I probably won’t comment much on the upcoming Vanity Fair piece on Microsoft, but did want to add some observations on the review system (which it seems VF is going to emphasize).
The basic concept of a curve-based review system is used across many high-tech (and probably other industry) companies. Digital Equipment Corporation, which by most measures was a far kinder and gentler employer than Microsoft, used it as well. And Microsoft used it during its highly successful periods not just during the “lost decade” that VF is writing about. Employees in any company hate these systems because they set up a competition between co-workers. Employers like them because they force managers to do their jobs and identify (and appropriately reward) employee performance.
If you look at a system that doesn’t force managers to differentiate between employees they have a tendency to rate everyone “satisfactory” and reward them approximately the same. So your superstar who walks on water saved the company gal gets an insignificant pay benefit over the 9-5 spends more time at the coffee machine than doing anything else guy down the hall.
The truth is that the Microsoft system of the 90s was far more brutal than the system of the 2000s! But in the 90s people complained less because the financial rewards were so great. Those thousands of competitive college hires were happy to be out proving they were the smartest hardest working software engineer on the planet.
What changed in the 2000s was three-fold in my view. First the attempt to make the system more transparent actually made it less so! The old system very clearly communicated the stack ranking that had gone on behind closed doors. The new system obscured it. (The newer system had other quirks that made it suck, IMHO, but I won’t go into them since I probably would be crossing a line.) Second, the company went from lots of single 20-somethings whose life revolved around work to people trying to focus attention on their families . And third, in the 90s you were competing mostly to see who could get to millionaire status the most quickly. In the 2000s you were fighting to avoid becoming layoff fodder. The same system (conceptually) went from being primarily a competition for reward to being a fight for survival.
The rest of the discontent with the system really has nothing to do with the system itself but rather with poor management application of it. For example, the VF abstract gives an example with a team of 10 people. It is crazy to force a team of 10 into an absolute curve. In fact, the curve probably only becomes absolute for organizations of 100 or more. There are various techniques for addressing this, but any second or third level manager who forces a lower level manager with so few people to absolutely follow the curve is failing to do their job.
When I was running a team of 35 my directs would assign their ratings and then we’d all get together to stack rank my org. Then I’d look at my curve and, if I thought there was someone who was getting an inappropriate rating, go to my boss and talk to him about it. In every case that I really went to bat for someone it turned out there was someone on another team that the “curve” was pushing inappropriately high and thus he managed the swap of ratings since at his level he really did have to meet the curve. When I was running a 300 person organization I also worked to make sure that someone wasn’t being inappropriately rated because they were on a small team. Of course some people still got ratings that weren’t quite perfect. If you are “on the bubble” you risk being pushed down (or bumped up!) a notch due to the curve.
The other failure of management is to wait until review delivery to let an employee know how they are doing. Review results should not be a big surprise! Sure the curve may push someone down or up a bit, but if they think they are succeeding wildly and then they get a “you’re failing” rating that is a management problem. In many cases the manager has failed to let them know throughout the year how they were doing. In some cases the manager did let them know, and they were in denial. The review results are an objective measure of both absolute and relative performance. It is up to the manager to provide subjective feedback at more frequent intervals so that the employee has a chance to adjust. As much as this is common sense, every manager (and I include myself) ends up learning this from experience. Or I should say, every good manager.
But the bottom line here is that little of this is Microsoft specific other than perhaps the shift from competition leading to great rewards to it being a fight for survival. And that is indeed an issue that Microsoft needs to address if it is to remain a great employer going forward.
Hal's (Im)Perfect Vision 
Organizational culture is what everyone points to *after* the fact to explain success or failure. I’d like to see someone use culture to *predict* outcomes ahead of time …
Puzzle interviews were all the rage when Microsoft was on top. Now, they’re out of favor and coding interviews are all the rage.
When Microsoft gave everyone a private office, it was admired for eliminating distractions and trusting employees to actually work when nobody was watching. Today, the fashion is for Google/Facebook-style open-plan offices where you spend four hours listening to everyone else’s conversations. Oops, I mean “collaborate.”
People used to point to Microsoft’s competitive culture as the reason for its success. This intense competition, people used to say, allowed the best ideas to bubble to the top. Today, it’s the reason for Microsoft’s stagnation.
Coding interviews were the rage in the 90s as well.
I think at DEC there was a huge difference between the engineering groups and the rest of the company. In many of the groups politics seemed to rule everything. I know of admins who literally ran departments while the department managers did things that I shouldn’t talk about. I know of people in the field who switched jobs and went from average ratings to winning awards and they couldn’t tell you what they did that made the difference.
I only hope Microsoft handled downsizing better than DEC did. At DEC the supposed “deadwood” were given huge severence packages while after all the “deadwood” was gone, the people who were TFSO’d received very little.
Having said all that, most of the people I know think their time at DEC was the best time of their lives.
DEC tried to do things the right way and do one big layoff, but as its financial condition deteriorated it was forced into multiple rounds and reduced the benefits for each. Thus the results you note. Microsoft has not been in a death spiral and thus, as far as I know, the severance package has remained constant through its many rounds of layoffs. But the fact that they institutionalized layoffs as a regular management tool, instead of stopping when the announced population target was reached, is worse in many ways. And for me it is inexcusable for a company that isn’t trapped in a death spiral.
It sounds like layoffs at Microsoft have become a coverup for poor management. That’s too bad. I respect Microsoft and many of their employees for the excellent software products they produce. However, I decided about 10 years ago that I had no desire to become an employee.
The nearly continuous reorgs in some large divisions of Microsoft are another factor. This particular malaise (one of the more obvious symptoms or poor leadership) wreaked havoc on product plans, strategy, people reviews and much more. In some groups it is alarmingly common for employees to go through 2 and sometimes 3 managers in the course of a single review period. Fair and sensible review are well nigh impossible in these circumstances.
A couple of other comments (at least from the MSFT field organization (which I was in for 12 years)).
1) One severe problem is promoting your best people into a level/pool in which they cannot compete. I know several people, who, after being identified as rising stars, got several promotions over a small number of years. Suddenly they are 65s and competing with their boss’s boss who’s a 67. Three of these are no longer with the company after two years of bad reviews at 65. It’s great to promote your best to the point where the system seems designed to force them to fail.
2) If the ratings were actually objective, things might make sense. I was “termininated for performance” last fall at review time even though I was in the top 3 or 4 of my extended group (about 30 people) in 4 of my 7 commitments and in the top quartile in another 2. My manager claimed that my failings in one area (which, not surprisingly, I disagreed with — by my measurments I was in the top 5) were enough to justify my termination (no severance or anything else after 12 years of service).
I’d much rather be a 65 than a 67 in terms of the review process. The 67 is expected to walk on water, so they have to perform a lot better than the 65 in order to get the same rating. The same is true for the 68/69/70 band. But again it is a damn if you do, damn if you don’t situation. A 64 who is continually told they aren’t ready to be a 65 will leave. If you promote them to 65 it increases the chance they will fail dramatically, and then they will leave/be forced to leave. Don’t you think most 64s at least want th opportunity to prove they can do the 65-level job?