Thursday, July 19, 2012

Microsoft FY12Q4 Results - Plus That Lost Decade Thing

Quarterly results time, quarterly post time.
What kind of questions do you have the financials and what's ahead for Microsoft?
For me: first of all, that damn browser is at again. If billions of dollars go towards amending IE then that pretty much undoes all the good work that Sinofsky has been weaving. Post consent-decree, there is a certain amount of swaggering happening on the old SafeCo campus. Oy.

  • Financial impact of the Browser Choice Screen screw-up?
  • Sure enough, the exclusion of being able to install an alternative browser on Win8 RT (a very purposeful name) is getting anti-trust attention.
Other items in motion:
  • Okay, so much for all that cash spent on aQuantive. How do the other acquisition investments shape up?
  • Expected Surface unit sells in next year? Availability? (And if you've used Win8 on ARM, which are the preferred deities we should be praying to make it actually fast and fluid?)
  • Poor Nokia.

Microsoft's Lost Decade. So, you know, that happened.
SteveB has often remarked on how he ignores the stock price of Microsoft and doesn't know what it takes to move it upward. Those financial types are just too darn inscrutable. He just focuses on doing his job. The stock has been flat and Microsoft Millionaire phenomena is a distant memory. It's a historical mind-trip to read a book like Microsoft in the Mirror and discover that most Microsofties then were hesitant to admit they worked at Microsoft, out of the resulting discomfort of everyone expecting them to be rich. Oh, to have such an awkward problem like that.
While Microsoft is on the edge of rolling success after success (financial and technical) in Windows 8, Office 15, Windows Phone 8 (yeah yeah), and Xbox, there's a level of white-washing to emphatically focus on what we currently have, despite ourselves. Vista happened. Kin happened. Billions have been sunk into the success that is Xbox, including funding the fall-out of a rushed technical designs. aQuantive happened. Six billion dollars in shareholder value gone "poof!" without so much a "ta-da!" And now it appears the EU has the opportunity to return to the Microsoft ATM for millions or billions of USD due to the browser choice screen mysteriously disappearing from Win7 SP1. I guess the testers were too busy fixing their cranky automation to notice.
I thought perhaps this year's SteveB Company Meeting "YEAAAAAH!!!" victory dance song should be I'm Still Standing but now maybe Oops, I Did it Again is more appropriate. With you know, a little pinky pointed to the corner of the mouth.
Vanity Fair has been making news with their Lost Decade piece. I really hoped to find something new and salacious, but it wasn't much more than what you'd find written here between the posts and the many passionate, thoughtful comments from smart, good-looking people like you. Perhaps post-article the author Kurt Eichenwald will get some good insider loving and have a more revealing follow-up.
Stack ranking comes up as one of the reasons Microsoft does so poorly due to the internal competition and lack of cooperation it inspires, impacting strategy and results. Remember the org-chart cartoon from earlier? Microsoft was depicted as hierarchical organizations with handguns pointed at one another. Reality? Myth? Culture. Like some low-brow Ferrengi scavenger, leadership adopted stack ranking without really trying to think through their own system or realize that stack ranking is meant for organizations in transition (layoffs / downsizing) vs. a constant twice-a-year grind that goes on and on and on. Snippet from the above link:
The biggest mistake is to use it forever.
"If you're going to do forced ranking, look at it as a short-term, three-five year thing. Do it annually but don't do it forever. By the end of four or five years, you've gotten all the value," he says.
Microsoft's particular implementation of stack ranking has been used—and under fire—for way more than five years. In 2005, HR grad student Stephen Gall published a scathing paper on it for Walden University.
Just when we finish the annual review and calibration, it's time to update your commitments. And then it's mid-year check-in, followed by annual again. It's a hamster wheel spinning above sulfur-enriched coals. I don't know about you, but my annual assessment, if printed before I provided any of my comments, would go on for six pages. Six pages of detailed commitments. WTF is all I can say to the detailed craziness our review system has evolved into.
The stakes behind our stack ranking changed radically with the last year's iteration. In one way, it's good: we're just talking about results. What did the person do? What did they accomplish? Then comes ordering people and goodness-forbid if you've gotten promoted recently because most likely it's congratulations and welcome to the bottom of the barrel. And it certainly does re-enforce the Peter Principle where you have people - very valued people - reach the peak of their career (usually a high place) and they discover the plateau can be a dispiriting place.
Why does this matter? A healthy, dynamic company needs talented employees (and most everyone has talent to some degree, not just the 1s and 2s) to be able to flow around the company based on opportunity and need. What you end up with are the 1s and 2s being easily mobile, the 3s having some potential, and the 4s and 5s being locked out of groups being interested in them unless you have a very enlightened (or desperate) hiring manager. So what did you just do? Made it so that the people on top are the ones that can leave your org and everyone else is sort of stuck and disillusioned.
Goldstars might be gone, but in its place we now have the 1* review ranking for the top of the top (so yes, it's really 1*, 1, 2, 3, 4, 5). It is a superstar culture, or at least a One-Star culture. We continue to celebrate the hero contributor, and team work is left for a poll question.
And do savvy people try to game the system? Of course they do, except that it's called adjusting to the reality of the situation. I know reports that chat up their Aunt and Uncles (peers to their manager) when they have good news to share about themselves. I know backstabbers. And I know exceptionally naive backstabbers who for some reason think fragging their manager will help their career out, which perplexes me to no end especially when the manager has been their champion and their report doesn't even understand what their manager does. And now I've got a broken trust relationship.
I'd love to know what new system LisaB came up with. I think it deserves to be revealed. Rumor is that she pushed this with Ballmer and there was no way he was going to let go of Neutron Jack's stack ranking. And after that supposed loss, LisaB sort of disengaged. Is she really the most universally hated executive? I don't know about that, but she certainly slipped away from being loved. Thousands of employees used to cheer for her. Now?
There's a thought-exercise being spread out over the past year that getting a 3 is like getting an A. That a 3 is good. Yeah, that's the ticket. Problem is, 2 is better and 1 is way better, and that 3 comes with a message that your peers are better than you. Well, your results. So the first question everyone is going to ask is, what does it take to get a 2 or a 1? One thing the Vanity Fair article touched on is, post stock options being the path to riches and reward, everyone is focused on getting a good review. I'd say beyond that, you have people at the top of Principal doing what it takes to make Partner. You see some pretty odd short-term crap happening out of L67 individuals desperate to break through, sometimes to the detriment of the product and group.
And I don't see an end in sight. It's going to take Ballmer leaving for a new review system to have a chance. In the meantime, we're comforted by "well, other companies do it, too" - like that class of excuse works for every teenager in the world. Microsoft is unique, and its employee experience should be unique and enriching, both for the bank account and for the people we hire and that we should continue to grow and enlighten.
And yes, if you don't like it, you can turn in that blue badge and hit the road. For those of you who have and have a review system that you like far better, I'd love to hear (well, read) your perspective.

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