‘Astonishingly foolish management’ at Microsoft

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.

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.”