Recently Vanity Fair writer Ken Eichenwald, wrote a fairly scathing article about the Microsoft bureaucracy and the current review system.  It discussed the Microsoft failures through the course of the Steve Ballmer led regime.  It’s a fairly decent article however I think somethings simplify the reasons for the problems Microsoft has had post – Bill Gates.  The article makes some good observations but is fairly short in retrospect and I think misses some key points.  I wrote a little about this last October in my blog post “The Walking Dead” . It’s been nearly three years since my departure from Microsoft, but since I live near Redmond and still have friends there I hear plenty about the mood and spirits of people come review time.  I will agree with Vanity Fair that the system is pretty hurtful to the company.  It was a long time coming so let’s get my take on this controversial system.

Mr Eichenwald was also on CBS Morning with Charlie Rose and company discussing his column.  One thing he got right and definitely had done his homework was where did this all begin?  It really began following the DOJ trial when Steve Balmer took over the reigns as CEO of the company.  AT the time Microsoft was struggling with growth as it had exceeded 20,000 employees and was seeing the first signs of bureaucracy creep into the corporate culture.  Steve had met and gotten to know GE CEO Jack Welch and got enamored with how Jack managed GE, a very large company.  The GE mindset was the bottom ten percent of employee performers would be better served by being let go than hanging on and collecting a paycheck at GE.  Even then though I thought a lot of the GE principles though nice would not seem relevant to a technology company.  The GE model was basically manage a portfolio of separate companies.  Bill Gates vision of integrated innovation went against that model as that requires cross organizational collaboration.  In my honest opinion it is very difficult to take models that were successful in one industry and try to apply them in another.  In technology where things move at an electric pace the result has been to make Microsoft into a very slow-moving company, which has been partly responsible for it being late to market time and time again.

The second thing is though Steve was looking at GE’s model over a decade ago the idea of stack ranking actually is fairly new.  Though it was there when I was let go, the hard lined 1-5 system of ranking employees was not implemented until after I was gone in early 2010. Prior to that there was a system of “exceeded expectations”, “met expectations” and “under performed”. However I never heard of any type of mandate where you must give x percent a high mark and x percent a low mark.  The current system essentially tells every group that there will be winner and losers.  In talking with many people at Microsoft, you almost do not want to work for a high performing group.  For example a group like XBox may seem cool, but since they are on a role, you could do outstanding work and exceed all your metrics, but if you are still less than your co-workers  (or at least perceived to be by your manager), you could get a review score of 5.  This means as HR begins to analyze who needs to be let go on the next round of layoffs (150 were laid off this past week at Microsoft), you already have one foot out the door.  No severance package either, why should you get one?  You area poor performer, your review says so.

This led to my next point which is Microsoft moral.  Given all the recent Windows 8, tablet, smartphone, etc..moral should be sky-high.  However it is not.  Part is unrelated to the review system.  The fact is Microsoft is no longer a young company and with age comes the trial and responsibilities of life.  Marriages, children, divorce, death, financial ups and downs, in short a lot of pressure.  That being said the work environment is no safe haven from those outside responsibilities.  You could probably argue it is only making things worse.  My wife is angry at me,my boss is putting pressure on me to out perform, and my co-worker who I like is also my competitor to keep my job.    No wonder people are not happy.

Finally the question is why? As stated earlier the GE (Jack Welch) mindset was the bottom 10% need to go.  For the companies benefit and for the benefit for the employee. An understandable concept, but I think a bit flawed.   A lot of people who I witnessed get let go were loyal and fanatical supporters of Microsoft products and Microsoft the company.  However that loyalty was not of value to the company.  No longer could you come to work and do the best you can and be happy.  You needed to aspire to go higher otherwise your worth was just not that great.  Plus every manager needs to give a 4 or 5 so after a while if you are in the same role your turn comes up.   I view some of these people as the core of what made Microsoft a great place to work. Their enthusiasm put a smile on people’s face.  Maybe I am a simpleton in my views, but smiles are better than placing fear in people’s hearts.

In the long run I don’t think the kind of culture being created at Microsoft is healthy nor can it succeed.  It will reduce the talent pool to a very specific type of individual who has the political chops to survive.  To those who are driven more by the process of success as an individual rather than as a company (former Sr Exec Bob Muglia mentioned this in his farewell email).  In many ways operating more like a military organization (which in many industries can be a successful model). But the technology world is driven by dedication and inspiration.  To not accept today, but to create tomorrow.  To look not towards the next year but to envision life in the next decade.  In many ways what is done in technology originates in man kinds dreams for the future and as the future evolves those dreams begin to take shape.  Science than leads us to a new frontier.  As George Bernard Shaw once said, “Some people see things as they are and ask why?  I dream of things that never were and ask, why not?”.  Microsoft needs to loosen up a bit and begin to envision the dream of the future, otherwise it will be a relic of the past.  In order to do that  people need to feel valued and liked. Today when I visit campus everyone seems to be looking over their shoulder, in some sort of paranoid state of mind. People are your most valued asset.  Treat them well.  You cannot innovate and lead without them.

Good Night and Good Luck

Hans Henrik Hoffmann July 14, 2012