Microsoft's success: Corporate strategy and human resources strategy
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Organizations can be simply defined as two or more people working co-operatively to achieve a common goal or set of goals. In this definition we can highlighted four essential elements that need to be existed to become an organization, those are people, location, activity and co-operation. Based on that above facts we can redefined the meaning of organization as social systems of co-operation that have been designed to develop individual effort aimed at goal achievement (Fox.W, 2006). This design of an organization is a means to accomplishing the organization's overall goal and the structure is not an end in itself. In systems theory terms, the design ensures that the appropriate inputs go through the necessary processes to produce the required outputs to produce the intended outcomes. During the process human involvement is very important in terms of managing the resources available in the organization. HR function involved management of all the people in the organization towards achieving organizational goals. Therefore we can define human resource management as part of management that specialises in the management of people in work organisations (Bratton & Gold 1999). As defined by Torrington, Hall & Taylor human resouce managemnt concerned with meeting four distinct sets of organizational objectives: staffing, performance, change management and administration.
Introduction of the case company
Microsoft Corporation is the giant in the software development industry in the world, develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing. Headquarters are located in USA. Bill gates and Paul Allen are the core founders of Microsoft Corporation. The company has five business unites to serve their customer based in all around the world. At Microsoft, the mission and values are to help people and businesses throughout the world realize their full potential. The main reason of selecting the Microsoft as the case company for this report is because capabilities, skills, knowledge etc of human resource of the company decides how effectively company achieve its objectives. Therefore from the company's view point strong human resource function is essential for the company's success.
This report has been addressed the human resource practices of Microsoft Corporation. There are no universal set practices which every organization follows in their human resource management function. Instead each and every organization has tailored their best fit model for HRM function in the organization.
Necessity for alignment between organizational corporate strategy and objectives with HR strategy
Current business environmental forces such as competition, innovation, globalization, technological advancement etc has created major impact on organizational behavior. These changes come in different forms. Sometimes it required to reorganize the structure of the organization and due to this organization may have to introduce new roles and new people. Sometimes it may require to change the culture of the organization. In all these situations HRM function plays a major role. Further recent development of new concepts such as knowledge workers has increased the complexity of HRM function. Nowadays HR has become strategic assets for organizations. From Microsoft's view point intellectual property that is knowledge of the software developers is crucial for their business than the physical asset of the company. This importance has heightened due to the transition of old economic conditions to knowledge based economy where it considers the intellectual property as one of key success factors of the organization. The impact of globalization and the technological advancements were the main contributing factors towards the above transformation.
As a result of the above transformation in the business environment strategic importance of the human resource function has increased in the current business environment. Therefore HRM function can be interpreted as strategic human resource management as well which is known as general approach to the strategic management of human resources in accordance with the intentions of the organization on the future direction where it wants to take. In other words human resources strategies need to be aligned to the corporate strategy of the particular organization. Strategic HRM has evolved based on human resource management principles incorporating the concept of strategy. So if HRM is a coherent approach to the management of people, then the strategic HRM now provide an idea which is done on a planned way that integrates organizational objectives with policies and action sequences. Corporate strategy of the organization is established based on the mission of the organization and later it has been cascade down in to lower level strategies such as business strategies and functional strategies. Therefore effectiveness of achieving the ultimate corporate strategy is depends on how successful in achieving the business and functional strategies of the organization. Therefore one of the driving factors behind the above achievement is the quality of the human capital within the organization. Therefore objective of human resources strategy should be based on company's objectives and it competent enough to achieve them.
Microsoft's success in aligning corporate strategy and human resources strategy
Resource based view of strategy explains when developing competitive strategy firm primarily in the application of the bundle of valuable resources at the firm. In other words it is an inside - out approach to develop a successful strategy to achieve the competitive advantage. As per the VRIO model of resource based view explains valuable, rare, less imitable and organization embedded resource help to develop a successful strategy for the company. In the majority of organizations people factor are now the biggest asset and when it comes to Microsoft they have differentiated themselves from the other players through following effective HRM strategies in the company. Because of this reason Microsoft always tend to recruit the best people in the market to introduce the best product to the software market. Microsoft's mission is to help people and business throughout in the world to realize their full potential. Their corporate strategy is to develop software to bring these objectives realistic. Therefore people factor of the organization plays the biggest input for that strategy. The knowledge, skills and abilities have helped them to differentiate themselves from the rivals to create value. Therefore HRM function does a major contribution in strategy development. As a result we can say that alignment between corporate strategy and human resource strategy is crucial in achieving organizational objectives.
The company believes that its five business divisions of windows and windows live division, server and tools, online service division, Microsoft business division and entertainment and device division offer the greatest potential to satisfy their customers. Therefore the company's corporate strategy is decided based on the mission and values of the company and their business strategies have been cascaded down through the five business unites mentioned above. Therefore when deciding human resource strategies such as recruiting and selection, motivation, retention, training and development etc. they are always consider what the company's expectations in delivering the service to the customer. As an example they invest enormous amount of money on training and development because they expect their employees are constantly update with the business environment which is ultimately help the company to update and improve their product with the changes in the technologies. Further detailed analysis of the human resource functions will be addressed in this report later section. Therefore, we can say that the company maintains a strong link between corporate strategy and the human resource strategies in their operation.
Changes that the organisation would need to make to its HRM if confront by mergers, acquisitions, strategic alliances or joint ventures.
Microsoft's biggest value is derived from its software developer's function and all other functions are linked to add further value to the above. As per the porters value chain analysis that acts as their one of major primary activity in the operation. As a secondary activity human resource function adds a major contribution to its successful. The company's that function is currently operated in centrally. However, through a merger, acquisitions, strategic alliances with another software development company will get an opportunity to access to further labour resources. Especially new markets well known for IT sector markets India, Singapore, China etc are the few opportunities available for them. As a result of this company will be able to expand their recruitment opportunities and will be able to select best from the world. However, HRM function should be able relook their other function such as training and development, performance evaluation, communication etc from the cross cultural perspective. As an example company may have to focus on increasing other skills such as communication and social skills even though those people possess high technical knowledge. Further, induction process is very important in this type of business expansion to bring new people under Microsoft culture and mission. In case of a joint venture, all the parties need to agree on common grounds for HR supply. Depends on the JV location the company have the access to HR and it may be cheaper in getting them rather than employing from the mother company. However company needs to make sure JV agreement will not have any negative impact on the current business in the future. Because knowledge transfers between JV parties could negatively impact each other.
Recruitment and selection strategies
Recruitment means creating pool of candidates who are suitable for the company's requirements and selection process is where select the best suitable candidate for the company's role. Selection process is generally known as a two way process where it's critical for the candidate as well as the company, because the wrong selection decision may negatively impact on the both parties. Therefore Microsoft maintains strong screening process when selecting a candidate to the company to make sure they will take the correct decision at the first time. Microsoft advertises on websites and in the papers. Applications are made online and are screened to find the best candidates. Interviews, tests, CV evaluation etc. are the main techniques used by the company in the selection process. As an example when they selecting software design engineer, first they evaluate the candidate through their CV to match with the job requirement. In the second stage candidate will be evaluated through a telephone conversation to identify his technical knowledge, logical thinking, background knowledge etc. After this he is being called for face to face interview and different people from the company such as Human resource department, technical people will be talked with the candidate and go through various sorts of psychometric testing to gauge their aptitude and personality. This is to evaluate their technical competency and suitability to Microsoft culture.
Further Microsoft's employee referral program plays a major role in recruitment process and this has been conducted with their "Spreadthelove" website. This site provide opportunity to Microsoft employees to "write up" their own individual story about their career with Microsoft and share the web link and "spread the love" with targeted friends, family and potential referrals. Further to maintain the effectiveness of this program by contacting the every referral is contacted first by an employment specialist, which then introduces them to a recruiter. (Online, www.articlesbase.com)
These are few examples of recruitment strategies that are company maintain. Other than that partnership with the Universities and educational institutes to recruit suitable candidates also famous strategies that are company operated. Microsoft recruit graduate student every year to get ensure that knowledge will be flown in to the company continuously. This type of highly screened and long term oriented recruitment and selection process ensure that company HR supply is in line with the requirements of the company and ensure that will not have negative impact on the operation.
Employee retention strategies
From a company's point of view recruitment and selection process involves a considerable amount of cost as well as it is a time consuming process in the HRM function. Therefore company needs to ensure selected candidate will be remained with the company for long term to convert cost incurred during the recruitment process to an investment for the company. In 2007, Microsoft has been named as the best place to work in. As per the company records it maintain just 5% of labour turnover. (Online, www.articlesbase.com) This is exactly shows the company's long term focus of employee retention. This indicate that Microsoft maintain proper working conditions that their employees are motivated to stay with the company.
From the day that employee joined with Microsoft attempt to cater to the needs of its employees. They wanted to keep the atmosphere at work and also make sure that Microsoft environment provides the sense of social belonging. For an example every employee allowed to have their own office they were free to decorate as they please and the provision of subsidized food and drink within the office premises. Further employee retention purposes Microsoft follow many strategies such as share option scheme for employees, annual employee recognition etc. Company believes giving an equity participation and sense ownership of the company will help to increase employees' loyalty and commitment in the long run. As per the Maslow's of hierarchy of needs people will climb their stages of their needs once they satisfy with the basic needs. This has been clearly identified by the Microsoft and strategically they tend to satisfy the esteem level needs of their employees to motivate and retain them in the future.
Training and development strategies
Training and development provides rooms for growth of the employees. The nature of the business the company involved in, knowledge and skills of their employees play a major role. Therefore Microsoft is not reluctant to invest enormous amount of money on employee training and development. Because of this reason an employee career at Microsoft more than just a job and it has become a path to increase skills, knowledge, capabilities etc. Further company provides opportunity to employees to apply for between companies where it assist them to learn about new societies, economies, cultures and increase their experience within global company. Training programs at Microsoft is conducted as a three way partnership between employees, managers and the company. As per their strategy employee must drive their career development plan, manager assist and coaches them and as a company always ensure that sufficient resources are available to operate the plan. Few of examples for career training programs are technical education seminars, management and professional development courses, the IT learning site, and Microsoft Training and Certification programs. Further the company reimburses employees for their tuition, membership, text book fees for work related exams.
Purpose and benefits of performance appraisal and reward management, including financial and non financial rewards
In this mechanism performance evaluation of each and every employee will be also important for both parties. From company's point of view it gives them the opportunity to identify knowledge level of the company and based on that they can identify what the ways are of fulfill if there is a shortfall between supply and demand. For employee, this will indirectly act as a motivation for them to increase their knowledge and skills based on the feedback. Therefore for employees' motivation clear communication between appraiser and employees and critical if this is to be successful and need to communicate appraisal procedures and guidelines at the beginning of the process. Further building a fair, unbiased and transparent reward system is essential to increase motivational level of the employees. Rewards could be in the form of financial or non financial. Financial benefits can be considered as salary increment, financial allowances, performance related bonus etc. Sometimes only financial benefits may not be motivated the employee but non existence could lead them to de-motivate. In other words these type factors could act as hygiene factors in motivation theory. Non financial factors would be participation to share option schemes, promotions, training & development etc. depends on the social and economic environment of the employees live in will create the importance whether financial or non financial rewards are more important. Proper planed performance evaluation process and reward system will increase the employees' commitment, ensure long term retention, motivational level etc which are ultimately reflected through the company's performance.
At Microsoft HR functions including recruitment & selection, training & development, performance evaluation, reward management etc are taken very seriously because they want the best people to work for them and their long term retention within the company is crucial for their success. Because of this reason they hire people not just for their current skills but for their future potential as well. Microsoft tries to ensure it always gets the best people. It works with schools and universities so it hears about the talent out there and it ensure that their labor demand is fulfilled. As per the current business context where knowledge workers dominate in the business success, managing the knowledge within the company and effective knowledge transfers are so important for the business to maintain their competitive position. Further current relationship between employees and the company is stick to a psychological contract. This is more important for companies like Microsoft where employees' capabilities, skills and knowledge decide the company's direction in the market. Therefore HR function strategies' plays a major contribution in achieving its objectives.
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