Microsoft's Downfall via "Stack Ranking"

[time space]

Previewing a more extensive article in it's upcoming August 2012 issue, Vanity Fair points out Microsoft's management system called "stack ranking" as one of the causes of Microsoft's Downfall: Inside the Executive E-mails and Cannibalistic Culture That Felled a Tech Giant (http://www.vanityfair.com/online/daily/2012/07/microsoft-downfall-emails-steve-ballmer).


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.” When Eichenwald asks Brian Cody, a former Microsoft engineer, whether a review of him was ever based on the quality of his work, Cody says, “It was always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers.”

[JAC]

Meh. Sounds like whiny ex-employees. Every large company sucks to work for. Except maybe Google. But it does kinda explain why Windows phones have sucked.

And "Felled" a tech giant? Please.

[Mark77]

I know Microsoft basically ignores the resumes of most domestic applicants, and primarily has been staffing most of their new hires with foreign guest workers. When they opened their Vancouver development center, thousands of qualified local software professionals applied but their resumes were basically trashcanned in favour of folks from India.

[Aznsilvrboy]

I know Microsoft basically ignores the resumes of most domestic applicants, and primarily has been staffing most of their new hires with foreign guest workers. When they opened their Vancouver development center, thousands of qualified local software professionals applied but their resumes were basically trashcanned in favour of folks from India.

How is this related to the topic of Microsoft's supposed downfall via stack ranking?

[Busybuyer888]

Not sure how that is different from many other organization. (Except, it is normally a silent/unspoken knowledge known to HR - known top performers, fast tracked staff are very common in large organizations.)

Did people actually think everyone in the same department were graded equally? (ie. everyone gets 10/10?)

It is a known fact, companies only give "outstanding" reviews to 10%-20%. Others are "normal".

Also, lets also acknowlege were are talking about tech development people. Tech developement people usually don't understand deadlines.

The open competition thing could be un-nerving. But if they don't fire you for being "normal" then it is okay.

But I don't think MS' HR policy lead to MS not becoming Google, nor Apple. MS was very sucessful in the past, and their staff's efforts were focused on continuing those succsessful product areas. MS is not in danger of becoming zero in 3 years (like RIMM). They do need to innovate their s/w strategy to the new computing shift (mobile).

[unknowing]

Yep, when looking for true insight into analysis of technology, or better yet, the operations of a tech company, of course first stop is always VANITY FAIR!!!:lol::lol:

[r1lee]

This is how rankings done in a lot of huge corporations. My wife and my employer does the same.

[xalex0]

This is how rankings done in a lot of huge corporations. My wife and my employer does the same.Whom does your wife rank? :eek:

[Piro21]

I know Microsoft basically ignores the resumes of most domestic applicants, and primarily has been staffing most of their new hires with foreign guest workers. When they opened their Vancouver development center, thousands of qualified local software professionals applied but their resumes were basically trashcanned in favour of folks from India.

Yeah this isn't true.

[number8888]

Many companies have the same employee evaluation model. The justification is that you have to perform above and beyond your peer group to receive the top ranking. Having been through it myself I must say that I hate it as it usually depends more on luck and company politics than the person's actual merit.

[toguy]

As mentioned above, a lot of large companies do this. They are simply "raising the bar" for the expected performance level each year. I completely disagree that this had anything to do with Microsoft's downfall. If scores of employees are heading for the exits then the company needs to focus more on its retention and/or recruiting initiatives and policies.

A lot of large consulting firms have a "move up or move out" policy and that doesn't lead to the firm's downfall, but rather the opposite - it is one of the things that they do that allows them to maintain a competitive edge.

[Sum_guy]

every company ranks staff and most expect that a certain percentage will be top and a certain percentage will be under performers.

What this sounds like is what fewer companies do - terminate that bottom 10%. It's not a bad strategy for the first few years - it forces some hard decisions - but it's not fun. The downside is that after a few years you're cutting the staff that were good a few years prior.

Add in the favouritism/politics plus the fact that it's usually done by division (is the bottom 10% of IT more effective than the bottom 10% of communications?) and it can breakdown pretty quick.

In an 'eat what you kill' business like investment banking or sales it's maybe workable but it kills long term IMHO.

[Mark77]

Yeah this isn't true.

Its absolutely true. And since Microsoft doesn't consider applicants in good faith, they're obviously not getting top quality talent.

Same deal at RIMM. They staffed most of their operation with UW grads and their friends -- no wonder! UW grads are just fine, but they certainly weren't hiring at the top of the potential talent pool.

[time space]

"Felled" a tech giant? Please.

Certainly a headline term used to generate emotion and therefore interest in reading the article, however this article (http://www.asymco.com/2012/07/04/the-building-and-dismantling-of-the-windows-advantage/) provides an interesting perspective on Microsoft's ups and downs in relation to it's competitor Apple.


When the Macintosh was launched in 1984, computers running the MS-DOS operating system were nearing a dominant position in the market. Having launched in 1981 as the IBM PC, they were quickly cloned and four years later “PCs” were selling at the rate of 2 million/yr. The Mac only managed 372k units in its first year.

In other words, PC was outselling the Mac by a factor of nearly 6. It turned out to be a high point. The ratio by which the PC outsold the Mac only increased from there.

When Windows 95 launched in 1995 it negated most of the advantages of the ease of use of the Macintosh and the PC market took off. The ratio reached 56 in 2004 when 182.5 million PCs were sold vs. 3.25 million Macs.

Then, in 2004, something happened.

Although PC volumes continued to grow, they did so more slowly and the Mac grew faster. What coincided with this was the emergence of portable computing. The MacBook became easily differentiable as a “better” laptop. It was not faster, did not have more storage or any key metrics being used to sell PCs. It was just better as an integrated product. The integration manifested itself through a sense of quality and robustness as well as intangibles like aesthetics and “feel”. I wrote about this a few years ago.

As a result the Mac began to whittle down the advantage Windows had. The ratio of Windows to Mac units shipped fell to below 20, a level that was last reached before Windows 95 launched.

If we consider all the devices Apple sells, the whittling becomes even more significant and the multiple drops to below 2. Seen this way, Post-PC devices wiped out of leverage faster than it was originally built. They not only reversed the advantage but cancelled it altogether.

Considering the near future, it’s safe to expect a “parity” of iOS+OS X vs. Windows within one or two years. The install base may remain larger for some time longer but the sales rate of alternatives will swamp it in due course.

The consequences are dire for Microsoft.

http://www.asymco.com/wp-content/uploads/2012/07/Screen-Shot-2012-07-04-at-7-4-2.12.03-PM.png

[xalex0]

^ They forgot to include iPods

[ichpen]

^ They forgot to include iPods

If we're going across the whole spectrum they also forgot to include xbox and xbox live, not to mention office, enterprise software etc. Probably a very tidy income for MS. But this is a comparison of OS system units? (little confused by the graph)

Anyway, back on topic.

[Agafaba]

^ They forgot to include iPods

They also forgot that android is doing its fair share to erode windows market. Just because nobody wants a windows phone doesnt mean that OS X is taking over the PC market.

[coolspot]

Meh. Sounds like whiny ex-employees. Every large company sucks to work for. Except maybe Google. But it does kinda explain why Windows phones have sucked.

Yeah the complaints all sound like the same problems at any big company. Older employees not understanding new technology... heh that's an age old problem!


As for the stack ranking... not everyone can get gold stars. Perhaps the system is a bit ridged but it's also the reality in many other companies beside Microsoft.



They also forgot that android is doing its fair share to erode windows market. Just because nobody wants a windows phone doesnt mean that OS X is taking over the PC market.


How is android eroding Windows' market share? They compete in totally different spaces.

If you're talking about Windows Phone ... Windows Phone never had a marketshare ;)





I know Microsoft basically ignores the resumes of most domestic applicants, and primarily has been staffing most of their new hires with foreign guest workers. When they opened their Vancouver development center, thousands of qualified local software professionals applied but their resumes were basically trashcanned in favour of folks from India.


I on the otherhand know several people hired by Microsoft. Perhaps the Indian developers had Masters and PhD credentials?

[Piro21]

^ They forgot to include iPods

They also didn't factor in the fact that people aren't buying PCs as often as they used to because the CPU power they already have is sufficient for everything they do. I play games, and even I'll admit that my i5 is massive overkill for any consumer application I'd ever run. I thought long and hard about buying another computer alongside my old reliable 4-year-old laptop, but eventually caved. Nearly everyone with an Apple product runs Windows on something in their house, but the same can't be said the other way around.

[Agafaba]

Yeah the complaints all sound like the same problems at any big company. Older employees not understanding new technology... heh that's an age old problem!


As for the stack ranking... not everyone can get gold stars. Perhaps the system is a bit ridged but it's also the reality in many other companies beside Microsoft.





How is android eroding Windows' market share? They compete in totally different spaces.

If you're talking about Windows Phone ... Windows Phone never had a marketshare ;)







I on the otherhand know several people hired by Microsoft. Perhaps the Indian developers had Masters and PhD credentials?

Chart doesnt care about that, its just comparing things with Apple OS to things with Windows OS. I could swear I remember Windows phones selling at one point, maybe I was mistaken lol. Either way apple selling 100 million more iPhones than Windows phones doesnt mean anything for PCs and the chart is misleading. Also what Piro21 said, how many of those "copies" of OS X are actually being used on the Mac they came with as opposed to that person installing windows.

[xalex0]

they also forgot to include xbox and xbox live, not to mention office, enterprise software etc. Probably a very tidy income for MS.But that wouldn't have helped them to reinforce their point :cry:

[Piro21]

Also what Piro21 said, how many of those "copies" of OS X are actually being used on the Mac they came with as opposed to that person installing windows.

It's not even just that. The chart uses new iOS and OSX sales figures for Apple, but most of the people I know are using older Windows computers because of the massive overkill in computing power that is an average PC. The iOS devices are selling like such hotcakes because phones are still pitiful when it comes to power, so every new upgrade grants a whole lot more functionality than a person's existing device. When the average phone becomes enough for a person like the average computer is now, upgrades will be much less attractive and the iOS new sales surge will hit a wall just like Windows sales did.

If we're just focusing on the flawed statistics inherent in the chart though, compare new Windows sales to new OSX sales alone. What are the numbers like then?

[time space]

Microsoft Posts First Ever Quarterly Loss! (http://www.cbc.ca/news/business/story/2012/07/19/microsoft-financial-results.html)

[xalex0]

Microsoft Posts First Ever Quarterly Loss! (http://www.cbc.ca/news/business/story/2012/07/19/microsoft-financial-results.html)
a) repost (http://forums.redflagdeals.com/microsoft-post-first-ever-quarterly-loss-since-1986-a-1204712/)
b) unrelated

[time space]

Microsoft Posts First Ever Quarterly Loss! (http://www.cbc.ca/news/business/story/2012/07/19/microsoft-financial-results.html)

a) repost
I can't find the original post you're referring to - can you please provide a link?




b) unrelated
Microsoft posts it's first loss ever after 26 years as a publicly traded company - and that's unrelated to Microsoft's downfall?!?

[LeeBear]

I can't find the original post you're referring to - can you please provide a link?




Microsoft posts it's first loss ever after 26 years as a publicly traded company - and that's unrelated to Microsoft's downfall?!?

It's just accounting. They wrote down 6.2B off there books from a company they bought 5 yearish ago that wasn't profitable which may them lose 473m for the quarter. If they didn't you would see 6.1 B profit. It's not a "real lost" its a paper lost, they could of just re-adjusted there books to write down 250m each quarter for the last 5 years, etc instead they just wrote it off all at once.

-LeeBear

[hagbard]

First, IBM, then MS, next Apple. They all crush innovative out of the box thinking in favour of elitist prick thinking.

[time space]

It's just accounting. They wrote down 6.2B off there books from a company they bought 5 yearish ago that wasn't profitable which may them lose 473m for the quarter. If they didn't you would see 6.1 B profit. It's not a "real lost" its a paper lost, they could of just re-adjusted there books to write down 250m each quarter for the last 5 years, etc instead they just wrote it off all at once.

-LeeBear
So, it's a good thing?

[ichpen]

So, it's a good thing?

Sure. Good to writeoff losses quickly and move on.

[time space]

Sure. Good to writeoff losses quickly and move on.

...and while they're at it - give Ballmer a raise!

[ichpen]

...and while they're at it - give Ballmer a raise!

Err. Ok. If you read through their filings their revenues actually rose which is a good thing. It's actually quite impressive given they're on the tail end of Windows 7, Office and Xbox (combined their largest money makers).

Assuming they don't mess up W8 and the slate isn't a disaster I foresee record profits starting Q4/Q1 2013. Xbox next year should further bolster that.

[xalex0]

I can't find the original post you're referring to - can you please provide a link?
Sorry, I though that the threads being beside each other was enough. Here, I fixed my post.




Microsoft posts it's first loss ever after 26 years as a publicly traded company - and that's unrelated to Microsoft's downfall?!?
Unrelated to "Stack Ranking"

[time space]

Err. Ok. If you read through their filings their revenues actually rose which is a good thing. It's actually quite impressive given they're on the tail end of Windows 7, Office and Xbox (combined their largest money makers).

Assuming they don't mess up W8 and the slate isn't a disaster I foresee record profits starting Q4/Q1 2013. Xbox next year should further bolster that.

Here is an interesting rebuttal in this blog post: Anti-Misleading Talk Also Misleads (http://parislemon.com/post/27589781722/anti-misleading-talk-also-misleads)


Here’s the thing. Everyone seems to want to rush to point out that Microsoft’s first quarterly loss was misleading because of a one-time $6.2 billion write-down.

No $#!+.

I mean, does anyone think anyone else really doesn’t understand that? But that anti-misleading talk is also misleading, in my opinion (still with me here?).

Yes, overall, Microsoft’s quarterly numbers were fine. A record for the quarter when it comes to revenue, even. That’s great. But there are several not-so-subtle points bubbling just under the surface (not to be confused with the Surface — though that may end up being one of them) that point to some very big changes already underway within the company.

Points like this one get quickly shot down by folks because people have been wanting to be the first to call Microsoft’s downfall for years. But this time, I think we’re actually seeing it. You can disagree, of course. But I’m not writing this out of some misguided hatred for Microsoft. I’m writing it to have it on record because I believe I’m right. Time will tell, obviously.

I think what we’re seeing in Microsoft’s numbers right now is the full-on shift of the company towards enterprise. To be clear, I think the company will remain alive and probably even thrive in that regard for a long time. I just think the time of their consumer dominance is already over. And within the next decade, it will be completely over.

I think at that point, Microsoft will be an enterprise software and services company with a strange, but successful gaming sub-division that will probably be spun off by then.

Over the next two quarters, everyone will rush to say that I’m wrong and point to big Windows 8 numbers. But that will also be misleading. The computing world has already changed. The Windows PC is over. OEMs will juice the numbers out of the gate for a bit, but then they’ll quickly go back on the decline. Microsoft’s money, increasingly, will come from Office and Services.

Are the children of today going to grow up to buy Windows-based PCs? Microsoft hopes they will, but all kinds of numbers are already showing the opposite happening. And if you look at even Microsoft’s current, seemingly strong fiscal numbers the correct way, I believe you can see it.

While the quarterly loss is being overblown in the short-term (it’s a one-time hit), it still matters. It shows just how bad of a mistake the company made in the Online Services division (already a constant mistake itself). And for the first time, such a mistake couldn’t be covered up by Windows and Office numbers. Some will say it was just a one-time mistake. But what if Microsoft had bought Yahoo for $50 billion? The lack of mistakes isn’t for a lack of trying.

It’s all related to the problem. But that’s another post…

[george__]

I read about this on Forbes

[Agafaba]

Here is an interesting rebuttal in this blog post: Anti-Misleading Talk Also Misleads (http://parislemon.com/post/27589781722/anti-misleading-talk-also-misleads)

I find it unlikely everyone is going to move over to linux... but I suppose stranger things have happened.

[george__]

I highly doubt everyone will move over to linux. Especially if you like playing video games...

[E_Phils]

Yeah this isn't true.


I know Microsoft basically ignores the resumes of most domestic applicants, and primarily has been staffing most of their new hires with foreign guest workers. When they opened their Vancouver development center, thousands of qualified local software professionals applied but their resumes were basically trashcanned in favour of folks from India.


100% not true. I worked for Fortinet when MS opened this development center in Burnaby. Some software developers did end up with jobs at MS. Not many people were looking to leave at that point since the company was public yet.

Awhile later Fortinet HR increased most developer’s salaries nicely.

A few people from other local companies did get jobs. I'm not sure were Mark is getting his intel from.

Mine is from working in the local Van/Burnaby tech area for 10+ years.