Why Microsodt started loosing its talented people?

Became larger organization with more beuricracy and this narrowed fown the innnovation and creativity within the business. Microsoft attained leadership positions in the IT market by hiring the best and brightest talent available, providing substantial resources, and allowing them the freedom to innovate in an organizational culture that prized the development of cutting edge technologies. For example, both Google and Yahoo are currently expanding their research and development activities, and Google alone has hired over 100 former Microsoft employees. According to various industry observers, Google is now the first choice among computer science students as the employer of choice (Greene, 2005). Several universities with high profile technology programs also report similar results. These individuals (the best and the brightest) are very astute, very knowledgeable of new, emerging technologies and new product development by various high-tech organizations, and want to work in an environment where personal and financial rewards are the greatest. They want a sense of excitement in their tasks and activities, and are both collaborative and competitive in their quest to be at the forefront of technological innovationUnfortunately for Microsoft, the perception among individuals in the high-tech community in general is that technology and new product development at Microsoft is old hat, and the technology forefront is now at firms such as Google, Yahoo, new internet startups, and firms in other countries such as India and China. Propagation of this perception poses a challenge for Microsoft management in its attempt to hire the type of software engineers and researchers necessary for innovation and development of new products, and enhancement of the firms competitive leadership in the domestic and international marketplace. The increased bureaucracy has weakened the perception that Microsoft is the leading firm in developing revolutionary technologies and fostered the perception that the driving force behind new innovations are topdown rather than bottomup, or a combination thereof. Many Microsofties feel that the company is more interested in maintenance of existing operations and upgrading of current products rather than the development of new, cutting-edge technologies and applicationsMorale at Microsoft, once considered one of the pillars of its success, also seems to be

demoralizing many of the top software engineers and researchers as well as others in the organization. THE MICROSOFT COMPENSATION PHILOSOPHY In order to understand a Microsoft offer, you need to first understand the Microsoft philosophy on compensation. Microsoft is a very performance-driven culture. High levels of commitment and effort are encouraged in every way possible. Peer pressure seems to be the most effective means, but the compensation package is also very effective. The philosophy is to give a very low base salary (generally 25-40% below market), and then supplement the salary with stock and cash bonuses which are a function of performance. While many companies do this to a limited degree, this is the central theme in the Microsoft compensation package. The problem with this philosophy, of course, is that the base salary may be far out of sync with the candidates current salary package. So the challenge becomes finding a way to get people to take what appears to be a significant reduction in compensation. Thats why the negotiation training is so important for the recruiters. The recruiters spend literally hours explaining the intangibles of working for Microsoft, and how the long-term value of even a small number of options can have dramatic upside potential. However, for most experienced candidates, the delta is simply too big, and in order to address this, Microsoft offers a starting bonus, which is calculated to fill most of the difference between your current salary and your first year Microsoft salary. How effective are Microsofts human resources policies and practices? Microsoft pursued human resources policies and practices that would address the critical psychological states, namely, experienced meaningfulness, experienced responsibility, and knowledge of results, of its employees. By doing so, they aimed high internal work motivation, high work performance and high satisfaction on the job. Microsoft hired people with already high growth need. They were newly college graduates with high motivation seeking self-achievement. Microsoft also hired those who are going to be good Microsoft people, so people could work with others who were like them, which would lessen personal conflicts. Once hired, people began to work in an atmosphere they were familiar with. They worked in the campus and had their meals at the cafeterias where the food was subsidized, which increased social interaction. They could also decorate their own offices according to their likings. In addition to these, Microsoft provided a vision shared by all

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employees, which gave the employees a sense of meaning of what they were doing. This vision also signified the employees tasks as they perceived the impact of their jobs and felt like they were changing the world. It also created natural work units consisting of 30 to 200 people, which again were divided into work groups. This clarified the task identity and task significance for the employees. Microsoft gave autonomy to these work groups, so that they could decide when to start to work or when to play volleyball. Horizontal transfers helped personal growth through job switching. Key people were allocated from one project to another which accelerated training and development process by increasing skill variety. The employees were not discouraged by the fear of failure since in the organizational culture of Microsoft, failure was considered as a part of learning curve. Even the brutal criticisms by Bill Gates became a source of motivation...

1)

Once hired, why do people work so hard at Microsoft? What motivates them? Answer: First, the culture of Microsoft. As the vision Gates mentioned: a computer on every desk in every home, running on Microsoft software, spirited many young to work hard. Second, rigorous and firm recruiting policy and process. As Ballmer said, We want people who are smart, who work hard, and who get things done. Third, Challenging work assignments and tasks. Microsoft believed that individuals were best developed through challenging and engaging work assignments. Forth, the policy of motivation and retention. Microsoft developed a good performance evaluation procedure inside of company and gave high salary and long-term stock option incentive.

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2) As of 1999, does Microsoft have a problem? Is the rising senior management turnover inevitable? Is it manageable? What recommendations would you make to Steve Ballmer & Bill Gates? Answer: Basically, Microsoft experienced a transit from a small company to a giant in the software industry. So many practices that implemented well in past can not be effective in the new situation. Of course, the rising senior management turnover can be controlled and managed if Microsoft can develop the management capacity well when it demands more leaders with growth. It means, when the company have 20,000 people, it still can transit its core norms and values clearly to its employees and keep them motivated and work hard. It is difficult, but some ways can be tried. First, Picking up managers and leaders from inside of company. They really understand what the employees want. Second, changing the organizational structure to avoid bureaucracy and ensure an open, quick communication environment. Third, providing the multiple benefit plan to employees to create a comfortable work environment. Forth, continue to encourage the innovation and challenging tasks. also make a point to retain their employees through competitive pay, generous stock options, and engaging work environment. Engineers see working at Microsoft as a status symbol, similar to being accepted at an Ivy League college. Developing software is much like being an artist, you take an idea or concept and turn that into something concrete, similar to a painting.

Recruitment and Selection: Attracting the Best and the Brightest Beginning from its initial days, Microsoft has believed in recruiting extremely intelligent staff, favouring intelligence over experience. Co founders Bill Gates and Paul Allen shared a preference22 for hiring

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extremely intelligent, not23 necessarily experienced, new college graduates dated from Microsofts startup days. Microsofts recruitment strategies reflect their philosophy Microsoft is an aggressive recruiter and is often the first24 company to offer jobs to elite graduates at campuses and career fairs across the world. At the beginning, the recruitment strategies at Microsoft included sourcing people from the elite educational facilities such as Harvard, Yale, MIT, CarnegieMelon and Stanford. Microsoft recruiters would visit these universities in search of the most brilliant, driven students. Experience was not required and it was in fact, preferred that new employees had no experience. The selected recruits would undergo a selection process which was focussed more on problem solving and thoughtprocess & composuretesting exercises rather than the actual technical interviews. This interviewing process was seen as one which would push the interviewees to the limit of their creative and analytic abilities rather than their familiarity with a computer programming language. The importance of hiring the right people is also shown in Microsofts n minus 1 strategy which means less people are employed than are required. This policy reinforces that hiring the right people is more important than hiring just to fill a position. Microsoft retains the same basic principles as they have expanded but had to change their methods when the number of new employees required could no longer be sourced only from universities. The recruiting practices continue to be active rather than passive, with Microsoft head hunting the best staff. These staff are found, monitored and recruited from other companies by over 300 recruiting experts. These staffs actively recruit suitable employees and focus on the right type of person rather than the right type of skill level Microsoft uses human resources for competitive advantage, basing its success on having the very best people in the industry and inspiring them to be the best. It is this that leads to Microsofts unique recruitment practices. What is most crucial here is that Microsofts recruitment practices meet its human resource needs. It is an important sign of the focused approach of Microsoft, with its actions always leading towards its ultimate goals. Some important factors to be considered in recruiting staff include that the recruiter should be from the same functional area and that candidates should not be deceived about the negative elements of a job. The interview process at Microsoft reflects this with the new employee being interviewed by the manager. The recruitment process also goes further than just informing the employee about the negative aspects, instead the recruitment process actually tests the employee on the negative26 aspects, putting them under the same type of pressure they would be put under on the job.

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Employee Motivation The key to supporting the motivation of your employee is to understand what motivates each of them. While the recruitment and selection process at Microsoft aims to employ people who will be motivated by the environment they are provided, the HR department at Microsoft takes great care to understand such needs and try fulfilling them for the employees. Opportunity and environment to allow the employees to progress and self develop is a part of the work culture that the HR staff is expected to adhere to. The fit between employee and organization is important to motivation and this is what Microsoft ensures. Microsoft ensures that the goals of the organization are understood via its strong culture and by employees being clearly aware of what is required of them. Motivation can be described as providing a work environment in which individual needs become satisfied through efforts that also serve organizational objectives. Microsoft achieves this by incorporating their goals into their human resource management programs. The people recruited and the systems within the organization all serve to motivate the type of people that Microsoft values. Employee motivation can also be related to Maslows hierarchy of needs theory. This theory has the top level of the needs theory as self actualization28 needs, which is a person`s need to be selffulfilled. Maslow describes that the way to achieve this is to provide people with opportunities to grow, be creative, and acquire training for challenging assignments and advancement.This is exactly what Microsoft provides for its staff and also exactly what it expects, for them to be the very best they can be. The link can also be seen here between the type of people that are employed and what is expected. Microsoft hires the very best people, for these people to achieve selfactualization they need to be pushed harder than most and given greater opportunity to achieve than most. Employee Satisfaction and Loyalty Microsoft attempts to cater to the needs of its employees by recognizing that the majority workforce comprises fresh graduates just out of college. This is the premise behind Microsoft setting up its offices as campuses rather than plain workspace and parking space setting that was the norm before Microsoft. The environment it provides also includes every employee being free to decorate their office as they please; and the provision of subsidized food and drink.

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Employee satisfaction was also afforded by the opportunity for growth, development also occurred by encouraging horizontal transfers, and employees were encouraged to develop themselves by switching jobs. Top management is required to coach30 lower levels and assisting in their development. These practices are designed to increase employee satisfaction and commitment to the organization, while maintaining the same spirit the small company began with. This program, which was initiated during the early 1990s during the recession, also became known as turning over the keys. The premise at that time was to retain the talented employees and keep them motivated by offering them new areas of learning and self development. In the hindsight, however, this was a unique exercise of employee empowerment and succession planning, where the mentor would teach the protg the skills and fineries of a position before moving on to the next position and leaving a worthy successor. For many organizations, empowering employees is seen as a relatively new approach to handling and motivating employees one which requires gradual changes to the corporate government and the work culture. However, in case of Microsoft, it can be seen as an inverted view wherein the idea of employee empowerment was an inherently intrinsic part of the work culture since its inception. Three aspects of tasks that affect job satisfaction are job complexity, degree of physical strain and perceived value of the task. Microsoft manages31 this by providing the high complexity high achievers require and by ensuring the perceived value of the task is high. This high value is communicated via the highachieving culture the company maintains. This issue can also be looked at in terms of an employees role. There are three factors associated with roles role ambiguity, role conflict and role overload. Role ambiguity is kept low by Microsoft because of the consistency in the culture and in what is required; role conflict is also kept low due to clear goals and objectives; Role overload is kept high, with employees pushed to their limits. In most organizations this would be a concern, but Microsofts awareness of this means that they specifically seek employees who will react well with role overload. jobs and felt like they were changing the world. It also created natural work units consisting of 30 to 200 people, which again were divided into work groups. This clarified the task identity and task significance for the employees. Microsoft gave autonomy to these work groups, so that they could decide when to start to work or when to play volleyball. Horizontal transfers helped personal growth through job switching. Key people were allocated from one project to another which

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accelerated training and development process by increasing skill variety. The employees were not discouraged by the fear of failure since in the organizational culture of Microsoft, failure was considered as a part of learning curve. Even the brutal criticisms by Bill Gates became a source of motivation... Employee Rewards: As an organization, Microsoft still follows the firm belief of its followers in linking employee ownership with employee motivation and retention. Critical to this is the link between individual performance and reward, with semiannual performance reviews linked to pay increases, bonus awards and stock options. The formal32 review system also includes more common evaluations by managers to ensure no unexpected deviations. The system also includes the process of employees evaluating themselves, these selfevaluations then being sent to the manager who does their own evaluation. The employee and manager then meet to discuss the review. In terms of performance, employees are measured against specific measurable goals, usually termed as SMART goalsunder Organizational Behaviour Terminology Specific, Measurable, Attainable, Results based, and Timebound. Stock options awards are based on whether the employee is considered a longterm asset of the company and awarded on this basis. This is an important symbol of Microsofts commitment to retaining good employees. In Ideas That Will Shape the Future of Management Practice (Bohl, Luthans, Hodgetts & Slocum) human resources is described as being the way of the future with it being argued that we will see a more mature articulation of the importance of people as a firms only sustainable competitive advantage. The change is described as giving high reward for high performance with the focus on a partnership. Microsoft recognizes the importance of its people and this is reflected in the reward systems, in the sense that not only current achievements are rewarded but also rewarded are stocks to those employees that are seen as valuable future assets of the company. This can be seen as a prime example of the focus on a partnership that Microsoft aims to foster with its employees. Important to the reward system is also the fact that there are two reward paths available, one for those following the technical path and one for those following the management path. The skills of employees can be divided into three areas: conceptual skills, human skills and

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technical skills. Typically, conceptual skills become more required and technical skills less required as one moves up the corporate ladder. Microsoft is a company valuing technical skills, due to the nature of its product. In most organizations, employees with conceptual skills would be rewarded by moving up the corporate ladder, while those with technical skills would not advance. Microsoft, however, offers two advancement paths allowing those with technical skills to advance as technical experts, just as those with conceptual skills advance as managers. Reward systems are an important part of organizational culture; they communicate to employees what is valued by the organization (Robbins, Bergman & Stagg 84). By having these two reward systems, Microsoft effectively communicates that both sets of skills are valued. This is also an important sign of Microsofts consistency. They recruit people for technical ability and so not rewarding for it would be dissatisfying to employees.

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