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'Astonishingly foolish management' at Microsoft

July 4, 2012 @ 6:45 pm

The Microsoft mojo seemed to be back, but you wouldn't know it from reading a scathing "Vanity Fair" article that describes the company's "lost decade" marked by "astonishingly foolish management decisions at the company that could serve as a business-school case study on the pitfalls of success."

Other than the little $6.2 billion write down from one of Microsoft's online divisions, the company has been on a roll this year. Recently Microsoft unveiled what looks to be an appealing tablet computer called Surface, by most accounts Windows 8 is solid operating system with many improvements over their previous version. Yeah, it's struggled with developing its own smartphone, but Windows Phone 8 is promising.

The "Vanity Fair" report by Kurt Eichenwald relies on dozens of interviews and e-mails he's obtained between executives at the highest ranks. Here's an online preview of the magazine's assessment of Microsoft.

MSFT

Screen grab from VanityFair.com of August feature report about Microsoft

Eichenwald's research leads him to conclude part of Microsoft's failure is due to its "cannibalistic culture."

Anyone who's worked for Microsoft, or has friends who are employed there, knows that Microsoft grades on a curve. Their "stack ranking" of employees requires each group to rate workers as top performers, good performers, average, and poor. I've written about Microsoft's evaluation system before because a version of it is being considered for evaluating teachers. (Rating teachers like Microsoft employees).

On first glance, the system would create a competitive workplace. That has benefits. The problem is, a Microsoft group could have six exceptional people working in a group, and of those some will have to be ranked poor. That's the way the game is played. And that has "effectively crippled Microsoft's ability to innovate," according to the "Vanity Fair" article.

Instead of competing with other companies, Microsoft was too focused on pitting one employee against another.

"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.

The "Vanity Fair" report comes out later this month. GeekWire's Todd Bishop, who's read an advance of the article calls it "epic, accurate and not entirely fair."

More from Linda Thomas

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Comments (43)


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  • Ron_Spins wrote...
    Let me grade Microsoft on a curve.
    July 4, 2012 8:52 pm
    Vista support sucked.Fail. Leaving everyone on XP.Win. Win 8 is gonna be a failure unless people (en masse)are on a tablet.?.
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  • NewButCurious wrote...
    Its not about Products - Well maybe a little
    July 5, 2012 5:30 am
    Microsoft has been behind the curve on product development... by design; Marketing does not compensate for poor design and weak innovation. The people practice - rank and yank - worse still; the environment in MS is no tone of fear - it borders on treachery; the hiring practice aims at climbers - not surviviors - so they are consistently on the offensive - with each other. (And arrogant in spite of their failures.) They also have too much cash - they do not know how to get effective because they do not feel the pinch enough. Finally - having to provide quarterly guidance to the analysts? Short-term thinking yields death - if you can;t think long-term, you will not have one.
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  • jstumbo wrote...
    As a former employee ...
    July 5, 2012 5:37 am
    I can agree 100%. I always got that middle review, except for the last few times when I got the low one. Since most everyone does a good job, it comes down to who is going to be the whipping boy or who upper management doesn't know. Then once they give you the low one, you are done because now you are the easy one to get the low review. I got the low review even though I was closing 40+% of the tickets on a team of 6-7 people. Get the low review and you might as well start looking for a new job, cause your career there is over. Catch the eye of upper management and you get good reviews. It is kind of like name recognition for politicians, where they get votes because someone recognizes their name, so they must be good. This is very destructive. There is no teamwork. There is only trying to one up your coworkers so that you catch the eye of upper management. It sucked and I would never work there again. But don't worry about me, I went on to bigger and better things and have always been a star in every other job I have had. I wonder how much of that has to do with the culture and what I learned as far as constantly pushing yourself at Microsoft?
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  • iapproveofthismessage wrote...
    "been on a roll this year"...
    July 5, 2012 5:54 am
    let's not's forget, Linda, that Surface, W8 and Windows Phone 8 have collectively returned zero share holder value. And, oh by the way, they'd have to sell lot's just to make up for the $6B of shareholder, employee and Pacific Northwest community value pissed away this week. Unless, the "rolling" you're referring to is backwards ;)
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  • D-Leon wrote...
    @iapprovethismessage.....
    July 6, 2012 7:17 am
    Windows 8, Surface, and Windows 8 phone have yet to hit the street so how can you say they collectively returned zero value? When plans for Surface came to light the stocks did soar and all prodcuts have been getting great reviews. Not wise to judge products before they had a chance to perform in the eye of the public.
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  • awbitf wrote...
    This is shocking!
    July 5, 2012 6:33 am
    You mean you can find former, disgruntled employees to write a negative article about Microsoft? No Way!

    Contrast this article to what was recently written in Gizmodo, Bits or Venture Beat and you have to wonder what the motive/agenda of Vanity Fair was.

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  • NewButCurious wrote...
    Not just Ex-employees See It
    July 5, 2012 7:03 am
    I work as an organizational and tooling/process consultant. Having worked with many clients, with decades of related experience, and broad background in how such things work - ultimately also a user and engineer - and never a Microsoft employee - I have no trouble affirming the article's review. Microsoft hires plenty of smart people - but the feel is very much that there is blood in the water; Focus is all career - Microsoft is much more sell & market than design; and much more politics than collaboration. My motives - to have a company wake up and remake themselves because they have potential being wasted.
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  • babylon05 wrote...
    Anyone check on Amazon yet?
    July 5, 2012 7:14 am
    This is not just a Microsoft issue. Check out any high-tech company. You will hear the same.
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  • iapproveofthismessage wrote...
    at the end of the day...
    July 5, 2012 7:16 am
    it really doesn't matter what VF, Giz, Bits, VB, you and or I say. It comes down to scorecards. The #1 deliverable of any CEO of a publicly traded company is shareholder value. Simply run a report of the MSFT share price when Ballmer became CEO in Jan of 2000 and compare it to yesterday's closing price. Then run the same report and rank the perfomance of any of his "peers" (Oracle, IBM, Apple, Google, Amazon, you choose). 'nuf said
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  • SeattleJoe wrote...
    Yea, so shocking...
    July 5, 2012 12:40 pm
    awbitf: How do you think those employees got disgruntled? I know of so many current and former MS employees that all say the exact same thing. Its not a matter of a few bad apples complaining about the company, this is a matter of a pervasive cancer within the company that needs to be killed for the company to recover. Stack rankings, the head of HR and Balmer need to go.
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  • anotherfencewalker wrote...
    No breaking news here...
    July 5, 2012 7:27 am
    M'soft has always struggled to keep from chewing its own legs off. You give everyone a title, a biz card, most an "office" with a door to close, bennies up the kaaazzooo and then appoint individuals to be managers and vice presidents who had no right to be in such a position without taking many bullets first, what do you get? An internal cancer that breaks the will of a genius. The sea of contract employees might save a buck but if you've ever been one you know where your passion is. Right. It's not at work.
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  • imanegro wrote...
    Come on guys and chicks
    July 5, 2012 7:28 am
    How do you measure success? Say what you will about Microsoft (and I'm not a fan of their products), but they are clearly successful in most ways, including financially. Many, many people are very wealthy, and countless more very comfortable because of MS. MS also changed the world when it comes to computers and how they are used. Don't forget what the computer world was like pre-MS. Criticize away, but give Bill, Steve, and the gang their due. They are successful by almost any measure- and you don't get that way by accident, or by having a bad employee evaluation process. Full disclosure: I was a vendor at MS for a year during Win95 roll-out; I have declined to work there numerous times since.
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  • NewButCurious wrote...
    Yesterday... and tomorrow...
    July 5, 2012 12:46 pm
    I think that Microsoft has stumbled more of late, and the increasing pressure from Facebook, Google, Apple, Amazon is hard to ignore. They are not dead by any measure - but having fans is preferable to hostages; Trending matters... Tipping points exist... IBM is still successful also - but not the way they were. Microsoft needs to know value precedes success - and connect with their market better or they risk it all.
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  • CH wrote...
    Who cares?
    July 5, 2012 7:38 am
    not me.
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  • Kosh wrote...
    Who cares?
    July 5, 2012 8:03 am
    About ANYTHING posted by CH
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  • slandc wrote...
    Shareholder Value
    July 5, 2012 8:10 am
    is not limited to appreciation in stock price. Dividends also pay a part in the equation. But, hey, let's keep focusing on they elephant herd mentality when it comes to stock prices instead of focusing on market fundamentals as the driver. That way we can continue to see companies like Facebook make billions during a goofy IPO while quality revenue generating companies like Microsoft are looked down upon. Crazy
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