I suspect many of the people reading HN these days aren't old enough to remember the "golden age" of Microsoft (or simply of "of age" at the time). Back in the 80s and 90s Microsoft was an unstoppable behemoth that people would describe as a battleship that could turn on a dime (IIRC this referred to Microsoft reinventing itself in the mid-90s so that everything was about the Internet).
Three things happened to Microsoft (IMHO):
1. The DoJ suit in 1997 was a serious blow to Microsoft inertia. Speaking as nothing more than an observer, it seemed that Gates lost his way. He simply didn't know what to do. From this I get the distinct impression he really believed Microsoft wasn't doing anything wrong and things like bundling a browser with the OS were just "innovations";
2. Microsoft became too hierarchical combined with more B and C managers. Once you don't have A managers in a software (or any tech) business it seems like it's all over. Nothing rots from within so deeply and completely as poor management; and
3. Ballmer had and has no business being CEO of a software business. This isn't simply due to him being a manager rather than an engineer but that certainly doesn't help. Gates was a programmer and actively participated in tech reviews in his heyday. Ballmer is the Carol Bartz of Microsoft. It's simply taking longer to kill Microsoft from within than it took Yahoo.
As far as stack ranking and these other things go: on the face of it I consider them symptoms rather than the root problem. The root problems are:
1. Microsoft, as an organization, is deathly afraid something will kill the Windows/Office golden goose;
2. Everything Microsoft does is done from the perspective of furthering the Windows/Office cash cow. It's why you hear Ballmer describe tablets as "just another PC form factor". He sees them as simply a means to an end and that end is selling licenses;
3. Microsoft is at the mercy of hardware OEMs that are shortsighted enough to run themselves into the ground taking Microsoft with them;
4. There doesn't seem to be any central strategy (beyond sell more Windows/Office licenses) or innovation; and
5. The "backwards compatibility" crowd lost out to the "breaking changes" crowd, which hastened the switch to Web-based applications.
"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."
This is the most important sentence in the article. Because many companies over the years - a lot of them start ups - would point to this practice by Microsoft and try to follow their lead. Microsoft has been stack ranking almost since conception. It was always a horrible way to run a company. But it took decades for it to actually bring the company down.
Novell did something similar. They used to fire IIRC the 'bottom' 10% every year. This HBS article talks about the system: http://hbr.org/2001/05/leading-through-rough-times-an-interv... Interestingly, Eric Schmidt seems to have modified it a bit and seen that it wasn't working well.
"Incidentally, not all systemic changes work. I’ve also learned that certain management techniques can actually make things worse when applied to a distressed culture. For example, I had always worked in companies with yearly and quarterly employee ranking systems, in which people were divided into three groups: overperforming, performing, and underperforming. So not long after I came here, we started a ranking program that graded on a curve: 45% into the overperforming group, 50% into the performing group, and 5% into the underperforming group. I didn’t know—and certainly didn’t intend it this way—that if you got the lowest grade, it was presumed that you were about to be fired. We started getting hate mail from people who argued that there was no way to rank people who worked as a team. The ranking system exacerbated the culture of fear and proved to be such a huge retention and motivation issue that we were forced to stop it after a year. In its place, we introduced a modified ranking program that better reflected overall employee performance."
I was employed in a company that used something like stack ranking. It was brutal having to evaluate the dev team I was leading. There were a couple veteran developers that consistently did excellent work, but there was a rookie that was learning incredibly fast and producing very high quality work.
On a scale of 1-5, I felt all three of them were 4.5, but I couldn't submit scores like that because of stack ranking. The question then became whether to piss off one of the veterans or to discourage the rookie by giving a < 4 score.
They used this as the point for why Microsoft has fallen behind. The former developer says, "I was too concerned with appeasing my manager's when I should have been concerned with being a better engineer."
But really? Is that why Microsoft has fallen by the wayside (realtively)? Because they don't have good enough engineers?
I disagree. I think they have a wealth of talented engineers.
What they need(ed) are people with vision, a deep understanding of the future of consumer electronics and computing, and a way to execute on that vision. They need to deliver short, medium and long-term products that feed their vision. They need to show people the future of the industry instead of lagging behind it.
Engineering is a crucial component in that, but it's only part of the story IMHO.
I think most of the comments here are missing a key ( and in my opinion the most detrimental) effect of stack ranking at microsoft: it prevents talent from clustering around good projects (unless they are so good as to be exempted from it).
Because someone always ends up on the bottom, a fair number of devs don't want to end up on who already has a top quality dev. Worse yet, in order to keep good people, managers don't want / will promise not to bring in more good people. Thus there is an active incentive to recruit( at least internally) mediocre talent since a team needs to hire people to keep headcount and needs to pad the middle of it's stack ranking.
Yeah, in theory this shouldn't happen because the rankings for each team are merge and those on the bottom of a good team should come in above the bottom of a bad team. In practice that seems not to work because both ICs and managers seem to have the above philosophy.
In education we call this 'norm referencing'. The highest scoring 10% get A, the next 15% down get a B and so on. In the UK, people have moved to 'criterion referencing' so certain performance criteria are set and if you reach those, then you get that grade.
Would the second practice, given sensible and negotiated targets work better?
Both Accenture and UBS do the same thing. I never liked it, myself, for the reasons cited in the article. This type of performance system means it's far more important to be good at schmoozing than to be good at working.
So when I was at Google, hiring was not done by the groups with the headcount. Instead they were hired centrally and then later dispatched. The reasoning for this is that for a manager, someone who is just good enough will generate utility and thus should be hired. The central hiring is supposed to enforce companywide higher levels.
I wonder if stack ranking is the same but for getting bad people to leave? Even a weak employee can be better than no employee for a manager...
Seems like it could appear to work in a growing, young company with rising stock value. If someone is genuinely good, but gets stack-ranked out of your group, it's probably not as hard to move to another, possibly new group, when the firm is growing.
But when the company is mature, and the stock is flat, and the headcount is under pressure...
The problem all these companies face is how to determine raises fairly. To do that, you can allow each manager to determine his employees' raises independently, which typically means the manager will exaggerate their performance, or you can devise some sort of system based on numerical reviews. But how do you create such a system? Every one I've ever heard of has been unfair and political in some way - but still probably less unfair and political than each manager picking numbers for their own team.
I'm trying to say this is a hard problem, and picking on the downsides of "stack ranking" is easy if you don't consider alternatives.
This is a fairly common practice across many relatively successful organizations. In addition to the other companies mentioned in this thread,I believe McKinsey consulting also takes a similar approach.
Granted, successful does not necessarily imply they are innovative. This management strategy may be more effective in more sedate and established industries where adhering to best practices may be more important than charting new courses.
If anything, this would seem to be a cautionary tale to tech startups that may be tempted to hastily implement traditional MBA'esque management styles. One size certainly does not fit all.
“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.”
Probably the best line from the article.
The point about stack ranking - good observation. I've heard about it for years from MS people as well as mini-MS and such. It struck me as problematic even back then. In one way it's "just another internal policy", but it's pretty obvious it's going to create internal competition, which is the last thing a company needs.
I remember around 2000 or so - when the DOJ trial was going on - the stuff coming out of MS was "we're the underdog - we see everyone as competition or potential competition" (paraphrasing, obviously). I don't know where that mindset went, but the last decade, they've not really acted like it.
Gosh, I'm not saying this well. They have acted like it, but haven't chosen their battles well, perhaps. Trying to compete in dozens and dozens of competitive landscapes at the same time has led to little focus. Yes, "Office and Windows" are cash cows, but the respect (and fear) for MS is largely gone - they've squandered their image playing "me too" catchup in too many fields, and they've got a long way to go to be the leader in any field that they once were.
At least one tech generation, probably more, never experienced MS as the big leader to be feared - back in the mid 90's, any conceptual startup had to consider "what if MS gets in to this market?". You had to be able to answer that question. I doubt that's a question anyone has asked themselves in at least 10 years, if not more. Replace MS with "Google" or "Apple" and that would instantly make sense to today's crop of startups. But if you said MS, no one would even take you seriously.
>"Today, a single Apple product—the iPhone—generates more revenue than all of Microsoft’s wares combined."
revenue != profit
And thus the article follows the canonical narrative: a dividend paying company's stock price looks different from that of one which is focused on accumulating cash; a B2B company oriented company doesn't inspire the same loyalty among consumers as a consumer electronics company; and a CEO who is the second largest shareholder (first is Gates) doesn't knee jerk from quarter to quarter to the delight of Wall Street analysts like a typical hired gun.
Of course the biggest cliche is that Microsoft has failed to innovate. This despite creating two new UX paradigms - the ribbon and Metro - not just implementing a PARC based UI on a touch screen;* or developing the .NET framework and the development of its associated tool chain; or things which few people in the tech press ever think about like Windows Server HPC.
*If capacitive touch screen development is seen as a great leap forward by Microsoft's competitors, where does that put Kinect?
> Of course the biggest cliche is that Microsoft has failed to innovate. This despite creating two new UX paradigms - the ribbon and Metro - not just implementing a PARC based UI on a touch screen
"Innovation" != "Different Idea".
I'm sure some people like Ribbon or Metro, but I haven't met any; I've been looking for WP7 "in the wild", and over the last 6 months found exactly one.
Intel innovated with the Itanium - but that wasn't useful innovation.
> where does that put Kinect?
In the PrimeSense / 3DV innovation camp. Yes, MS did bring it to the masses. But they didn't get the thing working themselves - they licensed from one innovator, and bought (and closed down) the other, shutting everyone else out of that market for a while.
Personally, I think Metro and Ribbon are both from the same design school: They look beautiful when you look at someone else using them, but they actually get in the way when you're trying to get things done. I've spent an hour playing with a Metro based WP7 to see what it's about; I feel that their "throw all other tiles, then replace the one you pressed" wastes time. I know what I pressed - let me get there.
The comparison you cited is between revenue, and is a fair direct comparison.
But it is likely also true that iOS devices generate more profit than Microsoft's total revenue (this is an unfair comparison, biased in Microsoft's favor).
>> a dividend paying company's stock price looks different from that of one which is focused on accumulating cash
The same place as Siri - interesting technology, bad execution, with lack of competent follow-through, becoming a mild laughingstock of their respective fields, and causing users to be mildly embarrassed that they believed all the hype.
* The difference between Macintosh 1984 and the Alto is bigger than the difference between before and after Ribbon. The difference between Macintosh 1984 and Macintosh 2012 even more so, to say nothing of the gap between Macintosh and iOS. Microsoft almost always followed Apple's lead in UI design though.
* Kinect is a game controller. There's no Kinect UI paradigm yet, certainly not the way multitouch is a UI paradigm over capacitive touchscreens. Again, the gap between mouse and Macintosh is at least as big as the gap between capacitive touchscreen and iPhone.
"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.”
HOLY SHIT that sounds like a bad idea! Who in the world would think that's a good idea. That's crazy.
This is pretty spot on. The process of reviews is one of the most corrosive elements of working at Microsoft. However, there's more to the story. MS fumbled a huge opportunity in the way they reacted to the financial crisis and recession. They put the vast majority of promotions and bonuses on hold. Keep in mind that this is a company that has tens of billions of dollars in cash on hand. More so, this is a company with an "up or out" philosophy baked into it (and that's a big reason for the review system). Due to fear and lack of leadership the company saved spending who knows how many millions of dollars and in the process drove away a lot of their best talent and lost out on hiring a lot of new talent as well. The way they went about layoffs didn't help either, with lots of little layoffs instead of one big purge and done (so that the remaining folks didn't have to question their job security every day). Instead of projecting strength they projected weakness, and they paid dearly for it.
But beyond all that it's the increasing culture of bureaucracy that's eaten away at MS. All the reorgs treating developers as nothing more than assembly line workers. All the incompetent middle managers and PMs that are 10x harder to get rid of than incompetent devs. All the silly out of order budget and management priorities. There's only so many times that an individual can pour their heart into a job and see nothing of substance come of it before they decide to move on to greener pastures.
The worst part of the whole thing is that few people realize the significant amount of lag between when a company starts falling down before it hits bottom. Losing a ton of talented devs probably won't stop you from shipping the current version of whatever is in the pipeline, or even the next version. It'll just mean a lot of projects that would have been conceived won't be, and it'll be harder to execute on a lot of projects that should have been a slam dunk. More so, being able to work with more talented devs is a big perk for other devs, which will tend to accelerate the exodus at all levels. And typically people will make up their mind to leave months or even years before they actually do. By the time it's actually supremely obvious that all the good talent has left it's far too late to do anything about it.
Plain and simple this article seems like it was written 3-5 years ago. With the recent things Microsoft has been coming out with (Kinect, WP7, WP8, Win8, Surface, New xbox, etc.) that has generated genuine interest...are we really saying that this company is dead?
Some good points are made in this article, but it gives off a strong vibe of bitter employees who got bad reviews.
Also:
>"Today, a single Apple product—the iPhone—generates more revenue than all of Microsoft’s wares combined."
Last quarter Apple made $11.6 billion. In pure profit.
Apple's margins are actually better than Microsoft's.
This is an incredible change of events. For the first time in ages Microsoft's primary competitors are far richer or just as rich. The competition are also now more talented and arguably better run. Microsoft cannot afford to act as if nothing has changed.
Until now most of the Microsoft reporting I've read has been "they need to move" and "they're feeling the heat from (Apple, Google etc.)". This is the first time they're past-tense, over and done with.
I'm not sure, though. They're surfing a wave of Windows/Office and XBOX cash and still very relevant for business with a huge ecosystem of developers, schools and universities educating future Microsoft users and sysadmins.
That doesn't help. It is lagging indicator reflecting what you did in the past, not what you do today or will do tomorrow.
For example read the Innovator's Dilemma where the pattern is repeated. Companies would listen closely to their customers, getting improving cash, rinse and repeat. Everything looks great right up until it falls off a cliff because attention moves to something else that looked irrelevant, but was actually disruptive.
A good example is RIM. They kept sailing on their prior work and even a year ago operating margins were 20%. Now they are minus 25%. Historically no mobile company has ever got out the place RIM is now in. But their wave of cash looked good and was enough to fool them into being complacent.
A lot of the MS technology stack makes sense in a world when you have a lot of individual servers scattered across companies. But speaking as a guy who still maintains a couple of physical servers of my own, I think that's dying. Ubiquitous good bandwidth means centrally managed services make much more sense.
I'd hate to discourage anybody from doing technical work, but about the last thing I'd recommend a student become today is an MS sysadmin. I think its career prospects are similar to COBOL developer: reasonable for people to keep going until they retire, but definitely not a growth industry with 40 years of solid prospects ahead.
I don't think the tone is that MS is going to be gone. I think it's more like MS is going the way of IBM, Oracle, Cisco, etc.- companies that will stick around and make important things, but do so quietly and with much less excitement from the public.
>This is the first time they're past-tense, over and done with.
The sentiment on HN has been that for a while.
Except when it comes to UEFI secure boot on ARM devices.
Then it is all about how Microsoft is going to get a monopoly on tablets and stop other OSes from booting on them and thus must be restricted by legal means right now.
The way they describe stack ranking is fundamentally wrong. Currently Windows is in calibration, where we stack rank and reward behaviors that are positive for the company. This is not done on a per team basis, but on a whole organization basis. Everyone at a given level is ranked against everyone at the same level, with the goal that those who do well will be rewarded-- not only monetarily but also in terms of their position within the company. This starts at the team level, where managers push for their reports and ICs to be recognized for their successes, and it follows all the way up the chain and across the company.
Stack ranking is not simply based on what you accomplished, but also how you did it. There are three main pillars: what you did, how you did it and how you showed growth during the timeframe/milestone.
There is no perfect system, but to be frank, the calibration and review system is pretty damn fair and consistent.
The problem I have with stack ranking, and one that I would think engineering companies like MSFT and AMZN would share, is that it is just bad science.
I can get on board with the idea that it is good to drop the bottom 10% of the company on a regular basis. But they're essentially taking very small sample sizes (individual teams), and assuming their distribution matches that of the entire company.
Or to put it another way, let's say you ranked every employee in the company 1-40,000 or whatever. You are trying to drop employees 36,001-40,000. An absolutely awful way to make that happen would be to create 4000 small groups of 10 people and then drop the bottom person from each group. Anybody who's even somewhat proficient in stats can tell you that this setup will yield results WAY off the mark. You could even quantify it with some simple analysis, and though I don't have time to do so, I'm sure the results would be horrifying.
And that's assuming a totally random distribution of people, which isn't true, and totally ignoring psychological effects of such a system. But at the very least, stack ranking is just bad science, and that should matter to these companies.
They initially missed the "Internet" and watched Netscape become huge and threatening. They initially missed gaming. Enter Xbox (which now actually also seems like the best VendorTV offering on the market vs lightweight and talk by the other guys)
They initially missed mobile and tablets. Hmmmmm. Now Windows 8 is right around the corner and CIO's are going to be enticed to have support just one OS across all devices.
The Miami Heat were down a couple of games in each series during the playoffs and had their end predicted more than once. I guess if you reject the premise what do you do with the details of the article?
While he's not right about everything he writes, and if you can separate fact from opinion, younger readers should acquaint themsleves with Cringley's book Accidental [MB]illionaires. It will tell you all you need to know about Gate and Ballmer's management style.
Anyone who thinks Gates is both a genius (as in programming genius) and that this genius was responsible for the success of the company is wrong. One of those is not a true statement.
Gates and Ballmer were very aggressive and sociopathic, like Steve Jobs. This helped the company succeed. But success is really the result of the young talented programmers who signed on with them, and worshipped these characters.
In MS's case it was Simonyi, the man who gave us Excel. And before him, it was Allen who helped Gates get into business. Gates could not write the compiler tools himself. He needed Allen.
Some people might not appreciate the way these guys treat employees. Many simply would not tolerate being belittled by a guy who is not as smart as they are. (Gates' famous line "I don't know how technical your are." was supposedly his way of dealing with the many, many others who knew more than he did.) But... many programmers are happy to be treated this way. And this is management formula that works very well. Belittling the young and easily influenced, especially software programmers, works. Perhaps that is Gates' and Jobs' genius.
Read Cringley. I think you will come away realizing guys like Simonyi were the true geniuses.
Hollywood ending to this comment i.e., the moral question leaft to the viewer/reader: Not all geniuses are good leaders, but is it necessary to be an a-hole to be an effective leader (of geniuses)?
This is absurd. I worked at Microsoft and blaming everything on Stack Ranking is very shortsighted.
This is the kind of things reporters do. There are many bigger issues with Microsoft than stack ranking.
How about the company focused on Desktop computing for far too long and missed the web, cloud and mobile?
This has nothing to do with reviews or HR, and everything to do with lack of vision and innovation. They thought Windows would remain relevant forever.
Downfall is a bit strong. Call me when Windows 8 is out of the door and it turns out to be an enormous flop. Until then, Windows 7 is a very solid os (the best iteration of windows MS has ever released imho); xbox rules the console gaming roost; exchange, active directory and c# dominate in the enterprise space; Office is still the best at what it does. The only parts they really suck at are web and phones.
To me that means they have some serious weaknesses (given the ever increasing importance of phone and web) but it doesn't mean they're in a death spiral. RIM... that's what real downfall looks like!
You can't count on xbox for stability. The gaming industry is a drunken battle royal. Just when someone is getting dominant, Nintendo (wasn't he out already?) comes in from behind and clubs them with a chair.
AD "dominates" only because Windows OS "dominates" and surely Java is still more used than C#?
>The only parts they really suck at are web and phones.
You mean the biggest areas of future growth? That doesn't sound too bad.
Post rationalised nonsense. Microsoft's problem has always been, and always will be, that's it never had an original idea, it's never understood why it's doing the things it does. It got lucky with Windows which has always been a shoddy product. Microsoft is no different now to what it was when Windows launched.
Put simply, Microsoft isn't a very good company. It's a blip on what is at present a very short timeline.
Quote from Steve Stone, founder of the tech group at Microsoft:
"“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?’”
The duality here strikes me because the winners in consumer technology are able to do both at the same time. They make money by shipping technology that is effective for consumers.
'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.'
Microsoft once was cool. It might be difficult to imagine, but from the time PC's came out with DOS through to MS Windows, you really could do interesting things on commodity hardware with their great tools and large user market.
It was obvious to me that MS lost it's cool as the Internet gathered steam at the time the Web was born. Doing Post-grad I couldn't help but laugh, to connect to the Internet using Microsoft operating systems you needed a vital component [0] from a lone programmer from Tasmania. How did that happen? How did MS miss the tidal wave we now call the Web?
"Open access to the World Wide Web was
not originally included in the classic
MSN service at the time of its initial
launch"
Toys like the Internet simply didn't register to the like of Microsoft. Gates even tried to tame it - remember 'The Microsoft Network?' [1] MS missed the Internet and the Web because of this need for control. Lesson learned: No matter how hard you try, networks can't be fully controlled or contained. You can't tame the beast.
Microsoft’s strategy has, for a long time now, seemed to me to be one of pure reactivity. Look for what others are being successful with, then try to emulate it just well enough to turn a buck. A vision for the future? Someone else will take on the big risks and figure that out.
Stack ranking is equivalent to having a finite bonus pool, or having Gold, Silver and Bronze in the Olympics. Yeah the 4th place finisher is an amazing athlete, but there are only three medals.
Suppose you are a manager who manages 5 employees. If you have $100K to give out as bonuses, you could just divide it up equally. Over time employees would come to expect to get their bonus and it would cease to be a motivator.
While stack ranking imposes a bit of an assumption about the distribution of effort/merit on a team, it's also intended to foster spirited competition for the top spots, much like the medal system used in the olympics.
If you are managing a meritocracy and the rules of the game are known, nobody will begrudge someone else getting a bigger bonus. Many workers idealize working on a team where they are not the strongest, so that they can learn from others.
The point is that it's not just about rewarding people, its about rewarding people for the kind of significant contributions to the team that make a business difference. If managers are letting it get political and it turns into a BS metric, then that's evidence of a larger management problem than a problem with the particular distribution of bonuses entailed by the program.
One could argue that any bonus that is uncertain has the potential to alienate the employee if it is not earned. The converse would be to give all employees motivational bonuses, or, in other words, not to give bonuses but to rename some of the guaranteed compensation "bonus" when it's actually just salary.
If a corporate culture is so backward that the genius in the next cube getting a bonus is viewed as a bad thing, then it's probably time to think about how/why bonuses (or the equivalent) are given in a smaller business where the bonus comes in the form of options being worth something, etc.
1)
The reason the oplympics works is that you can rank people accurately down to within miliseconds. And peoples success doesn't depend on others help.
2)
If the bonus pool is fixed, you can give everybody the same one year if that makes sense given the input and one year you can give something to one guy and more to the rest. You can't do that with a fixed band system. That is its key flaw.
>>Stack ranking is equivalent to having a finite bonus pool, or having Gold, Silver and Bronze in the Olympics. Yeah the 4th place finisher is an amazing athlete, but there are only three medals.
Aha! That explains why this at most works for individuals and not for teams.
And all the best doing big things without successful teams.
This article has got it wrong; Sinofsky is remaking Microsoft. He is, of course, remaking it into an even more competitive, Apple-ish kind of place. But the market will reward him for doing that, and we as consumers will, too.
I think I'd rather have two Apples in the world, (although MS has a long way to go to do that) than two IBMs.
[+] [-] cletus|13 years ago|reply
Three things happened to Microsoft (IMHO):
1. The DoJ suit in 1997 was a serious blow to Microsoft inertia. Speaking as nothing more than an observer, it seemed that Gates lost his way. He simply didn't know what to do. From this I get the distinct impression he really believed Microsoft wasn't doing anything wrong and things like bundling a browser with the OS were just "innovations";
2. Microsoft became too hierarchical combined with more B and C managers. Once you don't have A managers in a software (or any tech) business it seems like it's all over. Nothing rots from within so deeply and completely as poor management; and
3. Ballmer had and has no business being CEO of a software business. This isn't simply due to him being a manager rather than an engineer but that certainly doesn't help. Gates was a programmer and actively participated in tech reviews in his heyday. Ballmer is the Carol Bartz of Microsoft. It's simply taking longer to kill Microsoft from within than it took Yahoo.
As far as stack ranking and these other things go: on the face of it I consider them symptoms rather than the root problem. The root problems are:
1. Microsoft, as an organization, is deathly afraid something will kill the Windows/Office golden goose;
2. Everything Microsoft does is done from the perspective of furthering the Windows/Office cash cow. It's why you hear Ballmer describe tablets as "just another PC form factor". He sees them as simply a means to an end and that end is selling licenses;
3. Microsoft is at the mercy of hardware OEMs that are shortsighted enough to run themselves into the ground taking Microsoft with them;
4. There doesn't seem to be any central strategy (beyond sell more Windows/Office licenses) or innovation; and
5. The "backwards compatibility" crowd lost out to the "breaking changes" crowd, which hastened the switch to Web-based applications.
[+] [-] silverbax88|13 years ago|reply
This is the most important sentence in the article. Because many companies over the years - a lot of them start ups - would point to this practice by Microsoft and try to follow their lead. Microsoft has been stack ranking almost since conception. It was always a horrible way to run a company. But it took decades for it to actually bring the company down.
[+] [-] jgrahamc|13 years ago|reply
"Incidentally, not all systemic changes work. I’ve also learned that certain management techniques can actually make things worse when applied to a distressed culture. For example, I had always worked in companies with yearly and quarterly employee ranking systems, in which people were divided into three groups: overperforming, performing, and underperforming. So not long after I came here, we started a ranking program that graded on a curve: 45% into the overperforming group, 50% into the performing group, and 5% into the underperforming group. I didn’t know—and certainly didn’t intend it this way—that if you got the lowest grade, it was presumed that you were about to be fired. We started getting hate mail from people who argued that there was no way to rank people who worked as a team. The ranking system exacerbated the culture of fear and proved to be such a huge retention and motivation issue that we were forced to stop it after a year. In its place, we introduced a modified ranking program that better reflected overall employee performance."
[+] [-] mcphilip|13 years ago|reply
On a scale of 1-5, I felt all three of them were 4.5, but I couldn't submit scores like that because of stack ranking. The question then became whether to piss off one of the veterans or to discourage the rookie by giving a < 4 score.
[+] [-] gavinlynch|13 years ago|reply
But really? Is that why Microsoft has fallen by the wayside (realtively)? Because they don't have good enough engineers?
I disagree. I think they have a wealth of talented engineers.
What they need(ed) are people with vision, a deep understanding of the future of consumer electronics and computing, and a way to execute on that vision. They need to deliver short, medium and long-term products that feed their vision. They need to show people the future of the industry instead of lagging behind it.
Engineering is a crucial component in that, but it's only part of the story IMHO.
[+] [-] anologwintermut|13 years ago|reply
Because someone always ends up on the bottom, a fair number of devs don't want to end up on who already has a top quality dev. Worse yet, in order to keep good people, managers don't want / will promise not to bring in more good people. Thus there is an active incentive to recruit( at least internally) mediocre talent since a team needs to hire people to keep headcount and needs to pad the middle of it's stack ranking.
Yeah, in theory this shouldn't happen because the rankings for each team are merge and those on the bottom of a good team should come in above the bottom of a bad team. In practice that seems not to work because both ICs and managers seem to have the above philosophy.
[+] [-] keithpeter|13 years ago|reply
Would the second practice, given sensible and negotiated targets work better?
[+] [-] swombat|13 years ago|reply
[+] [-] joshu|13 years ago|reply
I wonder if stack ranking is the same but for getting bad people to leave? Even a weak employee can be better than no employee for a manager...
[+] [-] rhizome|13 years ago|reply
http://minimsft.blogspot.com/2004/07/microsoft-stack-rank-as...
[+] [-] fiatpandas|13 years ago|reply
[+] [-] jonhendry|13 years ago|reply
But when the company is mature, and the stock is flat, and the headcount is under pressure...
[+] [-] unknown|13 years ago|reply
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[+] [-] helmut_hed|13 years ago|reply
I'm trying to say this is a hard problem, and picking on the downsides of "stack ranking" is easy if you don't consider alternatives.
[+] [-] doktrin|13 years ago|reply
Granted, successful does not necessarily imply they are innovative. This management strategy may be more effective in more sedate and established industries where adhering to best practices may be more important than charting new courses.
If anything, this would seem to be a cautionary tale to tech startups that may be tempted to hastily implement traditional MBA'esque management styles. One size certainly does not fit all.
[+] [-] thereallurch|13 years ago|reply
[+] [-] unknown|13 years ago|reply
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[+] [-] mgkimsal|13 years ago|reply
Probably the best line from the article.
The point about stack ranking - good observation. I've heard about it for years from MS people as well as mini-MS and such. It struck me as problematic even back then. In one way it's "just another internal policy", but it's pretty obvious it's going to create internal competition, which is the last thing a company needs.
I remember around 2000 or so - when the DOJ trial was going on - the stuff coming out of MS was "we're the underdog - we see everyone as competition or potential competition" (paraphrasing, obviously). I don't know where that mindset went, but the last decade, they've not really acted like it.
Gosh, I'm not saying this well. They have acted like it, but haven't chosen their battles well, perhaps. Trying to compete in dozens and dozens of competitive landscapes at the same time has led to little focus. Yes, "Office and Windows" are cash cows, but the respect (and fear) for MS is largely gone - they've squandered their image playing "me too" catchup in too many fields, and they've got a long way to go to be the leader in any field that they once were.
At least one tech generation, probably more, never experienced MS as the big leader to be feared - back in the mid 90's, any conceptual startup had to consider "what if MS gets in to this market?". You had to be able to answer that question. I doubt that's a question anyone has asked themselves in at least 10 years, if not more. Replace MS with "Google" or "Apple" and that would instantly make sense to today's crop of startups. But if you said MS, no one would even take you seriously.
[+] [-] brudgers|13 years ago|reply
revenue != profit
And thus the article follows the canonical narrative: a dividend paying company's stock price looks different from that of one which is focused on accumulating cash; a B2B company oriented company doesn't inspire the same loyalty among consumers as a consumer electronics company; and a CEO who is the second largest shareholder (first is Gates) doesn't knee jerk from quarter to quarter to the delight of Wall Street analysts like a typical hired gun.
Of course the biggest cliche is that Microsoft has failed to innovate. This despite creating two new UX paradigms - the ribbon and Metro - not just implementing a PARC based UI on a touch screen;* or developing the .NET framework and the development of its associated tool chain; or things which few people in the tech press ever think about like Windows Server HPC.
*If capacitive touch screen development is seen as a great leap forward by Microsoft's competitors, where does that put Kinect?
[+] [-] beagle3|13 years ago|reply
"Innovation" != "Different Idea".
I'm sure some people like Ribbon or Metro, but I haven't met any; I've been looking for WP7 "in the wild", and over the last 6 months found exactly one.
Intel innovated with the Itanium - but that wasn't useful innovation.
> where does that put Kinect?
In the PrimeSense / 3DV innovation camp. Yes, MS did bring it to the masses. But they didn't get the thing working themselves - they licensed from one innovator, and bought (and closed down) the other, shutting everyone else out of that market for a while.
Personally, I think Metro and Ribbon are both from the same design school: They look beautiful when you look at someone else using them, but they actually get in the way when you're trying to get things done. I've spent an hour playing with a Metro based WP7 to see what it's about; I feel that their "throw all other tiles, then replace the one you pressed" wastes time. I know what I pressed - let me get there.
[+] [-] runako|13 years ago|reply
The comparison you cited is between revenue, and is a fair direct comparison.
But it is likely also true that iOS devices generate more profit than Microsoft's total revenue (this is an unfair comparison, biased in Microsoft's favor).
>> a dividend paying company's stock price looks different from that of one which is focused on accumulating cash
Both AAPL and MSFT have announced dividends (http://investor.apple.com/faq.cfm).
[+] [-] jonhendry|13 years ago|reply
There are estimates that the iPhone business does generate more profit than Microsoft as a whole.
[+] [-] potatolicious|13 years ago|reply
The same place as Siri - interesting technology, bad execution, with lack of competent follow-through, becoming a mild laughingstock of their respective fields, and causing users to be mildly embarrassed that they believed all the hype.
[+] [-] philwelch|13 years ago|reply
* The difference between Macintosh 1984 and the Alto is bigger than the difference between before and after Ribbon. The difference between Macintosh 1984 and Macintosh 2012 even more so, to say nothing of the gap between Macintosh and iOS. Microsoft almost always followed Apple's lead in UI design though.
* Kinect is a game controller. There's no Kinect UI paradigm yet, certainly not the way multitouch is a UI paradigm over capacitive touchscreens. Again, the gap between mouse and Macintosh is at least as big as the gap between capacitive touchscreen and iPhone.
[+] [-] wmeredith|13 years ago|reply
HOLY SHIT that sounds like a bad idea! Who in the world would think that's a good idea. That's crazy.
[+] [-] InclinedPlane|13 years ago|reply
But beyond all that it's the increasing culture of bureaucracy that's eaten away at MS. All the reorgs treating developers as nothing more than assembly line workers. All the incompetent middle managers and PMs that are 10x harder to get rid of than incompetent devs. All the silly out of order budget and management priorities. There's only so many times that an individual can pour their heart into a job and see nothing of substance come of it before they decide to move on to greener pastures.
The worst part of the whole thing is that few people realize the significant amount of lag between when a company starts falling down before it hits bottom. Losing a ton of talented devs probably won't stop you from shipping the current version of whatever is in the pipeline, or even the next version. It'll just mean a lot of projects that would have been conceived won't be, and it'll be harder to execute on a lot of projects that should have been a slam dunk. More so, being able to work with more talented devs is a big perk for other devs, which will tend to accelerate the exodus at all levels. And typically people will make up their mind to leave months or even years before they actually do. By the time it's actually supremely obvious that all the good talent has left it's far too late to do anything about it.
[+] [-] rlu|13 years ago|reply
Some good points are made in this article, but it gives off a strong vibe of bitter employees who got bad reviews.
Also:
>"Today, a single Apple product—the iPhone—generates more revenue than all of Microsoft’s wares combined."
uh, maybe but revenue != profit. I like the closing on this post: http://dcurt.is/steve-ballmers-microsoft
"we should not forget this very consistently true fact: Microsoft makes around $5.5 billion every three months. In pure profit."
[+] [-] mrdodge|13 years ago|reply
Apple's margins are actually better than Microsoft's.
This is an incredible change of events. For the first time in ages Microsoft's primary competitors are far richer or just as rich. The competition are also now more talented and arguably better run. Microsoft cannot afford to act as if nothing has changed.
[+] [-] mahrain|13 years ago|reply
I'm not sure, though. They're surfing a wave of Windows/Office and XBOX cash and still very relevant for business with a huge ecosystem of developers, schools and universities educating future Microsoft users and sysadmins.
[+] [-] rogerbinns|13 years ago|reply
That doesn't help. It is lagging indicator reflecting what you did in the past, not what you do today or will do tomorrow.
For example read the Innovator's Dilemma where the pattern is repeated. Companies would listen closely to their customers, getting improving cash, rinse and repeat. Everything looks great right up until it falls off a cliff because attention moves to something else that looked irrelevant, but was actually disruptive.
A good example is RIM. They kept sailing on their prior work and even a year ago operating margins were 20%. Now they are minus 25%. Historically no mobile company has ever got out the place RIM is now in. But their wave of cash looked good and was enough to fool them into being complacent.
http://www.asymco.com/2012/07/02/rims-tailspin/
[+] [-] wpietri|13 years ago|reply
A lot of the MS technology stack makes sense in a world when you have a lot of individual servers scattered across companies. But speaking as a guy who still maintains a couple of physical servers of my own, I think that's dying. Ubiquitous good bandwidth means centrally managed services make much more sense.
I'd hate to discourage anybody from doing technical work, but about the last thing I'd recommend a student become today is an MS sysadmin. I think its career prospects are similar to COBOL developer: reasonable for people to keep going until they retire, but definitely not a growth industry with 40 years of solid prospects ahead.
[+] [-] Apocryphon|13 years ago|reply
[+] [-] flyinRyan|13 years ago|reply
[+] [-] cooldeal|13 years ago|reply
The sentiment on HN has been that for a while.
Except when it comes to UEFI secure boot on ARM devices.
Then it is all about how Microsoft is going to get a monopoly on tablets and stop other OSes from booting on them and thus must be restricted by legal means right now.
[+] [-] wcdolphin|13 years ago|reply
Stack ranking is not simply based on what you accomplished, but also how you did it. There are three main pillars: what you did, how you did it and how you showed growth during the timeframe/milestone.
There is no perfect system, but to be frank, the calibration and review system is pretty damn fair and consistent.
[+] [-] balloot|13 years ago|reply
I can get on board with the idea that it is good to drop the bottom 10% of the company on a regular basis. But they're essentially taking very small sample sizes (individual teams), and assuming their distribution matches that of the entire company.
Or to put it another way, let's say you ranked every employee in the company 1-40,000 or whatever. You are trying to drop employees 36,001-40,000. An absolutely awful way to make that happen would be to create 4000 small groups of 10 people and then drop the bottom person from each group. Anybody who's even somewhat proficient in stats can tell you that this setup will yield results WAY off the mark. You could even quantify it with some simple analysis, and though I don't have time to do so, I'm sure the results would be horrifying.
And that's assuming a totally random distribution of people, which isn't true, and totally ignoring psychological effects of such a system. But at the very least, stack ranking is just bad science, and that should matter to these companies.
[+] [-] jusben1369|13 years ago|reply
They initially missed the "Internet" and watched Netscape become huge and threatening. They initially missed gaming. Enter Xbox (which now actually also seems like the best VendorTV offering on the market vs lightweight and talk by the other guys)
They initially missed mobile and tablets. Hmmmmm. Now Windows 8 is right around the corner and CIO's are going to be enticed to have support just one OS across all devices.
The Miami Heat were down a couple of games in each series during the playoffs and had their end predicted more than once. I guess if you reject the premise what do you do with the details of the article?
[+] [-] woodholly|13 years ago|reply
Anyone who thinks Gates is both a genius (as in programming genius) and that this genius was responsible for the success of the company is wrong. One of those is not a true statement.
Gates and Ballmer were very aggressive and sociopathic, like Steve Jobs. This helped the company succeed. But success is really the result of the young talented programmers who signed on with them, and worshipped these characters.
In MS's case it was Simonyi, the man who gave us Excel. And before him, it was Allen who helped Gates get into business. Gates could not write the compiler tools himself. He needed Allen.
Some people might not appreciate the way these guys treat employees. Many simply would not tolerate being belittled by a guy who is not as smart as they are. (Gates' famous line "I don't know how technical your are." was supposedly his way of dealing with the many, many others who knew more than he did.) But... many programmers are happy to be treated this way. And this is management formula that works very well. Belittling the young and easily influenced, especially software programmers, works. Perhaps that is Gates' and Jobs' genius.
Read Cringley. I think you will come away realizing guys like Simonyi were the true geniuses.
Hollywood ending to this comment i.e., the moral question leaft to the viewer/reader: Not all geniuses are good leaders, but is it necessary to be an a-hole to be an effective leader (of geniuses)?
[+] [-] danielpal|13 years ago|reply
This is the kind of things reporters do. There are many bigger issues with Microsoft than stack ranking.
How about the company focused on Desktop computing for far too long and missed the web, cloud and mobile? This has nothing to do with reviews or HR, and everything to do with lack of vision and innovation. They thought Windows would remain relevant forever.
[+] [-] corford|13 years ago|reply
To me that means they have some serious weaknesses (given the ever increasing importance of phone and web) but it doesn't mean they're in a death spiral. RIM... that's what real downfall looks like!
[+] [-] flyinRyan|13 years ago|reply
AD "dominates" only because Windows OS "dominates" and surely Java is still more used than C#?
>The only parts they really suck at are web and phones.
You mean the biggest areas of future growth? That doesn't sound too bad.
[+] [-] tomelders|13 years ago|reply
Put simply, Microsoft isn't a very good company. It's a blip on what is at present a very short timeline.
[+] [-] runako|13 years ago|reply
"“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?’”
The duality here strikes me because the winners in consumer technology are able to do both at the same time. They make money by shipping technology that is effective for consumers.
[+] [-] bootload|13 years ago|reply
Microsoft once was cool. It might be difficult to imagine, but from the time PC's came out with DOS through to MS Windows, you really could do interesting things on commodity hardware with their great tools and large user market.
It was obvious to me that MS lost it's cool as the Internet gathered steam at the time the Web was born. Doing Post-grad I couldn't help but laugh, to connect to the Internet using Microsoft operating systems you needed a vital component [0] from a lone programmer from Tasmania. How did that happen? How did MS miss the tidal wave we now call the Web?
Toys like the Internet simply didn't register to the like of Microsoft. Gates even tried to tame it - remember 'The Microsoft Network?' [1] MS missed the Internet and the Web because of this need for control. Lesson learned: No matter how hard you try, networks can't be fully controlled or contained. You can't tame the beast.[0] Winsock built by Peter Tattam owner of Tattam Software a small Tasmanian software company. Used Trumpet & didn't pay? You can here ~ http://trumpet.com.au/index.php/news/3-latest-news/17-mar-20...
[1] https://en.wikipedia.org/wiki/Microsoft_Network#MSN_Classic
[+] [-] StacyC|13 years ago|reply
[+] [-] grandalf|13 years ago|reply
Suppose you are a manager who manages 5 employees. If you have $100K to give out as bonuses, you could just divide it up equally. Over time employees would come to expect to get their bonus and it would cease to be a motivator.
While stack ranking imposes a bit of an assumption about the distribution of effort/merit on a team, it's also intended to foster spirited competition for the top spots, much like the medal system used in the olympics.
If you are managing a meritocracy and the rules of the game are known, nobody will begrudge someone else getting a bigger bonus. Many workers idealize working on a team where they are not the strongest, so that they can learn from others.
The point is that it's not just about rewarding people, its about rewarding people for the kind of significant contributions to the team that make a business difference. If managers are letting it get political and it turns into a BS metric, then that's evidence of a larger management problem than a problem with the particular distribution of bonuses entailed by the program.
One could argue that any bonus that is uncertain has the potential to alienate the employee if it is not earned. The converse would be to give all employees motivational bonuses, or, in other words, not to give bonuses but to rename some of the guaranteed compensation "bonus" when it's actually just salary.
If a corporate culture is so backward that the genius in the next cube getting a bonus is viewed as a bad thing, then it's probably time to think about how/why bonuses (or the equivalent) are given in a smaller business where the bonus comes in the form of options being worth something, etc.
[+] [-] tomjen3|13 years ago|reply
If so you need to keep these two points in mind:
1) The reason the oplympics works is that you can rank people accurately down to within miliseconds. And peoples success doesn't depend on others help.
2) If the bonus pool is fixed, you can give everybody the same one year if that makes sense given the input and one year you can give something to one guy and more to the rest. You can't do that with a fixed band system. That is its key flaw.
[+] [-] shin_lao|13 years ago|reply
The system you describe might improve individual performance to the detriment of the company's performance.
You don't need competition within a team, you need cooperation toward a common goal.
[+] [-] kamaal|13 years ago|reply
Aha! That explains why this at most works for individuals and not for teams.
And all the best doing big things without successful teams.
[+] [-] vessenes|13 years ago|reply
I think I'd rather have two Apples in the world, (although MS has a long way to go to do that) than two IBMs.