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.