[LINK] "Microsofts Downfall"
stephen at melbpc.org.au
stephen at melbpc.org.au
Wed Jul 11 20:29:42 AEST 2012
By Vanity Fair, July 3 2012
Analyzing one of American corporate historys greatest mysteries the
lost decade of Microsoft George Polk Award winner (and V.F.s newest
contributing editor) Kurt Eichenwald traces the astonishingly foolish
management decisions at the company that could serve as a business-
school case study on the pitfalls of success.
Relying on dozens of interviews and internal corporate records
including e-mails between executives at the companys highest ranks
Eichenwald offers an unprecedented view of life inside Microsoft during
the reign of its current chief executive, Steve Ballmer, in the August
Today, a single Apple product the iPhone generates more revenue than
all of Microsofts wares combined.
Eichenwalds conversations reveal that a management system known
as stack ranking a program that forces every unit to declare a
certain percentage of employees as top performers, good performers,
average, and poor effectively crippled Microsofts ability to innovate.
Every current and former Microsoft employee I interviewed every one
cited stack ranking as the most destructive process inside of Microsoft,
something that drove out untold numbers of employees, Eichenwald
writes. If you were on a team of 10 people, you walked in the first day
knowing that, no matter how good everyone was, 2 people were going to get
a great review, 7 were going to get mediocre reviews, and 1 was going to
get a terrible review, says a former software developer.
It leads to employees focusing on competing with each other rather than
competing with other companies.
When Eichenwald asks Brian Cody, a former Microsoft engineer, whether a
review of him was ever based on the quality of his work, Cody says, It
was always much less about how I could become a better engineer and much
more about my need to improve my visibility among other managers.
Ed McCahill, who worked at Microsoft as a marketing manager for 16 years,
says, You look at the Windows Phone and you cant help but wonder, How
did Microsoft squander the lead they had with the Windows CE devices?
They had a great lead, they were years ahead. And they completely blew
it. And they completely blew it because of the bureaucracy.
According to Eichenwald, Microsoft had a prototype e-reader ready to go
in 1998, but when the technology group presented it to Bill Gates he
promptly gave it a thumbs-down, saying it wasnt right for Microsoft. He
didnt like the user interface, because it didnt look like Windows, a
programmer involved in the project recalls.
The group working on the initiative was removed from a reporting line to
Gates and folded into the major-product group dedicated to software for
Office, Eichenwald reports. Immediately, the technology unit was
reclassified from one charged with dreaming up and producing new ideas to
one required to report profits and losses right away. Our entire plan
had to be moved forward three to four years from 200304, and we had to
ship a product in 1999, says Steve Stone, a founder of the technology
group. We couldnt be focused anymore on developing technology that was
effective for consumers. Instead, all of a sudden we had to look at this
and say, How are we going to use this to make money?
A former official in Microsofts Office division tells Eichenwald that
the death of the e-reader effort was not simply the consequence of a
desire for immediate profits. The real problem for his colleagues was the
touch screen: Office is designed to inputting with a keyboard, not a
stylus or a finger, the official says. There were all kinds of personal
prejudices at work. According to Microsoft executives, the companys
loyalty to Windows and Office repeatedly kept them from jumping on
emerging technologies. Windows was the god everything had to work with
Windows, Stone tells Eichenwald. Ideas about mobile computing with a
user experience that was cleaner than with a P.C. were deemed unimportant
by a few powerful people in that division, and they managed to kill the
When one of the young developers of MSN Messenger noticed college kids
giving status updates on AOLs AIM, he saw what Microsofts product
lacked. That was the beginning of the trend toward Facebook, people
having somewhere to put their thoughts, a continuous stream of
consciousness, he tells Eichenwald. The main purpose of AIM wasnt to
chat, but to give you the chance to log in at any time and check out what
your friends were doing. When he pointed out to his boss that Messenger
lacked a short-message feature, the older man dismissed his concerns; he
couldnt see why young people would care about putting up a few
words. He didnt get it, the developer says. And because he didnt
know or didnt believe how young people were using messenger programs, we
didnt do anything.
I see Microsoft as technologys answer to Sears, said Kurt Massey, a
former senior marketing manager. In the 40s, 50s, and 60s, Sears had it
nailed. It was top-notch, but now its just a barren wasteland. And
thats Microsoft. The company just isnt cool anymore.
They used to point their finger at IBM and laugh, said Bill Hill, a
former Microsoft manager. Now theyve become the thing they despised.
Reader's Comments ..
As someone who spent 7 years in Microsoft until recently, I cannot state
strongly enough how dead on correct this article is. I see some defensive
postings below such as "What about XP?!" when the fact is that Windows ME
and Windows Vista were two of the worst OS' ever released.
The stack rating system is one of the absolute worst management
techniques I've ever encountered. As the article says, it pits team
member against team member (e.g. one of us MUST die regardless of how we
do as a team"). Innovation requires taking risks and stepping outside of
the box. The stack ranking system pretty much ensures that neither take
place - people do not take risks and instead focus each day on how to
SURVIVE vs. how to make the Microsoft more Successful. If you try to push
for new ideas and new processes, you are simply labeled a troublemaker
and will soon be culled from the herd.
The middle management layer is Microsoft's Achilles heel - a bunch of
frightened rabbits not wanting to do anything to risk their career path
at Microsoft. Some years back I saw a comment posted on a web blog -
"Microsoft - Brilliant people doing mediocre things". This could not be
more true across the vast majority of the company - and the employees
feel this way themselves. They are very poorly led, and the
management/review system will continue to be disingenuous and drag the
company down. And it's such a shame because there are a lot of brilliant
people there who could change the world in the way Apple and Google and
Facebook have. All they need is a management system that facilitates such.
5:43 PM on 7/3/2012
As somebody who joined as an engineer in one of Microsoft's fast moving
division early this year, I can say that the first and second paragraph
are spot on. In my first one-to-one meeting with my manager, he went over
the exact same points. He talked about stack-ranking and said that
somebody from the overall team would have to take the hit. Even if the
team had 100 out-performing members, somebody HAS to fill the bottom-
stack. He also talked about how important visibility is here. The more
people that have seen/used my code and/or tool, the better are my chances
of getting a good review. The engineering behind it is secondary, the
primary thing is usage/visibility. He in fact asked me to go around
talking to leads from Test/Development and Program management just so
that I could get noticed and he could SELL me when he has the review with
his managers. We don't talk about engineering improvements or how our
work has an impact on the product, but how to we can stand out from other
teams and showcase our work
6:58 PM on 7/3/2012
I worked for IBM for a long time, and I definitely agree that "stacked
ranking" in a company immediately and effectively kills all creativity in
a team. No matter how brilliant anyone (or even everyone) on a team is,
the majority of them will be relegated to mediocre-to-poor ratings year-
after-year, while one or two of their higher-profile counterparts take
the top rankings. Depending on the team, these top-ranked may truly be
the best in the group, or they may just be more friendly with the manager
or have a role within the team that gives them more exposure to their
superiors. These rankings, as meaningless as they are, then affect every
aspect of an employee's career, from raises and bonuses to advancement
opportunities, to job security during periods of layoffs. When I left IBM
I promised myself I would never work for another company engaging in this
As for Microsoft in particular, I have serious doubts that the company
will ever be able to return to its former glory, especially under the
leadership of Steve Ballmer, who obviously does not have what it takes to
inject much-needed creativity and forward-thinking into the company.
Windows will continue to dominate the desktop, despite the existence of
operating systems, such as Linux, which are light-years ahead in terms of
innovation, features and functionality, just because it is so entrenched
in the space. However, the importance of that dominance will continue to
decline, just like Microsoft's profits, as more and more computing cycles
are spend on other devices, where competitors will continue to eat
11:00 AM on 7/4/2012
I am a victim of Microsoft's dreaded Stack ranking. In spite of winning
laurels and awards in my 6 year tenure, one fine day my manager ( I had
11 of them in my 6 yr tenure) calls me in his office and says that it is
beyond his control & I am redundant.
He was candid in mentioning that one of the reasons is that I did not
kiss the right arses. I was aghast. Although I worked for 6 years, it may
have taken a Bozo less than 6 seconds to decide that I needed to be let
go. Thats when I realized that Microsoft does not value its employees.
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