the ranking model, or he may honestly believe you didn't contribute as much to the product as the rest of the team. You need to sit down and speak with him and figure out what his expectations were/are. Ask him point-blank what contributions others made to the team that forced you to be ranked lower...from that information you'll be able to get a better gauge on things.

Anonymous said...

You said:

"You have no data on his performance level relative to that of his peers, yet you immediately condem his manager."

Perhaps you should reread the post, in it I said -

"If, relative to your peers, you performed in the middle or top third you should have gotten a 3.5 or 4.0."

Then you said:

"It is rare that someone new to a well-functioning team is able to add more value than the current members (not impossible, but rare in my experience)."

He's not new, he says he's been there a year. I've seen tons of people who were more impressive in their first year than the folks who had been there since the groups inception. Again, I'm assuming that he performed well relative to his peers.

What's disturbing is his managers reaction that it's just the norm. I fell for this one once too, it's BS. It's a justification for managers to use the stack ranking system (which tends to suck) to justify their employment. My old lead once told me he'd never seen anyone working at Microsoft for more than five years who was a manager who didn't completely and unfairly screw someone's career over. He was a smart guy, it's completely true.

Anonymous said...

After thinking about it last night, I now believe the proposed AOL partnership is actually directed at GOOG.

If you read the prospectus for the GOOG secondary:

"In addition, advertising and other fees generated from one Google Network member, America Online, Inc...accounted for approximately 12% and 11% of our revenues in 2004 and in the six months ended June 30, 2005..."

So one vendor, AOL, is 12% of revenue. Also, timing the announcement right after their secondary.

Back of the envelope, this works out to about $200m. GOOG has free cash flow a about $650m.

Sounds like the same old story, cut off their oxygen with cash that would otherwise remain idle.

Just my opinion.

Anonymous said...

It's definitely directed at Google. I'd be willing to bet it actually happens though, Microsoft made cuts several years ago in MSN, the fact is the whole division has cost them a lot of money. If they can spin it off to put cash in the bank, they'll do it. Expect to see some email from Ballmer talking about moving "in the right direction" soon.

Anonymous said...

You said:

"You have no data on his performance level relative to that of his peers, yet you immediately condem his manager."

Perhaps you should reread the post, in it I said -

"If, relative to your peers, you performed in the middle or top third you should have gotten a 3.5 or 4.0."

Then you said:

"It is rare that someone new to a well-functioning team is able to add more value than the current members (not impossible, but rare in my experience)."

He's not new, he says he's been there a year. I've seen tons of people who were more impressive in their first year than the folks who had been there since the groups inception. Again, I'm assuming that he performed well relative to his peers.

What's disturbing is his managers reaction that it's just the norm. I fell for this one once too, it's BS. It's a justification for managers to use the stack ranking system (which tends to suck) to justify their employment. My old lead once told me he'd never seen anyone working at Microsoft for more than five years who was a manager who didn't completely and unfairly screw someone's career over. He was a smart guy, it's completely true.


I'd be inclined to agree with the second person here - I did receive a decent stock grant and while the pay hike was pretty bad - I did get one. From what I know my boss has no hidden agenda. I think the biggest mistake I made was in not understanding the kind of things you're required to do at the level that I came in at..

fCh said...

Somebody here quoted ""Microsoft Corp. and Time Warner Inc. have been discussing potential online partnerships that would help the two companies better compete against rivals Google Inc. and Yahoo Inc. (Nasdaq:YHOO - news), two people familiar with the talks said Thursday."


MSN has always had a problem: it tried to be(at) AOL no matter what the users who were going to Yahoo! and Google were saying. Now, they think that putting together two less-than-stellar entities will form soemthing great. Hmmm, unless I am a hopeless geek, they should ask Carly--the former first lady at HPQ!

Anonymous said...

Check out this great weekend article in FT on the business model changes that being triggered by Google. The scenarios are insightful. We should figure out how MSN can lead in this new businss model. Url: http://news.ft.com/cms/s/ea3248d4-2718-11da-b6fe-00000e2511c8.htmlare

Anonymous said...

There are too many HR at microsoft the size of which is greater than many medium sized businesses - many of whom are just fomenting conflict and creating more beureucracy.

Anonymous said...

>What HAS changed in the way the money is distributed across the stack. It used to be that a 3.0 could get some raise, bonus and even some stock. Most of mine did. But now upper management forces most 3.0's into zero raise, zero bonus, zero stock. And there's pressure to turn repeat 3.0's into 2.5's and terminations.


That is just not true. I gave 3.0s in my team this year that included stock, merit, and reasonable bonus (5%). What is true, which people have heard a few whispers about, is that it is fatal to get stuck at a low level. What sometimes happens is someone comes in at 59, gets one raise to 60 after a year or two, and then gets stuck at 60 for a few years. That 60 -> 61 jump is really tough for a lot of people. It's the jump from basically always being told what to do, to being able to figure out things on your own, whether they're technical details, how to build UI, whatever it is that you do in your job. Of course this is applies only to product teams. What I have seen happen over and over is someone who goes >2 years in 60, getting 3.0s - those are the majority of people who are encouraged to leave, at least in my experience.

Anonymous said...

What I have seen happen over and over is someone who goes >2 years in 60, getting 3.0s - those are the majority of people who are encouraged to leave, at least in my experience.

Ditto for level 61 whether the 3.0's are real or trended.

Anonymous said...

Based on what evidence? Maybe the guy DID underperform everyone else. It is rare that someone new to a well-functioning team is able to add more value than the current members (not impossible, but rare in my experience). You have no data on his performance level relative to that of his peers, yet you immediately condem his manager.

If you try to get evidence about why a certain score was given, HR tells you it is a secret. They cannot explain exactly why you got what you did because you might guess if they describe the work that got someone a higher score.

If you ask exactly what you need to do to absolutely get a higher review score next time, they can't tell you because you are graded on a curve.

Convenient huh?

You can chase rainbows if you want.

If they are making it that difficult to get ahead, chances are they want to get rid of you.

Anonymous said...

Someone said:
Seriously, the only way I can think of for Microsoft to automatically demoralize about 1/3 of it's employees (whether it's deserved or not) more efficiently than stack ranking would be to pick out 1/3 and kick them in the nuts once a year. Notice I said 'nuts', because women simply don't get kicked as hard (if at all) for being poor to mediocre at Microsoft because they want to portray diversity as being a priority.

Women simply don't get kicked as hard?!?!? I almost lost my lunch. Women are repeatedly overlooked for good ratings and promotions, even when year over year their responsibilities grow. Remember these are subjective things. And people tend to reward people that are more like themselves. Microsoft is still male dominated.
Even if a woman chooses to say anything (and risk her career), because there are so few of us (in the technical side of things anyway), HR uses the 'no statistical relevance' excuse to prove that this does NOT happen.

Anonymous said...

What about the media group - the "own the living room" people?

Anonymous said...

I was at MS in the early 80's. A start-up Microsoft is alot different than a mature Microsoft. The innovation and energy in the 80's just isn't there any more. What I don't understand is why current MS employees stay there and just complain all of the time. The stock sucks - why are you still there? Benefits have been cut. Hey - they don't even supply towels any more. So cut the crap and just send me your resume and I'll hook you up with a dynamic innovative company where you will be energized each day.

Opportunity doesn't start with an M. smr888@earthlink.net

garote said...

Come work for Apple. Peer-reviewed, peer-INTERviewed. Fast moving, well-designed product pipeline.

Anonymous said...

this last august, I took all of my accrued (and subject to forfit) vacation and decided not to return to MSFT afterwards. One of the best decisions I could have made. I found a job market hungry for my experience and ready to reward me at a rate I'd have waited another 4 years or so (if historical compensation models held true there). I feel as if I just finished grad school and found out that its not like the ivory tower. THANK YOU FOR ALL THE POSTS!!! I'm not alone.

DAMIAN AIDAROOS said...

Off the hook!! Can u tell me how u got an archieve for every month? I got stuck with september and everything I posted since then aint coming on my blog! thnx

Anonymous said...

I wonder how any of you are MS employees and not just MS bashers. I'm an MS employee of over 10 years. Here are some of the problems...

Morale is low. Why?

1 - Too many middle management refugee's from IBM. Why did we hire these incompetent castoff's from the company we all used to laugh about?

2 - The stock performance sucks. Too much in the market. Use about $20 Billion and buy it back.

3 - Quit shipping jobs to India. Not just support jobs are going to India. There is a large development center in Hyderabad.

4 - ...

This list could go on for days. Yes...MS has grown fat and clumsy. It was once a great company. Now it's an overindulged shadow of itself.

I used to love coming to work everyday. I've hated it now for years. And I make a 6 figure salary. Guess it just goes to prove there's more to happiness than just money.

BTW...yes...there has always been a stack ranking. Doesn't mean it's right.

Anonymous said...

As an X Softie, I know the frustration of working there. But you know what the real problem at MS is? It grew too fast and a lot of that dead would that should have been trimmed off got promoted to positions that they can't handle. So they surround themselves with the weakest people and remove the high performers so they don't look bad.

I have never gotten a review with a level below 4.0 in my entire career. I worked in the Medical Device indsutry, consumer products, pharmaceuticals just to name a few. I did not apply for a job at MS, someone at MS heard about me and I was contacted constantly to come work on a very specific project. Finally after months of a debate over salery, I was hired. I came in and fixed a major problem for the company, while saving millions of dollars in operating expenses. Suddenly I'm handed off to an ID-TEN-T Manager. This person felt threatened by me because I gave some very negative manager feedback so this person decided to give me a 2.5 and try to fire me.

Meanwhile this manager would not allow me to make a business change because of their personal relationship with a vendor. This change would have saved millions of dollars for the company, yet they would not allow me to make the change because they had made personal committments to people at a particular company.

So guess what I did? I got a job that gave me a 45% increase in pay and I left. The funny thing is, the good people will move on and find something else and then at the end of the day when BillG is done w/ the company, you are going to have a rather large company with a bunch of really piss poor managers there.

If I ever ran a company, I would want 80% of my staff to be 4 or 5 and 20% would be 3's. I would want a higher caliber person that would not require a manager. For some silly reason, most companies have not figured this out. Why would you want the majority of yoru work force to be middle of the road employees? Makes ZERO sense. So, just my two cents from the other side of the fence. Hope everyone is well in Seattle.

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Anonymous said...

...frustrating (3) people in my group(who were really really good---like scary smart/geniuses just packed up thier offices, and we watched them leave.

2 are now working for google, the other for apple. Frustrating, sad, as we the devs watch the iceberg hit just a few years ago... (or did we hit the iceberg) enter Celine Dion..

I lov ED this Company, but apathy has truely sit into the bowels of Very bright R&D team

Anonymous said...

If you hate it, get out. But telling your immensely wealthy bosses that change is needed? Please. They're laughing at you, if they think of you at all.

Harsh, but there's something to it. Any company this size operates as a kind of pyramid scheme. Do the math. If you did something which caused the stock to go up x%, how much would you make? How much would a senior executive make? If the latter has 100 times as much stock than you, then he benefits 100 times as much from your work than you do, even if he has nothing to do with it.

You might argue that if you actually did something that had an attributable positive impact on the stock that you'd be rewarded heavily by the company, making your work with it. But that's not necessarily true, because there are likely plenty of middle managers poised to take most of the credit from you anyway.

I know some extremly bright employees who left the compnay for smaller companies because they felt that nothing they could do---good or bad---would have any effect on MS's overall success. Let's face it, the stock price is all based on how many copies of Windows and Office OEMs can sell, and it's totally impossible to attribute credit or blame for that with any granularity.