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Microsoft: Competing on Talent Essay

In 1999, a front page Wall Street Journal article was attracting attention with a headline “As Microsoft Matures, Some Top Talent Chooses to Go off Line.” It was a question taken very seriously by Gates and Ballmer who understood that company’s enormous success was largely due to its ability to recruit, motivate, and retain extraordinary talent. This article explores the HR philosophies, policies, and practice in 1980s and examines how the policies were managed in 1990s.

Microsoft through the 1990s

* Recruiting: Attracting the Best and Brightest * Bill Gates preference: intelligent, not necessarily experienced, new college graduates, smarts, get things done. * Recruit from elite educational institutions, made visits to schools to search the most brilliant and driven students * An intense interview process, which interviewed by at least 3-10 employees * Microsoft’s tight control on headcount further reinforced the pressure, philosophy was “n–1” * Microsoft’s Work Environment: The Caffeine Culture

* Hard work environment, kept strange hours, consumed cases of Coke, and occasionally slept on the office floor * Comfortable work environment was recognized as being essential to morale and mental health * But some eventually became worn down by the demanding pace, and burnout was as continual concern * Gates keep alive the feeling of a small company by restructured the organizations into small units * Development through Stretch and Challenge

* Strong belief that such individuals were best developed through challenging and engaging work assignments * Limited educational and training, because primarily recruited technical experts some would not be effective managers * Development by horizontal transfers and personal mentoring * “Ladder levels” established to assist managers in recruiting developers and in offering salaries based on skill level * Review and Reward: The Options-Driven Engine

* Gates’ belief: employee ownership raised motivation and retention, key employees were given equity * Linkage between individual performance and reward, acronym SMART was applied * The semi-annual review, learning from mistakes, a forced evaluation curve tied to a 1–5 performance scale * Salaries were set at the 50th percentile, merit increases awarded on the basis present skills Microsoft through the 1990s

Sales already exceeded $1 billion, the number of employees moved over the 5,000 mark, and no longer the small company * Recruiting in the 90s * Gates and Ballmer preserve their general recruiting principles, still followed the rigorous interviewing practice * A full-time team of 35 managed recruiting activities, recruiting was still a responsibility of everyone in organizations * Rapid growth outpaced its ability to recruit from college campus, attracting experienced from within the industry * In 1999, Microsoft earned a place on Fortune’s elite list of World’s Most Admired Companies * Managing Culture in the 90s

* In the 1990s, Gates concerned that it was losing some values and spirit that had made it successful * In early 1990s, they had begun using employee surveys to quantify employee attitudes * Big retention problems: attrition rate was 7.6% in 1997, and 7% in 1998, below the industry rate 15.3% * Facing this problem, Ballmer proposed two priorities: change company’s vision and develop capable leaders * Development in the 90s

* Lack of capable managers and leaders as they recruit brilliant technical people * “Bench Program” initiatives, to identify future leader then try to find specific ways to help them grow, not effective * Develop “key people review” approach, to identify potential people * Highest potential list was segmented into 3 waves: near-term VP, functional leadership and young high potential * Review and Reward in the 90s

* Developed “competency model” with 6 “success factors”: taking a long-term approach to people and technology, getting results, individual excellence, a passion for products and technology, customer feedback, and teamwork * Developed 29 individual competencies, brings greater clarity and consistency to many of its people processes * Increase the target level for base pay from the 50th percentile to the 65th percentile Protecting the Past, Building the Future

* Dilemma facing management: how to protect the HR policies and practices, while adapting to the new business reality * Ballmer proposing a balance of life and work, but eliminate the pressure-cooker environment * In fact, turnover running at half industry norms and the company received 15,000 job applications a month


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