A Business Lesson From Microsoft

Long, long ago, when there was a stock market boom, lots and lots of people wanted to work at Microsoft. Its stock was going ever higher, and the company was famous for its generous stock options. True, there was the dreaded “stack rank” review procedure that turfed out a lot of good people, but, hey, the stock! Look at the stock! People signed on for the ride and enjoyed it greatly.

Then, the stock market turned. MSFT was no longer synonymous with magic or even growth. Microsoft had become a mature industry, and its stock price leveled off after dropping hard in early 2000. Microsoft kept its stack rank procedures, but now, there wasn’t any options fun to balance out the terror of a policy in which a certain percentage of the workforce was to be fired each year, usually because they didn’t have good relations with managers they didn’t report directly to.

Without the incentive to stick around in the form of stock options, a lot of talented people left the company. A LOT. Not all of the talent, but a significant chunk of it. New talent didn’t gravitate to Microsoft. Now, I hear people talking about it they way people used to talk about Novell… how it’s a shadow of what it used to be. It’s not the big industry mover that it was in 1999, that’s for sure.

What could turn the company around? Ideas. Where do ideas come from? Bright people that don’t want to be massacred by a stack rank policy in a car accident. The problem is that the policy is entrenched, the management doesn’t really listen to the workers when they complain about it, and the company as a whole suffers.

Moral of the story: don’t fire people for the sake of firing people in order to create a false sort of competition between workers. It doesn’t work.

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