The Re-engineering of Microsoft Begins: A New Take on Performance Evaluation

November 22, 2013

The Re-Engineering of Microsoft Begins with a New Take on Performance Evaluation

Microsoft's New Culture: Revisiting Performance Reviews

A few weeks ago, I wrote about how Microsoft had committed a colossal blunder with the upgrade path on their Windows Phone platform. This week, I want to talk about the slow re-engineering Microsoft is undergoing internally. With the departure of Steve Ballmer as CEO, Microsoft is seen as a company in transition, despite being enormously profitable.

Last week, as reported in a Zdnet article, Microsoft announced a fundamental change to their organization. They had earned a notorious reputation for their “Stack Ranking” of employees. For those unfamiliar with this system, all Microsoft employees were graded on a curve that had a pre-targeted distribution. A certain percentage of Microsoft’s employees were required to be rated as top performers, good performers, average, and poor.

As you can guess, this fueled a divisive corporate culture that ended up being the topic of an expose published in Vanity Fair. There were tales of infighting and a toxic environment that stifled innovation and let to the development of a siloed organization.

I’m stating the obvious, but innovation is the key to any organization, especially a company like Microsoft which is facing a “post-PC” era.

So What are the Changes in Store for Microsoft?

  • Performance won’t be judged solely by individual performance. There will be a new emphasis on teamwork and collaboration.
  • Managers will provide more timely feedback to allow for ongoing improvement versus just an annual review.
  • Curve-based evaluation systems and ratings will be eliminated.
  • There will be increased autonomy for managers and leadership to decide bonus compensation.

This is a significant shift from the more centralized approach Microsoft has employed previously. At first glance, it seems the goal is to provide a morale booster and a strong signal to employees that Microsoft is fundamentally changing how they do business.

It also sends a signal to prospective employees that Microsoft is becoming a better place to work, hopefully encouraging the best and the brightest to apply once again.

Finally, it sends a broader message to investors and the industry that the company is honest about the challenges it is facing and open and willing to address its shortcomings.

How to manage employee performance evaluations is a choice every company — be it Microsoft or a B2B SaaS startup — has to make. That said, entrepreneurs can learn from Microsoft’s failures and apply the necessary lessons to their own business.

How do you handle performance evaluation and reviews in your businesses?



Corporate Strategy, Sales Operations

Sudip is in charge of Corporate Strategy, Sales Operations at <a href="">Alegeus Technologies</a>. Previously, he worked at OpenView from 2012 until 2014 with portfolio companies to provide insights on the markets they operate in, their customers, and drive development of business strategies.