WRITTEN CASE ANALYSIS SECTIONS At a minimum, the following sections are to be included in each written case analysis. Full discussions, explanations, reasoning, and support are to be included as to demonstrate to the reader the students complete understanding, knowledge, and competencies of all areas of business.

Introduction/case overview

Case personnel and their roles to the case/company

CHR ISTOPOHER A. BARTLETT

Microsoft: Competing on Talent (A)

In the summer of 1999, a front-page Wall Street Journal article was attracting attention on the

Redmond campus. Under the headline As Microsoft Matures, Some Top Talent Chooses to Go Off

Line, the article reported: Tired of grueling deadlines, frustrated by the bureaucracy that has

accompanied Microsofts explosive growth, or lured away by the boom in high-tech start-ups, dozens

of the companys most capable leaders, all around 40, have opted outat least temporarily . . .i (See

Exhibit 1 for the articles list of senior level departures.)

Steve Ballmer, the companys recently appointed president and COO, was quoted as saying that

some of the departures were voluntary and some were not, opening opportunities for fresher,

smarter replacements. We have a bench that is very deep, he said. We have people who are fired

updrivento lead the next generation.ii Yet despite the positive outlook, Ballmer clearly

recognized that Microsoft had to change or adapt some of the human resource practices that had

allowed it to assemble and retain what CEO Bill Gates proudly called the best team of software

professionals the world has ever seen. Just six weeks before the WSJ article was published, Ballmer

had announced a package of changes that sweetened salaries, allowed more frequent promotions,

and softened some of the pressures that had long been part of the hard-core Microsoft culture.

Still, there were some who wondered if the rumblings in the senior management ranks reported

by the WSJ were not the signs of larger looming problems for Microsoft. It was a question taken very

seriously by Gates and Ballmer who understood very well that the companys enormous success was

largely due to its ability to recruit, motivate, and retain extraordinary talent.

the companys growth led to changes in the way such policies were managed in the 1990sand

sometimes to changes in the policies themselves. (See Exhibit 2 for Microsofts growth profile.)

Recruiting: Attracting the Best and Brightest

Gates had long recognized that it took exceptional people to write outstanding software. His

preference for hiring extremely intelligent, not necessarily experienced, new college graduates dated

from Microsofts start-up days, when he and co-founder Paul Allen recruited the brightest people

they knew from schooltheir smart friends. In subsequent years, the importance of recruiting well was constantly reinforced by Gates, who considered helping his managers hire the best of all possible

candidates as his greatest accomplishment. Were in the intellectual property business, he told

them. Its the effectiveness of our developers that determines our success. Underlining the

importance of hiring and retaining superior talent, in 1992 Gates acknowledged: Take our 20 best

people away, and I will tell you that Microsoft will become an unimportant company.iii

For Gates, acquired knowledge was less important than smartsthe ability to think creatively;

and experience was less important than ambitionthe drive to get things done. Above all, however,

he wanted to use recruiting to continually raise the bar. Id have to say my best business decisions

have had to do with picking people, he said. Deciding to go into business with Paul Allen is

probably at the top of the list, and subsequently, hiring a friendSteve Ballmerwho has been my

primary business partner ever since. As Fortune magazine once observed, Microsoft has been led

by a man widely recognized as a genius in his own right, who has had the foresight to recognize the

genius in others.iv Almost from the day he was hired as assistant to the president in 1980, one of Steve Ballmers

primary responsibilities was to act as recruiting coordinator. It was an assignment he particularly

relished. According to one senior manager, Steves mantra was, We want people who are smart,

who work hard, and who get things done. That simple mantra is something that people still talk

about today. And once the smartest, most driven were identified, Ballmer and his team were

relentless in getting them on board. Theres a standing policy here, said Ballmer, whenever you

meet a kick-ass guy, get him. . . . There are some people you meet only once in a lifetime. So why

screw around? In Fortunes assessment, The deliberate way in which [Gates] has fashioned an

organization that prizes smart people is the single most important, and the most consistently

overlooked aspect of Microsofts success.v

Although the need for experienced managers led the company to recruit some key people from

other companies, in the early days Microsofts favorite recruiting grounds were elite educational

institutions, particularly Harvard, Yale, MIT, Carnegie-Melon, Stanford, and a few highly targeted

others. As growth increased recruiting needs, the net spread wider, eventually targeting 15

universities in the United States, four in Canada, and six in Japan. Microsoft recruiters made visits to

each of these schools in search of the most brilliant, driven studentsonce-in-a-lifetime people

paying little attention to prior experience. Indeed the company preferred people who didnt have to

unlearn different company values, work habits, or technological approaches.

Before being hired, however, every candidate had to survive an intense interview process that

many found quite harrowing. Each candidate was interviewed by at least 3, and sometimes up to 10,

Microsoft employees. During the interview, the candidates were tested more on their thought

processes, problem-solving abilities, and work habits than on specific knowledge or experience. And

because developers played such an important role in Microsoftwriting the lines of code that were

Microsoft productstheir recruiting process was particularly rigorous.

Technical interviews typically focused on programming problems that candidates were expected

to answer by writing code. Some managers posed scenarios with key information missing to see if

the candidate would ask for data or just move straight to a solution. Then they might throw in an

oddball question like, How many times does the average person use the word the in a day? meant

to test the candidates deductive reasoning, creative problem solving, and composure. If a candidate

gave such questions 30 seconds of thought and said they didnt know, the interview was effectively

over. If they were incapable of creative problem solving, they were not an appropriate candidate.

Next, an unfamiliar but practical problemfor example, describe the perfect TV remote control

might be thrown in to see how the candidates broke down the problem, how simple or complex they

made the solution, and if that solution solved customer needs.

As soon as the interview was over, each interviewer would send e-mail to all other interviewers,

starting with the words Hire or No Hire, followed by specific feedback and suggestions for

follow-up. There was no gray areaa good candidate who just cleared the bar was a No Hire.

Based on earlier e-mails, people interviewing later in the afternoon would refine their questions to

drill down in areas where the earlier interviewers thought the candidate was weak. The purpose of

the interviews was to push the candidates until they failed, to get a full understanding of both their

strengths and their limitations. (See Exhibit 3 for an interview feedback email.)

After all the input was in, the hiring decision had to pass two screens. If the reviews were

favorable overall, a final, end-of-the-day interview with the candidates prospective manager was

scheduled. Based on his or her own impressions and the comments from other people in the group,

the prospective manager then made the hire/no hire recommendation. But to assure that only top

candidates were hired, a so-called as appropriate interviewer was also involved in the interviewing

process. A senior manager explained:

Very often, the as appropriate interviewer is a person who is outside the hiring group, a

person really solidly grounded in Microsoft culture and committed to making sure that we hire

only those who are going to be good Microsoft people, not just good people for specific jobs.

That person has veto power, which puts a system of checks and balances in, because the hiring

manager may feel a lot of pressure to fill a job, while the as appropriate interviewer doesnt.

Microsofts tight control on headcount further reinforced the pressure to resist settling for the

merely satisfactory candidate. Even in the early days, when the company was growing extremely

rapidly, Gates and Ballmer insisted on hiring fewer employees than were actually required to carry

out the work. The internal code for this philosophy was n minus 1, where n was the number of

people really needed. Said one senior HR manager:

[Beyond hiring smart, driven people] the second principle Steve Ballmer was preaching was

that the default decision on a candidate is no-hire. In other words, unless you can identify a

clear reason why we should hire this person, we should not hire him or her. . . . That principle

has been really important in keeping the bar high and our selection ratio very low.

The companys credo was that an adequate but not outstanding new employee was worse than a

disastrous appointment. If you have somebody whos mediocre, who just sort of gets by on the

job, Gates explained to Microsoft managers, then were in big trouble. The big trouble Gates

saw was that, while poor performers were quickly weeded out, a mediocre employee might continue

to occupy a place that could be filled by someone brilliant.