[LINK] "Microsofts Downfall"

stephen at melbpc.org.au stephen at melbpc.org.au
Wed Jul 11 20:29:42 AEST 2012

"Microsoft’s Downfall"

By Vanity Fair, July 3 2012 

Analyzing one of American corporate history’s 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 company’s 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 Microsoft’s wares combined.

Eichenwald’s 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 Microsoft’s 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 can’t 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 wasn’t right for Microsoft. “He 
didn’t like the user interface, because it didn’t 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 2003–04, and we had to 
ship a product in 1999,” says Steve Stone, a founder of the technology 
group. “We couldn’t 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 Microsoft’s 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 company’s 
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 AOL’s AIM, he saw what Microsoft’s 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 wasn’t 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 
couldn’t see why young people would care about putting up a few 
words. “He didn’t get it,” the developer says. “And because he didn’t 
know or didn’t believe how young people were using messenger programs, we 
didn’t do anything.”

“I see Microsoft as technology’s 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 it’s just a barren wasteland. And 
that’s Microsoft. The company just isn’t cool anymore.”

“They used to point their finger at IBM and laugh,” said Bill Hill, a 
former Microsoft manager. “Now they’ve 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 
absurd practice.

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 
Microsoft's lunch.

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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