Microsoft Losing Key Employees

This BusinessWeek article (Troubling Exits at Microsoft) is a fairly hard-hitting and frank evaluation detailing the recent losses of Microsoft people, notably Kai-Fu Lee, to Google and other companies.

Until Lee's case goes to trial in January, he's received permission to work at Google in a limited capacity. The damage is done, though -- even if Lee is blocked and can only work in a limited capacity, Lee and Google have successfully painted Microsoft as the bad guy (Lee being sharply critical of Microsoft's environment in his testimony, and of course the infamous "chair throwing" incident). There are other high profile departures, and Jim Allchin recently announced his intention to retire at the end of 2006. (Note, though, that Jim's passion seems as hot as ever, and cites personal reasons for his retirement.)

The article points out frustrations with large incentive gaps between the mass employees and senior management, as well as the decline of some benefit packages. Still, though, Microsoft's benefits are among the best in the nation, and the turnover and attraction rate is well above average.

But is Microsoft in a funk?

Maybe. I can tell you from what I've seen at PDC, if the new software doesn't get you excited, nothing will. There's a surge of great stuff coming out of Microsoft in the next 12 months. According to the article, many employees are frustrated with the sluggish pace of product development.

Indeed, Microsoft is aware of this. Longhorn is the classic example -- delay and delay and ultimately a massive project reset. In fairness, I can say at least Microsoft has learned (perhaps from WinME) about how not to develop software, and it's not just rhetoric that Vista will be the most secure and best OS yet. In addition, it's the largest software development project in the world -- certainly no easy task.

All I can say is: if you're not in a group that's getting you excited, then find one that will. Or try to get excited, and maybe even motivate the people around you. The hardest thing for a large, seasoned company to do is remain agile, but in the technology sector that's exactly what is required.

One of the best seminars I took was presented by Dick Haab (http://www.performanceleadershipgroup.com). Teams (whether you think of it as the whole company, just the product division, or individual feature team) can exist in one of two states: "at stake" or "at risk." Helping to propel Google to such greatness is they are in at stake environment ... there's nothing to lose, they've got momentum, and sky's the limit. At stake environments foster innovation and quick turnaround.

Microsoft, on the other hand, is largely in an at risk environment (arguably not true for some areas like MSN, but certainly within Windows). We've already accomplished most of what we set out to do -- but now what? How do you exceed and move even further?

With the weight of past success riding on the shoulders, how do you keep from descending like IBM did in the late 80's to early 90's? Or improve on the New York Rangers of the mid 90's? (Sports teams often refer to this as "rebuilding." But here's what doesn't work, as proven by the Rangers since then: spending more and more to recruit top talent with refusal to let go of the past -- 10 years later, they're still a losing team.) To get from one peak to an even higher peak often means travelling downhill -- that's not what companies want to do. Still, there are ways to keep an at stake environment alive and not be paralyzed by past success, and it doesn't have to mean travelling downhill or breaking up the company into smaller bits.

You know what would get people excited at Microsoft (for those not already excited)? Have Google and one or two other hot companies open offices next door. Literally next door. Name it "binary valley" or something similar -- and if that doesn't make the game interesting, I don't know what would.
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