Microsoft was started by Bill Gates with the help of his friend Paul Allen. He believed that for the writing the best software, people with brilliant and outstanding brains have to be hired. As the company was a software programming company, the main motto of the company was on hiring the right kind of people for the right job who had inter-personal skills and the extra technical knowledge of writing software. But, the procedure of selecting and hiring candidates was not as easy as it looked. So, lets discuss what happened with Microsoft while hiring candidates and what challenges it faced.
Effectiveness of the core elements:
CEO Bill gates called Microsoft as “the best team of software professionals the world has ever seen” (As stated in the case Bartlett 2001: 1). By this it is stated that the core element of Microsoft are its employees. The core elements were also recruitment, leadership, motivation and its reward system. Gates and Ballmer strongly accept the fact that the success behind Microsoft has been its talent to recruit, motivate and retain extraordinary professionals. Bill Gates strongly believed that Microsoft being a software company, its main strength is employees. His belief was that it is not necessary to hire experienced professionals but to hire even fresh college graduates who have the talent and are extremely intelligent (As stated in the case Bartlett 2001: 1).
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Gates initially used to help his manager hire and believed that it is the developer's effectiveness that determines our success. The HR had faith in gates and believed that if they take out the 20 best employees of the company then the company will be lose its importance (As stated in the case Bartlett 2001: 2). For hiring, Gates looked at people who were smart, hard working and who get things done (As stated in the case Bartlett 2001: 2).
The prime recruitment policy of HR in initial days was to hire professional from elite educational institutions rather from other companies. But as the company grew, the need for recruitment also increased. So now they started visiting selected institutes in US, Canada and Japan and started hiring students “once-in-a-lifetime” (As stated in the case Bartlett 2001: 2) and only a little attention was being paid to their previous experience.
The HR policy for hiring was that the candidates had to go for an intense interview process which included at least three to ten rounds of interview with Microsoft managers and HR personnel (As stated in the case Bartlett 2001: 2). The main aim of HR while recruitment was not just salary negotiation; but also was to look at the candidates thought process, the problem solving ability and the working habits than on specific knowledge or previous experience. Technical interviews consisted of programming problems that candidates were expected to answer by writing the code (As stated in the case Bartlett 2001:2). Some times managers used to give part information and then used to wait for candidates to ask for the remaining data. The managers wanted to see if the candidate asks or continues writing the solution. This would give an insight about the candidate's knowledge (As stated in the case Bartlett 2001: 3). The flow for recruitment goes on in a very systematic way where managers interview the candidates and then all the other interviewers were informed by an e-mail starting with “Hire or No Hire” (As stated in the case Bartlett 2001: 3) continuing with an appropriate feedback.
At the end of the day, the candidate is interviewed with his/her prospective manager who in turn finally with the recommendation of others in the group recommends a Hire or No hire decision. Senior managers also thought of hiring candidates by conducting interviews of candidates with an “appropriate” interviewer who is out of the recruitment panel. This would involve decision without the pressure of filling in the job criteria (As stated in the case Bartlett 2001: 3). Steve Ballmer also stated that the default decision for any candidate is a “No-Hire” (As stated in the case Bartlett 2001: 3). He means to say that if appropriate reasons are being identified to hire a particular person, then he or she can be hired but apart from that it will be a no hire. The thinking of HR was adequate but not outstanding. If they have someone, who just sort of gets into the job, then that particular candidate will be in big trouble. Because poor performers were quickly sent out, a third person might continue to occupy that particular place that could have been filled with a brilliant candidate or professional (As stated in the case Bartlett 2001: 3).
Always on Time
Marked to Standard
Microsoft working environment was a very friendly and homely one. There were cafeterias where you would get food at subsidized rates. The reason for this was due to the long hours of work and stressful work environment. Having a comfortable work environment was recognized as being essential to morale and mental health. At Microsoft, people used to get there own cabins where they were allowed to decorate as they want. Here the “n minus 1” staffing philosophy (as stated in the case Bartlett 2001:3) where n was the number of people actually needed and still Gates and Ballmer, insisted on hiring fewer employees than were actually required in the organization. The “n minus 1” philosophy (as stated in the case Bartlett 2001:5) ensured that the people were sent for projects early on before they were even ready for that particular assignment and due to this everyone was stretched and challenged. The work culture was maintained in the same way as it was before, that is of a small company feeling. They used to divide the company into small units of 30 to 200 people future dividing it into smaller groups, projects or programs(As stated in the case Bartlett 2001: 4).
Microsoft followed the hands on style (As stated in the case Bartlett 2001: 6) of management. Bill Gates used to directly coordinate and control the management and decision making process. In 1983 and 1984 HR introduced the ladder level concept which helped the managers to recruit developers according to there skill set and marking salary according to the same (As stated in the case Bartlett 2001: 6). Later this was implemented into other parallel divisions. There were 12 levels of ladder for a non executive which started from clerical position to a senior manager level. A good example is that a professional hired from a college would be at level 30 and a professional with a master's degree would be hired directly to level 31 and would not wait for 18 months to get promoted from level 30 to 31. As the ladder increases, the timeframe for promotions also increases. Promotion from 34 to 35 needed the approval from Bill Gates (As stated in the case Bartlett 2001: 6). One more policy for HR was to internally promote people horizontally from one department to other. Prior success was not necessary the key criteria and Microsoft had a long tradition of promoting people who are not very successful in projects. There belief was that by firing a person who failed means that you are throwing away the learning also (As stated in the case Bartlett 2001: 6).
Apart from experiential learning, Microsoft also believed in developing professionals through personal mentoring. Coaching and mentoring were deeply embedded in the company's values (As stated in the case Bartlett 2001: 6). Gates also added the oversight to what was essentially a free market process of allocating scarce talent by moving key professionals from one project to another; this was not to influence the outcome of project but to accelerate the training and development process. Exchanging of knowledge could be made possible by doing this.
There was also a well established link between the individual performance and rewards. As stated in the case (Bartlett 2001: 7) when providing a frequent and typically honest feedback, the norms as per Bill Gates became institutionalized in a process of a direct, clear semi-annual performance reviews which tied to an increase in the pay and bonus rewards performance. As per the example given in the case study that a professional who is a developer may agree to complete three code modules in the next 6 months or would have to reduce the number of bugs from 1000 to 50. And eventually after this, the SMART was being applied into the Microsoft's system for performance evaluation. SMART is not a tool, but a way to write your objectives in a way that ensures a clear understanding of what you will deliver during the year, and how you will then be measured at the end of the year as part of your performance review. The meaning of SMART was Specific, Measurable, Attainable, Results-based and Time-bound.
Leadership is the basic requirement of any organisation. The leaders are responsible of guiding people who are in need of assistance and provide guidance to their subordinates in performing a particular task.
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As per the contingency theories of Leadership, we can take the following theory
“As stated by (Rollinson 2005:362,375)"Fiedler's Contingency Theory -
Companies contingencies also included the disease model of Management where professionals learned from the mistakes they made in the past performances. The other model for performance was introduced by Paul Maritz which was Forced evaluation curve tied to a 1 - 5 performance scale. This practice helped the professionals to avoid performance review surprises and deviations from the agreed role. The employees used to fill their performance evaluation forms twice in a year which reveals, what they have done and achieved in the past six months and also rating them on the scale of 1 to 5. This form is then sent to their managers who fill in there evaluation. Then with the help of particular software the final rating is concluded. After all this, the manager and the employee sit together and discuss about the evaluation which has been done and then the final rating and an increment is disclosed to that employee (As stated in the case Bartlett 2001: 7).
1. High attrition rate because of the dot com boom which resulted in sky high salaries offered by companies that were not on very strong financial footing. Many employees jumped based on attractive salaries, until the companies they joined started collapsing.
2. The company was being investigated for monopolistic business practices and, as the case unwound in the courts, the hard driving competitive culture started being shown in a bad light. Result: people started losing pride in what the company represented, which further led to high attrition and poor morale.
As Microsoft entered into the 1990s, they saw the sales exceeding 1 billion dollar slab, with an employee strength of 500 plus professionals working in different projects and streams. It was no longer to be called as a small, personnel startup firm, where they had personnel, policies and practices. But now being a giant in itself had to modify various traditional polices and practices. Though Microsoft did not want to give away all of its tradition policies like the people philosophy followed by Microsoft and also which was also known as the heart of Microsoft's success(As stated in the case Bartlett 2001: 9). Microsoft's size and growth rate forced Microsoft to formalize and structure the earlier practices of attracting exceptional people for joining the company. Microsoft wanted to retain its general recruitment principals.
The philosophy of personnel management involvement was to be continued which used to give unbiased decisions. Previously Bill Gates and Steve Ballmer used to interview every individual but now the structure had changed, as the strength of company and also the requirement of the company had increased to a great extent. And it was not possible to interview every individual. They had a team of 35 people who used to make the panel for recruitment (As stated in the case Bartlett 2001: 9). They used to go to campuses for hiring graduates and yet the prime responsibility of recruitment team was the quality of people. Gates frequently stated to the managers that the prime reason for the success of Microsoft was the selection, hiring and retaining the best brains in the industry.
As the strength and requirement of the company was increasing to very high numbers, Microsoft had to depend on other sources of recruitment rather then the traditional method of hiring from colleges. In 1998, Microsoft had a requirement of 7000 employees(As stated in the case Bartlett 2001: 9), so the campus could not be the only source, and then the team went ahead and sourced resources from the industry itself. These people were experienced and got an added value to the company. But later on this system of hiring experienced people from the industry extended 75% of the total hiring (As stated in the case Bartlett 2001: 9). To track this talent from the industry, Microsoft got a group of people who were constantly tracking the resumes and profiles of the individuals and were always in contact. The other source which they adopted to recruit was to be aware of the external environment, where they get to know about the company in the same industry is planning to downsize. This was the change that we saw in the side of recruitment and selections.
The changes that came along with time in the phase of managing culture; In the 1990s the company passed the slab of 10,000 employees and then 20,000 employees (As stated in the case Bartlett 2001: 10). So now it was difficult to manage things in the same way. Bill Gates saw and was concerned about losing the value and spirit which was followed at earlier years of the company, which gates thought was the success for the company. But later in 1990s HR started highlighting attrition rates and employees job satisfaction issues. Microsoft had never faced the problem of attrition before but now started looking at this challenge. A survey which was conducted in the past years helped in identifying the reasons for the same. With this there was a survey which was conducted to find out from the ex- employees the reason for leaving the company. Armed with the data, from the termination study and the prior employee surveys helped them to develop the Organizational Health Index (As stated in the case Bartlett 2001: 11). The work environment became the biggest retention tool Microsoft had to manage.
This issue of retention was worked by Steve Ballmer who first started interviewing 100 people on a one on one basis, to understand the reason for attrition and satisfaction. After interviewing Ballmer concluded by saying that Microsoft had to get two things into the system.
One was a greater sense of clarity and excitement about the company's direction and the second was to give more freedom to act without Bureaucracy or Red Tape. The first step which Ballmer took was to discuss with Bill Gates and change the vision of the company which was “a computer on every desk and in every house running on Microsoft software” to version two as “to empower people to do anything they want, any place they want and on any device” (As stated in the case Bartlett 2001:12).
The second thing that Ballmer wanted to develop was the Leadership capability of clearing the obstacles, making decisions quickly, and defining clear goals and objectives. To achieve this, Ballmer and the other people in the management would have to discontinue many of the company's old approaches and even have to change their management style. The example used was very good and that was, “I'm used to diving in deeply but now I'm trying to let other people dive in before I do”. By this he meant that the previous style of hand on control has to be replaced by “turning over the key” concept (As stated in the case Bartlett 2001: 11). By this he meant that now the management had to pass on the responsibility and authority to their subordinates.
As Microsoft grew and the number of employees grew in the organization, management felt the need for having a more structured review and the feedback process. They felt that the need for process is a need in today's growing business. The key role for this process formulation was to get open, good communication and the diffusion of core norms and values. The steps taken for this were to ask 50 senior management executives to describe about what made Microsoft successful. This in turn got a good response and the response was divided into 6 success factors like taking a long term approach to people and technology, getting results, individual excellence, a passion for product and technology, customer feedback and team work(As stated in the case Bartlett 2001: 13). After this a tool kit was provided to managers which helped them in managing well and the flow of recruitment was also properly managed. The competency Model was being widely used across the company to bring greater clarity and consistency to many of its people processes, ranging from job skill requirement to recruiting new hires, to coaching and development processes and to six month performance reviews.
As the company grew, the management found a lack of capable leaders and managers in the current company's strength of employees. But this was explained by Chris Williams, Vice President of Human Resources, that like most technical companies, we recruit brilliant technical people who may not be the best manager or people developer, but they are best in there field of developing software(As stated in the case Bartlett 2001:12).
The steps taken for overcoming the lack of managers and leaders was that the management identified some few 90 potential leaders from the company's professionals and then made plans to have training for their growth (As stated in the case Bartlett 2001: 12). But this did not turn out to be effective as they did not have enough response and this in turn did not produce enough managers to run a large organization.
Then the second step for making this issue successful was to develop a more formal approach known as “ Key people review” (As stated in the case Bartlett 2001: 12). Here the VP's were asked to identify high potential people within the company and their names were to be consolidated. This list was segregated into waves of 1, 2 and 3(As stated in the case Bartlett 2001: 13). Each group was given special attention, growth plans were being made and intensive training was being provided.
The problem which came in may 1999 was Microsoft's traditional HR reward system practice. The reason was the intense competition for highly trained technical talent and the pay that the industry was offering was much higher than that paid by Microsoft. But this intense competition made Microsoft increase their target level of base pay from 50th percentile to 65th percentile (As stated in the case Bartlett 2001: 14). The problem was explained by Williams as “our offer and acceptance rate remained extremely high as up as 90% for the industry level recruitment and 72% for the campus hires”,(As stated in the case Bartlett 2001: 14). But the problem was within the market that is increasingly competitive; it is very hard to ask a candidate or to offer a candidate less then what he/she is drawing. This could grow as a threat at a later stage.
So the step which was taken by Microsoft was to increase the number of ladder from 12 to 22, which was nearly double. This helped the company to reward its highest performer more frequently with promotions. Now those who would perform better would not have to wait for 3 to 4 years. They would be promoted every 18 months to two years. This was a visible reward for the employees as well as the prospective candidates and also a great motivational factor.
Industry comparison & compensation was not the main reason for rewards & motivation. The main reason was how to protect the human resources policies and practices in which the company was so successful. It was seen that the senior management was going off line and they were even beginning to modify some of the companies legendary “hard core” culture(As stated in the case Bartlett 2001: 14). The senior management had started enjoying weekends and do not respond, but this was one of the main frames of Microsoft. Working hard and even on Saturdays was always there. People tried to change this but there is always going to be pressure, deadlines and demand that require extraordinary efforts. Accepting that the stress was a part of the Microsoft culture, many senior managers argued that the campus's pressure cooker atmosphere was vital both to the company's survival and to the development of staff.
I would recommend that the professional should never forget the success factor of Microsoft and the main reasons for why Microsoft is known in the market. The strength of Microsoft are its employees and an employee's strength can only be determined when employees religiously follow the policies and fair practices of the company.
The recommendations that I would suggest would be that Microsoft should not change the culture of their company. The pressure cooker environment is a must in the industry in which Microsoft is working. If professionals are made in a habit of good to go policy then the companies reputation may get down at a later stage as there can be a mismanagement of delivering commitments and also in working of the company(As stated in the case Bartlett 2001: 14). The major success of Microsoft is the hard core culture which it possesses. What Bill Gates should apply to the company is the leveraging of the working hours when the work pressure is low and keeping the pressure cooker environment when the work load is in demand and deadlines have to be met. In very simple language we can call it as compensation off.
The second recommendation that I would call for is the compensation and performance evaluation of employees. The long said term which is firing an employee means throwing the learning of the professionals with it. More attention should be paid towards retention strategy than hiring policies. To hire a new person is a liability for the company and loosing a current employee in the face of attrition is loosing an asset of the company. I would say that the ladder level should be made flexible and should be given control to the management and the managers. By this I mean to say that the managers should know and should decide on increasing the level of their subordinates, irrespective of his/her past promotion time grade. If a professional is hard working and deserves a dual promotion in a single year then he should be given and should be made flexible. This would motivate the professionals to work harder and with better efficiency. This ladder level should be given a flow about who should climb up and who should stay back. The performance evaluation system should be made more attached to the ladder level. The managers should set guidelines for evaluating the performance form of every individual. And with this, the professionals will not be able to blame the company for their low salary but would have to sit and think of increasing their efficiency and their productivity level. This performance evaluation form can also contain terms like relationship with other departments, which in turn will help employees to interact within the departments. The control will be in the hands of management. The issue which was raised earlier about non interaction of professionals will be reduced to a great extent.
The last recommendation that I would suggest is for the recruitment policy which is currently going on. I would say that Microsoft is known and grew in the past just because of its employee quality. It should follow the same fundamentals but can change the frame of working on it. Quality should not be given a second thought as the quality of people that Microsoft carries can do the work of 3 Non-Microsoft employees(As stated in the case Bartlett 2001: 12). Policy of offering professionals with homely environment at office motivates them to offer great working hours. With the growing company and the employee strength, Microsoft should look for better campuses to accommodate the future requirement of work place in advance. Also the number of cafeterias should be decided on per hundred employees or some ratio which fits the situation. These motivational factors will build the brand image of Microsoft's working environment. These reasons of policies and culture make professionals to think Microsoft as their dream company to work with.
Finally, in order to overcome the bad perception it had acquired as being a big bully in the industry, it is important to also communicate externally how the company is trying to change and be a kindler, gentler, and more responsible member of the software industry. Competitive, but softer; aggressive but responsible. The external communication is meaningless unless these changes are put into practice and made visible for all to see.
Bartlett, C.A.2001. Microsoft: Competing on talent (A). Harvard Business School Case Study 9-300-001. Harvard Business School Publishing.
Rollinson, D. (2005), “Organisational Behaviour and Analysis, an integrated approach”, 3rd edition, Pearson Education Limited.