r,i HARvaRD lBr.,s, MEss lse Noor.

9-3 00" 001

Microsoft: Competing on Talent (A)

.^ Ir the summ* of 1999, a konr page tyajl S4eet Joumat arhcte was aihrctin,t airenrron on the
Redmond Gmpus. flnder the headtine,,As lvljcrosoft M.tures, Some
r.r"", 2r,""r"" i. C" Oir
Inc ,re dl ie r'p,, .d -t.ed or g(et ne oFdotne" r1.na."o T.p r,r',,," r,,,",-.*rl-,
a.coaponco!t.ro.otLsc.Doriresrowthor'L,Eodwd)o.,.Fbo,.ninrA.rerrn-n-uo,.oozenj"".
of the lompml/s most capabte lead;rc, all arouli au, r,,i".p,"a
Frhibtt I ror l,h( "* "i r","" i .'." O*
a,n. h'. Lrt o..e-,or'e\et
qppdn-,e. j "_p",""i"I
Steve BJllmer. rhe comp.ny s rccenrt) iFpojnted presideni and COO, was
quoted as saying ihar
some ot th€ dep iurcs were \otunr \' dnd sohe were not, op""-g oppoit".it". roi 1."s1",,
smarter replacenenis ,We hav€ a bench rhar is \er1 deep,,he sari. t). hai,e peopre wtro ae rrea
up-drven Jo lead the nar generation.,,, despii. rhe pos,rrve outtook,'Baffr"". .r*Ay
r- o8lr-ed U1d. A/r.(..u r l-".1 ,o. _ler
-". or ra"pr "o.. of $p humd *-r,*
orroNr'r ir ro d.-Frb F ard rp drn hit ( tU Bi C,rp.
o..,,-, *.
Fl " prouJ\ c" ed .ihF be,r rc" n oi -orM-r.""o
h
professionals the world Jusi six weeks beiore rh; Ws/ a.ticle was published, B.Imer
liq doun.ed ! pdclrg^ ot .hdnScr lh" .\.erned dt,owed more rr.d,ent p,omoJo -
dd.o'ened.oreot!\ep,e.-u-e,rndLhaotJngbeenpdr".,r,e.. or ih. na.o-.ore v,crJ"orrc,tt,..
snI, there ,yere some who rvondered if rhe mblmgs in rhe senio. mdagemenr rdts reporie.l
bvlhe^n^*.m .t."--,8n.or d8e-toon"gprohrem",ro.\4hro,o. t, ..:;;:;:;;;,,i..,,.,
.6, oJ-rv b\ coter ond Brrtrpr h Lo udc-Jruod ..r/ ,
et, Jrdt rL. .^Tpd_, . Fno_nou- 5,, -1. * r a:
largely due io lts abiliiyio recruir, moii\ate, d ret i" tui".t.'
"rt"ao.a-o.y
ln the frret pa,i of r]!r case ,\e wilt e\plore rhe loundarlons of Microsofr,s human resource
pu ,c,es and prr.hces as de\ etop.d primarity n rhe 1980s. lve lrill then examine how
the ronp--\,8-ostr leo t^ L-d.BF- ,4 -" qd) -urh pot,ce, ,or" m aAed D .e t9o0_do
qoi etr e\ to 'h"r8o5 in rh. pol,. rp, r-em-c,...s ,r. c t\hibit 2 jor M..,. .o,t .
E,.h - proht^
,

Recruiting: Attracting the Best and Brightesl

Gaies had long.ecognized rhar ji rook exccphonal people ro lrrite
outsrmdhs sottlvare Hic
D,eh €nF ror i-,rhs e ,remet, ,r .t.iser,. nor rec".,_,i y
.i.p*i*."a .""',.r"g"?,,a-d.-
ll"l,."::i:::1.,,,--:,n,,: ",:t*""1 ...ouae"p.ur ,,renre(a.t.o,i"ui,,g.,". p*p."
",,""
uieyserror .Juo-,heir'>ndrt Lpr..- rn,uoceqj.n.ve,r-.h" mpo,"neorri.rur.;*"t,
 on T'l'nt (A)
Microsolt C'nPeiing &

r-J'dter'hir,tl__b"r-o''Lr"rbh
s"5co-{d,tlfrerfo(coD)Lcte'whocoi',,oeredherPmbu
';"'" the flellecr!'' ProPcr'l D-'he'
rold
.,n.I-dd-.- r. n', sre"ler".co-Ph'nn"tt ';
ifl'.'",.,;h,n.g
importance ot
"i;.;:" "'.,, "1"1."1-,,:i,:::.3i:::".:..fi;
retaining and suPerror
Ill:lll:3;-j
M
anLcomP\1'
;::;:;' :."-" ;ii,;,i'o t"i'rr' - "" rrrbeco*clu.rPo'
ioDortui than "smarts'-the rbilri to thinl
creaiivcly;
For Gales, a.quired knowledBe $'as less Abo'e'rr'h^$ee-
"""':;;"'.";;- " '*po,''n' '-"'u"i'- '" \ 'rr ''"'o{et 'rmc'd'!'
o n'i " o '_' m beo burh"s'd-' 'or'
ru'rin; lo.orlru'r'y -r'""a'"g
1,.
^," ." -o ,\. i. '"'''
*'i
" '": to go rnto busrd'ss \sih Paul Allen 's
have had to do with P1'khg PeoPle"' r'" \e'e8llm"r qh' h" bee nt
nr.."bl' "rdrelopur Ll-'l-L i-d'"b'eqi"nil n'''e' ti'e"J
;,;".* r"''"""".,tsli'j*:.'1..";-;
:;i;:',';J':::,;;;
;y mM widetv recognized rs
a
" '^'
a genrus rn ru!
,Y,",ti;I;#ii'11

*mG, r,!m ihe dna.^: y'.:l:"...::.:;H:11:j"..'*,;]-l?"i:"*'j3,;ffi""J,'Jil,:,1,TI;

, ,1,-r '|p po-'ror rLre' ""' " "'i11"'':'"1?".:,,;";;," ;" , ,'" d n, peupr' .u.o lre n irr
:ll J'::,.^t::i' :1': :. ;::T;;lT:::'
ll;""l:, i;1,:l *:" t :'[,I ;:':
;*l;":B"Lmer,
.l,out to.la\ ' And once the smartest' mosl
:.rl..,::,""^,; ;,."-on..trd rr'rc'' '"ndmgp' nvr-ere' .saro :'""" " "-
;.; :,. : s,: r,n.,**,,".o.i;;15;";"i;::ll""r"1[.iil:' :."".':"J]
,,7i.':i;;il""'
.;;;ll:f';",. ui\Ij'ruson: ;" i;i"'- -' ,ip u'' ' "na r"' 'o'' 'on''*"n t'
asp€.t su'cess s
".;rlooke.l nor
,rr ,o,:n lne.."d ..' con Pdn to f-ai. rome le/ peopl"
tor e<peirenced m"r. ee-' r"d ed'r'arionrr
;;;i'tr,"3 ts'ounds w"te err'P
in r,e FJr ' or) "' "'""'i'
''l!'":;;;;''*4"1;-'
';;;;' ' Ie'
h8hr! 'd-eptrd
p \a " Mr
r". ,n tion,.
" t,ourlv hdndro' '"Li'- "a"::lJiilj;:.:""1ff,1:
.i;-'l i-'d;;;:;;""c'pd re. u r'ns fj:".'".:i,.;::',:,:::
'-; 'i 'r:' :.Ir":: ::d.l::lT; ,1,'"'li1;; ;', , n"'* l-"*' ' --'- ' n d rii"n' e I Ii\e ro
peoprF-
p*'.rred people dh' o:d'
Dd\uq,rL.eq.rpnuon.o D -d"'o 'n"'' "p"'"
:'.i;; ;,;";."" "-0"". \
"r
JF' ^ or\ ho r' or re( hnorosi'"r apPr^r'he'
lhat
hall io sufl_ive an illense intervieiv Proc'ss
Before beins hjred, holveve', every t"' '"-'r I dro'onP,'necuPro 0

.,:: :. :"; ;;b) ;",

.8 ,"
r,."*, u""""'"";;::;"*^-a
-,-",."'r."
'ddidale

1 ;-:;";fl :.:;: ;*:"i"J:,:lJ#"

t' j:
Drocesses problem sohug abrlrtic!' '1i!o the lines of code thai rvere
i^--,." .r".,"t""ers olavea ,,"t "" ,-p*,*iroi" in Mic.osofi-lvriting
i,'":-:;;;';'. 'J: e ,u,r .b D'|o e* \'r Par -'" r) riEoroL' '
' that cnd:i"l:L:'-" *P*"0
recuical r"tcrviews lpLcallv io'us'd on Prosrmmms Prcblem\
*'tr' rcv 'nro'm''i"" ^:'T9-l: ?:""I
ro mswer bv $'ritins cod". s.-" '-"g"* i''"""o 'c""*i'i
ro Th"1 lhc) mrShl ti"o' ' er
,"""-."01" .,."r.", cr oo'' or r' 't -ol"'t'"" ' 'oltrrror Lhe'ndJ-\r'ne"nr
"
,1"-""'Li":n.""'-''a"*'"""'""''sep"''on''"r'"'o'd
"J""'", p""uLJE1.'or"'e' <mpo:,:l:'-.]l: -*t*"
io test the candidalet .Ied*h* '"*'"&;;;;;" l_o$ ""aheirte^ir'vwd PfrFavp\
,-v, ,-.n ode_hon,'t0 'ecora ofLrro'gnta d-rdtl_"\drdr'r
rhe\ w'r not dl dPp-oPrJie cdotdaL''
.'er. lrrrc, we-e n$PdblP otrreari'" p';';";;i's'
i-n1pr"l a""""u" the petect w remote connol-
NFxt an unlamilie but p'"H'"r p't*'ii"' simPle or conPlex rhey
mieht be throlvn in to see l'*' tn" t*u'd""'i"o" a;n Lhe problem'io'v
-,?.,i"..r"U.", *a rr tn'tsolution sohed customerneeds
 Microsoir cDnPeuns on Talenr t,a)

&

As soon as the iniervlew r-as over, ea.h iniefliewer ,ould send e-mail ro aI orher inre(,rewers,
sta.ting ryiih the words "Hire', o. ,,No Hire' folo\ e.t bv specnrc fecdbalt d ,"*"stlo* r",
follo*up rhtre was no ,,sray area,,_a Sood candrdrte ivho iusr cleared Lh.r", .." i: ri" u""."
q,'T o, e,-,er.-nar .peop,e Lrpruiehrrs rrp-r hpar pr oun, r.,
d,.flJo/-,ncr-d,,v.relFedl,er.nre,.ip,v.-. lho-8rr rhe.r_dioJL.-a,.r." "-_".",,.
ha,vecL..lh"DUrpo"eo,
the inle(.Fws sas to push ihe candidaies until they iailed, to ger a fuu una*.,-a-* oit.,r, ,r,""
sirengths and thei! llmriaiioE. (See Exhibit 3 for iqteniew f;edba.t< erail.)
qfter all tlre Dput was h the hrfig decisjon
. ha.t to pass rwo s.reens If ihe revien^ were
ra,uidbl" o\eidll : rm.. and ut rl-e-oa\ rk lrew wr,h L_t-: cd drdare" prospe.hr. r;ndgr, hc.
jo-,crdLe,onmen.-rr,.o,n",'p"opr",n,f,",o-p
...'edued.n.-ed
ln- pro-Ee.livp r"nd8p. rher n le l]le hrre 10 rI-" re.onmend"rio . arr ro ,-rru rt r. ont. rop
" ,as
.andrdates were hiled, a so-.alled app.opdaie,, inie^ iewer was also jnrojl,ed in ihe jnreMewmB
p.ocess. A s€nor mmager explained:

Very ofien, the 'as apprcpriare,, intefl,ie\ver B a pe6on who 6 out"rde the hrins
A.oup, a
person realty solidly grounded in Nli.rosofi cutture d comhlted ro hakms *-,fr'","".
orJy ihtre who e goDg to be good Micro,oit
t"-
Feople. not lust good peopfl r., ,p"",r,. i"t".
that person has l.€io pNer, whjch purs a sysieh otit *a tut*""s ii, U--i ri," hi.^g
manago may feel a lor of pressure 10 fill ajob, while ihe"cr."
,,as
appropriate,, inlenie$.er doesn,t
Microsofi's tight conlrot on headcounr iurther reintorced rhe press!rc to resEr
settlins for ihe
merely saiislaciory candidale. Even in the ear\ days rvhen the;unpan) g.o*-g el.t_u-"ty
rapidly, Cates md Ballner instsred on hi.jng fcwer empro_ves th.r rere i.r,*i
".u"
u-. rhe wo l 'lhp .teflul .^de fo- rL, phto,ophl *". ;, q., s r..whe,. -q""?a t, *-,
-eall) r.pdeJ Sdid o1e -pnior HR mdrber " "". rt""..fr"..
I Peoprp

. IBel,ond hirina smdL driveh peopl€l ihe second principle Sreve Ballmer a,as preachins was
that ihe default decision on a .andidate is ,,no-hire.,,_ h oihe. words, .,nless y",r'.., ia""'tiiy
'Itu- ,aln s h\ $-"hor.o nr.e,.i- pehon $e.ioulo ro'hjp 1,m or her ... n"l pi r.rpt "
h".b e-redlh rnpundr hteFpns nebd- l'ghddour .et-..onrdLo\ea ]ow

. The omp
dFd-hou.
y s (edo \vas rhare ddequare butnot outsimdlng nerv emptoyee
was ryorse than a
app.ahnm.. tr )ou ",e -or.ebod) s o, nediolr;. hhotu.r-o I otee..01 oa..r
job," Gaies explained to lvlicrosoft managers, ,,ttien u,eie n big iroubte. rrre
he [o,ttl" cata
sa$,a,as that, rvhlie poorperformers were quiclt) *""oea our, i .mplov e; mish i conrrnue
Loo..Jp\ r pla.erl.r. coLld b-r,,ted b) -oneonebr'tri!rr ^"a,o.,e

Microsoft's Work Environment: The Caffeine Cultule

Microsoftt cultural norms could be traced ba.k to ihe company,s siali up days when
caies,
Allen, @d four proBrarDe.s creared a horhousc ol rmolahon dhardho.i
n'"y t.pi"o-g"
hours, .onsumed cases of Coke (deljvered rivhe a veel at compan)
*.*,uinriy ,r"pt
on ihe of he flmr. Soiix are_devetopeE domuaied rhe conpa;y, ed ".p"*"1, "ra y".r" C"i", t"*,
i" tr- *Ay
tner ndm* laces d iehphohe ertrrons by heari. Said one piogru*"., t i,ej
ro_ MIT - u."
earl\ Iq80-: 'll / c. dboJ, rhe ontJ compr) \1ere )ou coutd ger your o"n ofri,, d Urdr.td8e
m
your career. There i\.as a lor of respect for a young kia.igt,t o"t oi"uit"g"."
B\ .o8b Vj.rcr{.ddr"art) t20oempovee.rdmo.cd,.olc$.o.tj-""in"20dueD,opert
-
-p sFr to oi i .dmpL>. rur a corpordte pdr^. r R"omo.d. t0 n,t"- e,-r o, sedr,tp. .l o pr,ur. .o(
rnterJchon the campus rncluded nrmero!s .afererias, which pror.ided food "t
ar prices subsidize.i by

I,,

ih.----
 Mic.osofr cof,peting orTalent lA)

the .ornpan). It a'as calculated ihai Mi.rosofi sPent more than $8,000 per employee each year on
nonmandated benefiis, with more than $715 of that going for beverates and food subsidies As one
empioyee explarrred, "-lnylhing with caffeue is free" A former director of human resources
descibed the campus envi.onment

Ho,! do you make young kids who had neler been awav f.om hom-or o'Jy as far as
collegc<onrforlable? lve antcd io keeP the ahnosphere at work one they werc somerYhai
familiara,ith, and also make sure ii Save ihem a sense of socialbelonging

Because Gates felt solitude and Privacy were ne.essary io allow peoPle io "sit dd think," ea'h
.mplolee had a tully enclos.d 9' x 12' offi.e with a door. P€ople were encou.aged 1o de.orai' Lheir
orri..'lowe"* U."1 r.nied ("Iis kind of like their {lo!m room," said one manager.) Given ihe
lons hou$ and fanahcrl pa.e, hiling a .omfortable {rork environmenl was lecogmzed as berng
.. .n . ro n nd menr.l I eallr .)ee T\hibitl rorcd PU- o u.n.ePict!rP'.r
".,te
trhile ihe move to thc Re.lmond.amPus in some says slmbolized Microsoft s slutt fiom start-up
10 successful .ompey, the early values of ftugality iemained remarkably unchmged: salaries
!'ere
modest, employe;s tBeled coa.h class, d there were no staius svmbols such as execuiive dining
.oo-" or f;.i office fumiiure. Long-iime managers reminded newcomers that the companvt
success had to be eamed one day ai a rime, and "ealing weenies insiead of shrimP" $'as j''
the
p ,lo-^ph],or '-cce... Th., Philo-.P.y e''' ded to re'uur'e dllo.dnon lu e'dPle' '\P - r
i empiol-ert ph,to"oph) nut on\;nsured that work lvould focus on the core, Priont-v issues, but
also rlai eve4one lvouldbe sireiched and challenged.

Thc culture ath'acted Lhose comfoliable s'ilh 1+hour days md rvorking rveekends, working
toward Gates's vision of "a comPuter on every desk in every home, ruming on Microsoft sofrware "
Gie \'licrosoft employee descrjbed a typicai day this way: "Wake uP, 8o io work, do some a'ork'
'Oh,I'm hungry G; dolYn d eat some breakfasi. Do some work' 'Oh, l'm hungr-v' Eat some
tmcl wort-mtrt 1'ou aroP Dive home. SleeP." Yet desPite ihe fast Pme and healY workload' tre
motjvahon and mo;ale we; hiSh ("Our efforts are slSNfrc:nt to m lrons of people-Ii s 'ld
changc-the $,orld thifl8," one explained.) Bui sone eventullv becahe wom doLvn bv the
a"-id:"g p"ce, -a b"rnoui was a .oniinual concer' As one emplovee noted, "one vear here is
like threc year! elseivhere."

Through all the g.os1h, Gates lrorked hard to keep alive rhe feeling of a mall comPany' He
contlnualiy rcstruchr"re.t the o.ganlzation into small 1nils-tyPically with 30 io 200 People-turth_'r
dividmg riese into Nork Sroup; tith lesponsjbrlrw for a product ProJecL or Program In this hi8hlv
ctra.geibut ntormat envlronmenl a .ollecdon of,mill Eroups Ether than an rntegraied entity-it
i,as ;ot m.ommon 1. run across a ieah of developeis Playin8 vollq'ba1t in swjmsuits' or fencing
with rubber svords. People sPoke in a iechie souding stang, much-of which w6 deril'ed from
Gaies's personal iaiom. ilor i:xample, "bandwidth" referred to ihe breadth o' one's inrelle'tral
powers, great ideas rvere "cool" whil; those that vere less thmenliShtened were "redoE'")

To those trom more iEditional orgdizatioff, rhis lrenetic'Paced, develoPer dnven' resource
constrained management model seemed chaotic. An ex-Xerox iechnical manager aho
joined
v,cro.ofr n ,"8., r;dd rhe ,a. ( or pro.e.5ror"l rddSemen. \urpns,nB:

There i'ere a loi of mmagers ai ihat ume who lacked the necessary skills to n age People'
It was the Peier Princlple: verl su.cesstul technical peoPle would Set promoted to
ranagem.nt roles. You'dget 30 peoPle rePo.tinS to one guy lvho a-as not on speaking icrms
wilh two thnds of the g.oup,which is mconceivable
 Ml.rosDft ConperinAon Talent {A)

A softrl,are programher f.om a large compenior had a sjmitar reacLjon after he ioured ihe
.ompany in the mid-1980s. His surpiise stemmed from ihe timited cross 6t coor.linationi

They had a modellyhe.e theyjust torally {orsoi aboutbejnq etii.jenr. Thai blerv our muds
We .ame oui of a mainlrame ,!orld, and nere ue r.e,e ttt,c.o.oit Datch,n8 at ot these
software tools thal w.re snpFosed to a,ork togeiher teing "t
built bI iotatty inclep;ndent units,
dd nobody was lalking io each oiher. Tle\ Jrdn'r lse any or ei.h orfer 5 aode d they
djdn't shaie anythin8. Blt over ihe years,lhat probablv iurned out to be in ihe pC wortd one
of the mosieffectlve hodels.

ThrouSh the 1980s and into the 1990s,ftuch of rhe dircction setiin8, coordination, and conirol lyas
managed by Gates personally. His legendary inteltecL high,energ./ invotvement, and iirensety
competitive nature lcd him to adopt a very "hands on" style. Du.ing rhis hme, he moniored around
100 bi'weekly (later monihly) status reports tuom proje.i md pro$am iems. He sa\e his rote as
assessing the 6r and .ompetitiveness oi ihe entire p.oducr portfotio md makmg the iough te.hnotogy
veEus.ommercial hadeoffs. His rcviews an,l nrenenhons coutd be .L,rxtal i Do ).o; wan! me io
arite the .ode for you?" he asked one laggh8 team. ,,t could do ft over the weekenrt.,,), but
developers found ihem stimulating and even mohrarmg ,,The objcctilc be.ame to gei Bitl to tike
your product," said one

One ex-Nfi.rosoft employee summed up the progGnrmers, feetings desplre {,o.kjns md.r
const i pressure this way, "lve i'ere liieraily cha n F,ng rhe , rorld. y ox feti
).ou u/ e re a r rhc aenier of
the universe Ii lvas b lnvigorarmg leeling,and all ihis po!ndtnt by Siel.e Ballmer md yankjng by
Bil rvas just the pdc€ you paid tobe ihere." Another said rhai Gates and his lop franager; '.reated a
.uliure whe.e everyone fett ihai ihet excellence was material to the bo$om ljne.,,,i yet another
former senior sofrE aie developer smmed up his view of the .ulru.e:

ln a lughl), compeuiive, su.cess orienied environrnent such as lvllcrosoft, hory .1o you
-r.p6d.('o.^ing\ourell od dor"eddrr goodiob,oa'r.-rrr I veoJ.e droud vo- r.
doLag at leasi ihat. And eve.y one of those people aroud you is at leasr as sood as you, or
beiter... The orLly a,ay toachievehereis to push theeraelope or hiraryou can ao r,".yauy
hy to do belter. Work smarte. Work harder. Imovaie more. Peopte are focused 100% on
performing their job as successfully as possible.

Developmeat Through Stretch and Chaltenge

The commiiment to build Microsoft on h\e foundaiion ol smari, drive peoplF,,hard core,, in
Mi.rosofl-Fpeak-'yas supported by d equally strong belicf ihat sr.rch jndivlduais were besl
developed th.ough challenSing and enga8ing work assigmenis. The company,s rapid
Browrh
.ombined rviih its "n ni,ls l" staffing philosophl/ ensured rhai people were thrown ini sir;ichjng
assignm.nts very early-often befo.e tlEy were ready, a.cording ro many insid.rs. Consequently,
alrhough luicrosoft offered several fomalized trainDg progEms lor manage., maauto.y.
The head ofthe.ompany's Execunve and ManaSement Development group, explained: "o"e -os

We have very limiied educaiional dd riaining opporluities for our mmase.s. But I rhint
l-dt\-ldr"ao:olurelvde.etoper to-der, . Weg"rp"6o1"L",.rro no.:,rommaap-g
10 peopte to managing 200 people overnighr. That kind of streicl in the job witl e her c;aie
growth or death. lorhhatel1., we have such greai peopte that most of rhem hav. just giow.
byleaps dbounds.

ii4-
 (A)
Microsofr comP'iing onTalcnt

il leameLi very earty ihai somelvould

Becausc the comPany P marlt'1 re'rulied teltnical experts' 4 mdivi{tEl rcntnbutors (as a
..t be efJective mdagcrs' thereJore P"'p';- ';;r't'p';""""
,leveloDer lor instance) and obtu- tt "
sa-e *mg.,n"", .:"-i*-o*, ".a
promotiun oPPorimilies
., ,"" "s m,- ,- i .-"D.od-c'1dn'cr, io,e a,pre
:..";.:;;",",;",".
mrq'r".i 'ecru ' nSoe"lor 'dd
! a-1.j o..81 aooer'e! l, ^"re'sldbl 'h"'j 'o 5'i'r m
-"."..-,.,...,,.;.""..",,,"^,.1":,:i'l;;ilI:;';::;::T:Jlal:TJl,;:l:
"o.' ,o.o"'"op ftrlrNee"rLJ:-'J.J;'..;;:;;iq
e'P''t l;:.,o,,r ,"a p- "*."-
..n'o' na o8b o F,a ",", iii::;;."..';;:;.5* ,o, *"r .. rherd..,o-J'.
:tr":H:ilili;-,il1ii*t+.t1i"-r'ei:ihi*lm-;,;:"rr*l*"*::
ein htred
ole, a nerv dc'eLopeL from a
I ro-mo"rron
r'c .'r-'r ,omoo"" """ "*' ;'';;";-'si'""'"u're\"r
'ollege
-",;','"" p'oai_'i'' '"o" *'rlt' lotof uP'1r ' _ On
re\ett0.o tp.., r' '-qu''.d oP ,l'r,', 'o '" "
D'e Leve'J2 rcrr"'' rPremJ hnorP
d"v',op'r.'rdl'd""' e 'n'1r';i' '"'-'
-\.rdpe
i'.i'"" y .,,,",mrager;,", "" ".,-, "' 1j::;r:if{":lg: ;.:: t. I;.. :'':ll, :; :
rFour.d thdr the des'Libe the
::";":,'i1.".,;..i;r- 4.,,, .' 'Fou,rd\ 1,e,'dppro\d
D.veloDmenialsoo.cuirel]bycncouragrnghorEontaltransfels/andempioy.eeswcle,eno!1raged
r aeveloo themselves bv switchins ,"'-tit"'il
i"' 2rl') ltars lnd&d' the pqsonal
job rd Be r'o o"'""" ''" "'"'v m'''"t'u l''''
c,orrL -j, n
"-'"'
,' a \ri'r o r'"d o ronorrbP'op", "o r"r
::: -,,;, .""1 ', -i-'. '"-'';"'-' ' I'o frieth' oe''o
\\''ordrod'roure
.^,r-"o.r.jl"dPro,e'b Theo"nq-o''o
ti :;i,"r', : :"
;, m ns,^, F L-e.o
:
;:l;irr::::";:;"ill:i ::i :ij"1.i'iJ:
., ,' ,p'-, rer1,-c ord no'"':"'. *::' ,,i,.;,,;; Lt e rre.'oe r P,
v'
ror therr leamrre fia' Pmrshed' A clas! "- "*,,a*
!::,:il:"'';i:;i";;,:,i*u;; *** * " *'"' "r such "rearnins
experien'es"

lworkedont}I.marketnStorLANMdaget,IilvasaEoPTh€ypTomo-tedfletoben
goi ott to itu't ]-)'1J^':':""o
ul-a"-' r"
.haree of markeirns ol 't " 'o'kv rhat soi
r" r.-8i11's assrstant and w*
""G'ip"
p*- 'n-g" ii
"'J'ti"i;ir"-""rt " ""-t^' '"-rccs
teen
'ff
suc'esstui
to a rockv starl too and tn"v
i'' i'""iJ hagine if t naa on
'"u" '" "
Pero -l
r.pF,,F'.-' ''d -rB l\r'c'o'orr P I st"d Li'n
m dcsloPmerr
Ar.,ne \ .h l:rcu-b:
-til'i,,-",n", ;,,,,, ","" ."";"*;":l;;Xt;:.';.r:l-'::jp:':::;',, "";
..,,rirrdvno,erd.sco'*p"'"''"":"'l:1,';;';;,;-"*p"."".-;.o
.ds e. . no'oo on
.rm,L\.pp -'.. r,o r"nlor'- o e'rou"r'"* s'-''l:i,"Ili ','--.i,"",i" -*t.
;; ;:;-, i
\''".,'-,r;r
* "
o"o*''o":llil.',il,l;,' :;i" l;i,il'"]:!f;,: L.:
""
o."ot 'n u". o"o r''or
"'"*--l:;:l;,i,;i-o*g'v.x"*"-q".red.'rhj..som'
,F..!n,-edr."'r':npor'i'Pc"or'her F!rn'D'l"I ^- :i::;.. .: i" h" m,i be,e,
bete h; or
,"::;;; ;';-;;' s*'''rru1'.o'^' norn;"'omer\'''orrdbeau'
P rr ver o"rPrd^d
nd, orp' ea-,r' Pdr'rr'rr 1' "igii ;*' ' '
rdkp'
01,,\.ra
DpoP '
.^"" ", '- *-a P-Pt"_'n'r8a' L do ' "-
,
"". -... d .,',: Ll; ::i,:T:.;:.ij:,:-:,:1, j.';;::: ;:-:T:.:t:;
!, o p")po
' eg-no"':e,,rv"etng
,:i;:3f,:::. -:i"l:,":'::^" "iT'l'Jr ;,":.'';";'i';'''''
I t-e!?l nlmbe$ disBlhEd
 Microsofi coipetinS Trl.nr (/i)
s on

Teams seni to great lenglhs to prepare lor such reviews and a common practice rras to rehea*e the
preseniaiion, ryiih someone jn the role of Gates \{hile Gaies challenged d probed, he also
respected pushback-as long as ii was backed by data. "Erploration of issues could be brlral a
knifc fi8ht" according to a iorrner emplolree But as many acknowledged, the rrue value of the
meetinSs was in the knorvled8e and commitnent the ieam gained f.om then pr.parntion.

Cai.s aiso added oversight to what was essentjally a tuee market process of alocating scarce
ialent bymovin8 ke). people from one project to aroiher, not only io influence ihe projed's ouicome,
but also to acceleiaie the h'ariing and developmeni process. He explained:

At my lerel, lvhat do I real-ty control? If a project really appears io be broken, then you
u t an independent review of the code- Ver). early ir the company ]'d say, "Hey, give me ihe
sour.e .ode. I'll iake ,t home." I .an't do ihat now So I take somebody, a D34 [Developer
Lei.el 341 or D35 and sa)., "Go dig inlo ihis thmg ad let me knor'," or "Help ihem oui m
tems of geiting morepersomel assi8ned."

Review and Rewardt The Options-Driven Engine

Rellecling GateJs behef that employee ownership raised moiivatior and retention, elel1 rn
Mi.rosoft's earllesi days, key e ployees rve.e given equil). in Lieu o{ high salaies-a skai€gy ihat
also.onserved cash for groNth. (Ior example, io atiraci Sieve Ballaer in 1980 as employce number
24, Gates offered him a $50,000 salary and a 6% stake.) In 1986, as the privately held compan,
approached 500 shareholders, Cates realized he r{o!]d ha\.e io take l,licrosofr public, nor just to ralse
$61 milllon in capilalbut also so he could keep makingnew employees olyners
)
Equalivweu established rras the linkagebetween individua] performance and reivard. lvhen hed
io Gaies's st).ie oI proliding faequent and t)?ically bruia]]y honesi feedback, this nom became
institutionalized ir a pro.ess of direct, ciear semi.auuat performmce reviews ued to pay in rcases,
bonus awards, md sto.k option grants. Gaies's style of setting specific qu hfiable objectives rvas
reflccied ln ihe nom of committing in writlng to measurable performm.e objectives ever) .,'
months. For example, a developer might agree io complele ihrce modules of code or redu.e the
nurber of blgs ,iom 1,000 io 50. Evenbially. the acronym SNI-qRT was appled io performance
oblecti!-es-specific, Measurable, Aitanable, Results based, and Time'bound.

The sem, annual revie$E also reflecied Cates's passion about learning ftom mistakes-.eferred to
as"thedis€asemodelofmdagement.'Sessionswererouti.elypunciuaiedrvilhquestionssuchas,
"l\hat did we learn?" or "What collld we have done be$er?" Perfonnmce revicw interactions weie
soon recognized as one oI Microsoft's besi employee development forums.

Paul Maritz, a senior mdater lvho joined Nlicrosofi in 1986, inlrodu.ed a forced eraluaiion
curte iied to a 1-io-5 performmce s.ale based on his erperience at lntel Over iime, the shape of the
.un'e -"volved to a dish'ibuiion, ln which 25% of ehployees received an evalualion of 3.0 or loiver,
.10% 3.5, and 35% 4 0 or higher. As one senior HR exe.uhve eplained, "The beauty of this rigorous
review system is that il has become part of the fabric of Mlcrosoft. People Sripe and complah, but
our suneys show that employees reallt appreciate that opportuit) io reset goals and get a 1-ieiv of
how they are doing."

ln addiiio to the fomal senri'annual evaluaiion and feedba.k process, mosi mmagers
revierved objeciives erery montlr or so ryith each individual. This piacllce helped Microsoft
employees avoid pe oimd.e-review surprlses and big deviahons tuom rhe agreed goals. "When an

),

Ekk---
 Mi'mso{li ComPsiinA on TarPnt (A)

to be" it means their

empLovee soes mto a rellew sa)!ng, I have no idea ahat my score is Soing
-j.'e" ,:a ,-sdPo r'ob -"rdwnPNrr"o\ot e ' ud\'
ta.h n-ebruarY and
ielie lorms desciibing a'hat
Atglrsl, all employees filled oui Derformanc \i "m"r
,n.1""-,:,:o.,;o"-",'":' .-".'i,, d ";;;"-;''" ' "r'o-(-d'e '\''l\cn'
\PP'ra's' n"'Pdr'^h'd
,n''hF molo.ep\mJlrst. dhotl'daop\rooe' r'i''-i"l'"''" """'nr^D'"rr/r"oroo'"ro J'"
iiJ;,:":;' -' ,*"*" .*.-" ,-s'';;;;'' n'r" '<r'-c'
;,;;::i".";;-,,;,'..,,ro,,,-o l:i:l;i;_]:1".;:"",;lii:_Il;;;::::J;::::ll:;
.^"e o, ,,'m"io, rompe'.Lo,:
'h,nn"' :"1;,"1";;
rcr( +
li;,&;" ,r."o,.i..r,"",p*." .
Tero to 1540 ot salalv. Ai Mr'rosoft mertt
LiL"i..-'. .,";,1",u,.h,e e-en''inrn,'mneo d "P'"P<r:od
Ar," d o ) 'DF "r, ,n^e irru . ih' Tlri::J::..i:d:l:J,hT: [:,.i.;';11:.'. ,: ::::j
\ n:.,,.neenp,o\eer--: Fdh'',o.he ,:!;";:,.:":.J,.rr,. \,q iundrdre-hc
HR eeneralist s ould meet $ rih tne muaB'r ":""." ii lras rega'ded as
re*n'ed for the lowst 25%'
)Because a score of 3'O or lorvcr rvas qe'
disc;ssion
;;0."',;;" ""d".:;";su,ua.ry-c-q.1.".0'. -..,.on1r,",.. ou,'hedo^r. onr-,
\ cn' t'N + 5 and onlv hvo or three
5 0 scores
liand. a score of 4.0 or abole lvas Sood news; tr'"rc'h'ere
6 ror
::Hfiil""";;.;r* n."""r'"' '"'1""a " las'""r "is't r",''
iorn'l
cates (see Eahibit

sample Pe.fonnancc rF\ier\

,n Ausus'. manasers a,so .:,". :I:1111111TX:".".:T"]):I,::$::"3,::J,i:ii:i:.'ii:,#ij;

thc fos'ard looking element oi ou' compensa a \4
RLsour?- OP..n ;-'' r"lue lo cno to'tnr'"I '-o"olt' 'rr"r "
d'I""i " :,
*".,g. .,,,,"",-., Fmo,' eF "- onr j::'lT
J*',jJ:*":J:";ffi :;:::iil",5
tprm comDdv rssetsl,a manager leret "X l
e'r' r"aa"' r""er ha'1 a speciried oPrion arlocation "maximur"
:;;;"1';;;'.,";'i;: "pp,'*l r ee-cono'nral -l'e
e\JluJnor' sPr< dPP'tec i -'"g' "'-"1 op'on'oar'
"s"rns' "l'ic" tr0;' o Lhcn"''mm fordn A rrring
a,e^rire6 e5hrrareof s"pt''U' 'r'o'"tt'-*ela_r'-'"- - da'i'l
ii,:.L.. s,',' - dduo""r0'"r"rdL'druB )"e T\h;bir rJr conDen'"no-
"i,;" ai the hrgher tevels A few
Plblic tecogniiion dda'saids 1{€re not u ldelv emplol ed' at least
a m'oe r"'m"l \aI \rmp\ d'd noJ iake
attemEts to institutionalize emPlovee '"""g"';;; ';
Mi.ro;oft's individuallsii. "'it"* tu* *"'"l"' "i- '
p'a"* " * 't"pPed the emplovrcs who
raks

;;"..P...;
;::';;.k;J;;;;i[;i.""ei.'"a ia"'t"r pr"i""' r""'t"i' tt"'1 tme a it us
Produrishlps'

.nntrrburer r ou hai e made to Microsott hr!

, :::Iff.;::*x;i".:I"'.T:,5;;::.rH'*
l*=L *;tin8s
a""." }.ho did d
a feu'People
:t,ards' manv used ihem a5 doorstoPs,) v"".rl
".'j":;d;",:;;;";,b,-^"""".:..,::i;*:;.,:;y;l;l;l;:;,1".,1"J;.Xl-ff';i
".
l r.ent above nnd bevond or achiered malor t
*"' "'r^v reog"d" we reno o be \erv
'r'l e''*t'i
'
."1:. ;: .; ,'", ";' rao rnm ''m
1' parsimonious
""
viih Prarse aroud here "
i
'il
Mictosoft Through lhe 1990s
{ ud tfe nudbs ol emPloees mored
billion
ir. As \4raosoft enlere{t the 1990s, sales exceeded $1
i ovcrihe5,000marklt*u""ofong*tn"'ttff'o*-"'f"t*u"p'^pdyroL\vhiditsoriSual
i I;--","r r.,'.,.'- -" p'"., ' ;,, ",d -o '"' "" "'" r'd to b' nod r' red adrored
"* '': "r;;"1' 'Jrou Lurhe iderltre pcoPle
i "..
pnr"orall. o.eruulcd u'rrrehd- '';';'h"'8d'''*
p_Lti"*prt*,i.i -"", i"]t a-ere at the hearr 'f Microsofit sllccess
I
H
,1

i9
a
t
t
 r,ri.rosof I conpeting onTalent (A)
e

RecrlLitifig in the gAs

Although Mi.rcsoftt siz€ and growih .are Jorced man1; oi the earty practi.es of airracting
excepiional people to be.ome mo.e shnciured and fo*atuea, C,tes and Bailme, wanted (r
Dresuve
their gen*al recruiiing prnciptes. Fd erampte rhet hrell io reiarn rhe personal .un'"g"n
turvolvement riar daied toom ihe days when BiU Gares and paul Allen rvould inteniew eveN ".,
.andidatc. While a tull iime tcam of 35 now mmaged recruiijng acrivties on over 100 .o1leg'e
campuses, kcrurtD8 $as still vjewed as a prime responsibil y of everyone m rhe o.ganizarion.
Mrcrosoit mrnrBeF and e, ecurives reg!tartt rerurned ro ihe schools from yhi.h rhey had;raduaied
io establish onships wilh ihe dsing sia6 And dunng rfe t9q0s, the comp;ny s e_\pandmg
..ehn
Dre nanor o op.rctorr hc.e rcrpd-in8l) , ,...,,.",;,,.".."
"' "" ",e.,
(laies conslahily reminded his managers ihii \4rclosofr pasr
s success $.as inseparable f.om iis
-uL.e,. rr hi'rg ino ..uiang h, be.r brair" A.Lt-ecorpdri.,e!rujtD8d o.tcjt
becare_more sophrsrr te{1, the hrtrg manaSers stnt follow;d the rigo;us inienterv;E Sre.miq,--
pra.rjces
e+ablslred nnal\ Io. h,rmt devetope^ rhe.andidare,s ,,snads,,
;mained tr," *o.ii-oo.t""t
sele.r;on crlterion- As thev conllnued io rar8et ihe top S% of success-driven, Type A personarties,
hanag_ds typrcauy told iheir groups, ,,ts rhe person ti- notr o,.
Jou,re interjewing
group? Th€r need io bc we tlani ro rajse rhe medran.' De"prte the cJmpanl "-oite.s huse hnanciat
resources, fic'r ninls l" nLle remained jn ptace nor onty 10 clnsrrar c.5is, bxr ako to;nsx.e
rhai
managers hired onl), fhe best. (In a rare exceprion r a the ,,n tuinus .r ttle,,, n the mid r990s
l!{lcrosofi
Research head Naihan N1)trvold amorm.ed thar \.Iiciosoft ,,had aU lhe budSei in the a,ortd,,
ro
lriple its Esearch siafl )

ay fie nid 1990s, N,ljoosoft Ecruiters &,ere scaming CVs of the enrire poputation ol abour 2s,Lrull
0 computer science graduates in ihe United Siaies to c.eaie a shoritisi of 8,000 lsimilar efforrs wc.e
ongoing overseas, alberr on a smatler scale.) These lLere rerrewed n deiarl ro ldenhf! apprormaiely
2,600 targeted for.ampus htenlews. Following ihesc. abour 800 candrdires we,J.'.,tea to
I,licrcsoftt Redmond cmpus near Seaiile. The finat rohd of inrefliervs resdted jn approximaiely "r",t
500 receivmg o#ers of rvhom almosi 400 accepted. tn facl, the jn
ield raie recent v*is haa ueen
increasing despiie ihe Fowing compeijtlon foigEduares. (See Exhibft 8.)

Nli.rosoft's rapid growth had long since ouipaced iis abitty io rec.lii primaril, from
.However,
cotlege Gmpues In 1998, for exampte, ihe comp ly .reared 4,823 n€a, positio;, md ;dding
replacements for the 69; ro 7% atriilon rare,lhe acftat rumber of iobs to be fitL,l wu" t. u ooo
Jntred-rrB,r re.n ire,, ."d ro'e,\ on a.rd. rmB e,penFq pJ n"no- I or wil 1i he h4u,rr\ "1o.", r o bl
ihemid 1990s ihis had become the source of over 75% of new hres (Evidence of this
couta be seen
in the arerage age of Microsoft employees, whjch by 1999 was 34.5 years,with20% now o,cr 10.)

To identify and irack these potenUat erperienced recruiis, Miciosoft mainrained a tull hme team
of more than 300 re.ruitmg experts 1a-hose job was to rdeniib the mdush) s host iatcnted peopte,
buitd a .elationship niih ihem, ad e1.enr!all) a ra.t ihem to lhcrosofj^o ,t. o" tit t."t
coniact, they expressed saiisfaction a-fth their e\ijhngJobs oreven a toiatdLdam^.tt",
ror Mrcrosoft "Once
someone had been idstified as "hard .ore,,-Mcrosoh s euphemEm for the tind of hishly
iatenied
ind d, ren p.ople irc. ,o.thr-th, pu-uir wJ.,elen e,;. rr .ubrte R"BUtar ,"hp:o*..U.,,
s.reet mien rls, .on ersarions ai mdustN conventions, invitaiioN to infomal di r;Is_recruitjng
,Fa n merbp.: emplo\Fo, \pD n-ar: ro L-ep
tne tre- or . ojr n ,-r drion open $ .h rh. oJ.enndl
'ddLldLe cdidor.=.o,HRp."cu5{e.Onpod- hpw I o, n.t"ooit wi-nb.urenrorBi/a,on
forwhatever icason. Thai day, hevitl catl us.,,

_ The rcmpany als responded more opporrunisiicallv. Ior exarple, tn.iust4 recru ers ,rere
fomedinto"st.iketeams'totakeadvantageofbreakDsopportuniE;r.,,Wen;vsendateamro

I
 on Ial"nt (A)
Mi'rosoff Co6P'ting

,. u ,- B-.1.,e1o,. ,p.' : :j . ""1"""1;.'j ''" ' "-=.""" "o.tl;:":,:i;

ae'ko'rso oo r' \e-ot
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:'",, hPr"''of'conlaLts'
M' r''o h' pcr'nd'
tlre) m
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out
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;:li".:;;:l ;:' ",i' '' "'r. .,..*r,,'''"t
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ALc, 'rt rhrb'r"d'enl 'o ' dror Pln' \o ap eo uPo " "' "
'^'"'tl'']i ]i;:;:::"t:
Ii:i,;1.;
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i : i.' ;:'.1 o"*tor
o.,tlr,-a t""."t'"g'Thatbtoh' rne "-,: "l;

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1c..E;ibit ec for Plolmcnl neadcoun'
r

0
Nlanaging C ltwe ifl the
1994s
20000emPlo'* * "' "'i;
.n Lte roo d e lornpdai Pd_'o ''- l''{ ' '"c i;'ii"
".i *j ii:l' -; i; ,:-'':;;-: ;': :'l:' """::'Ii;-:: {:l'r::,It*,m::"
rr:*;
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iri :; - = ": ;;,,,i,r*'1r'1 tf Il, t'
i
:::;:r:il."-,: ::.'."::;f : :li:],:rrJ:i";,!..":x:;;
;.
":: ,"i1":,:: *
l:
ij;1:;;";1; :. ;1",'";'-,i'. ::lll;' ; "'.'p'"': i'" ^:'i : r':::l'; :
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. Jj::;':;:13"",11.;l:;."i..;:J:"'":;-fl""$l''":Sl:il''i':';":!":li"::'::
;:U:..":,-;:;' r .fryr" ri,"*t* r;t*.-' ir' ilt $::;: il;
'i' .- i",,,;; " ;il :';,i;;:; 1':,;;l " ;): ;;; ;"::t, [lJ.-:ti]: Jli,]
";i
::;:"i "":;: : i','- J";;[L";;i, j::""::"".;":;*l "i.:
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Ld4P;ead

l0
 Mi.msoit Comperingon Tilential
E

organizaiion inieFiev ex emplolees to find out why they left ihe .ompany. lsee Erhibit 10 for

Amed ivjih data fron ihe Teminator stld_y and prior empioyee sun.ys, iniemal experts
developed an "Oltanizational Health lndex"(OHl), which could be administered as pait of the
mual employee surey. "With control oler .ompensatjon largely outsou.ced to NASDAQ lthe
sto.k ex.hange on which Mi.rosoft !\,as llstedl, the work enyironmenl becme the bi8gest reiention
tool a,e had to manage," said Chis Williahs. He lvent or to explain. however, ihat the objecUve
lven {ellbeyond ietention: "Iit about keeping alive our entrepreneurial spidt, abiht_v for individual
acnon, and the opportunity to make a difierence " Fortuitously, ihe.on lusion of the OHI initiahve
coincided'vlihSieveBaUmer'sappontmentasMicrosofi'spresidentmJulyl99E.llithalnost30,000
emplo]ees, 180 producis and five layers of m agemeni, it lvas a very dlfierent conpany the ihe
one he and Cales were ruming ei,en a decadeearlier.

(he of Ballme.'s iirst priorities x,as io embark on a se.ies of one on one intervlews wlth a cross-
seciion of 100 employees. Ai the end of this process, he concluded that Microsoft needed 11yo
ihugs: a 8reater sense of clariiv and excii.ment about ihe company's direchon and more treedom to
act lviihout bureaucracy or red tape. The lirst of ihese led Ballme. io lake the bold step of proFosDg
to Cates that Microsoft change it's long tE1e vision of cEaiint a uorld rvith "a computer on every
desk and in everyhomc rwinS on ltlicrosoft sofiware" io Vision Ve$ion 2-"io emporler people to
do aiyrhing they s'ant, ay place they wani, and on any dcvice "

Ballmer's se.ond pdority w6 io develop leade.s capable of clearing the obsiacles, maklng
decisiotu qui.kiy, md defnirg .lear goals. To a.hiel,e rhis, he ed other senior danage.s would
have io dismeile many of the compmy's old approa.hes ed even .hmge their mmagement style.
0 "l'm used io diving in deeply/" commented Ballmer. "Norv I'm trying to lei other people dive in
before I do " Ballmer's .on.lusron that top mana8ement $-ould have io push authority down ed
replace it's tradiironai hands-on conhol a,iih coaching-what he termed "iumi!g ove. ihe keys"-
ilas.ongruous niih ihe HR group's oHl resear.h findings
Composed of 19 .arefully selected employee-sun'ey quesiions designed io correlate direcily to a
perso!'s iitent to stay al Microsoft, ihe firsi OHI suney was implemented in the fall of 1996.
Unsnrpishgly, those s.oring 4 or 5 on state ents like "I work towards dear 8oals," "l ,m
appropriatelr involved D decisions," "I have resour.es I need," and "I feel resPe.ted and vatued ai
Microsoft," were significanily more llkely to respond positively to a queshon about inte.t to slay
wlth the company ihm ihose scorjng 3 or lorver on those statements. The respo$es from several
thousand emplovees in the smior ranks rvere tabriated 6nd the index was .reaied wiih a composite
score ior each \,P. Microsoft's 39 firsiievel VPs,^ere stack'ranked liom the highest to ihe lowest
scoring. The lT at the top oi ihe 1is1 received a raiing of 78, ,vhich meant that 78% employees in his
or her orgmEahon gave a favorable response 4 or 5 on a s'polnt scal+across the 19 ii.ms of the
OHL, Said one seflior HR m ager. "We've Biven inis highly data diilen culiure a lvay io create m
index ihrough which they can ialk aborl leadership qualities. And it's working because it ljnk into
ou. inlenul comp--tiliveness and our need fo. quantified scores or grades." (See Exhibitll for
sample suney questions )

The nea. oHl measure lras given teeth bI feeding back to each VP his detailed score by iiem as
Bell as his rankDg and by tult rdkmg details lo Bill Gaies and Stev. Ballmer. Ballmer
gi1-jnB the
also insisicd that all VPs make OHI ihe focus of their first slide in iheir amual business revrew
me.ting. ",AId he doesn't Iei them ofi the hook easily," explajned Clns Williams. "He ask them to

2lhere wep slvls ar llic!.solr in 1993 30 tust lpvel vts and 15 Vls above ih. tust-level vPs. Orny L\e 39 Llut had uetr
o(r oBanDrhonswere leponed D lneOHl sutrey

1t

11
 Nt'.r6uri ComPrtirE on Taleni rAl

explain why individual items are hi8h or low, and nore imPortant'
tthat sPecific aclion they are
going lo take io imProve."

Deulopfient ifi the 1990s

compan, feli was a lrl< of
As lvlicrosofi's growth conlinued, one of the greaiest constramts tire
.',tr,",",,t-."rJL" k-"se6 and leaders As Chris Wiiliahs elPlained' "L'ke mosi ie'hnical
il;";,"'. 'i;;.*;;rr,-i t".r."."r p-pr" are noi ne'ess;rlv sreai manasers or Peopre
a""i.f"'.. w" a*ra"a had to Pui m;re ;ffort"ho
on leadership an{l manasemeni develoPment'"
"'e
OneoftheearliesiiniliativesrYas$e"Be'chProBrim,"Geatedin1994'tordenhtyolrtuture
r""a*r il* r-a 1o help them grow'" accordmg to c" de'eloPer Doug Mc(enna'
"i,"
;il,1';;.;;;i.;;";;'Ir r"oa*" i," p.t""t r"aels lvere identthed actoss rhe comPan) Btl rike
"peciJi.i{ays
; ";; ;." J p,Jf'an,'" oL in. HB prore'rondr' nroduc' Lr-" o 'F
;;"..; ";1.-.-;'
i;.; " \.r'' "'' --.Ber' nu I oi w \or'rrDr'. d d -o rrP en'n rr'
;..-.',,"i de eloPne- orgdn ' d ion'
';" "-" " *,n-, -l\ ia-d1 hm' 'ellrnF, r\rs ppioa.l' n our Produ(r
:
'i- ; ;1...,;,p;,;: i. 1,".,,r:p aet"iopne- pre''' rd''"a v'hptu " rr a "DPro' h
G" breJ!lcad"r' b!r' noL c""rr er uBh'^ ru larSr u'8o'votron
'"no oprodu e " "
th ne, bec"r ro ru' 1", o , 'd 5^o dlle'Robelilerbooioined\4r'ro'oit"''nieroPFr'h'gotle'
i. 1995- AIf,r lo \'d_..qrl. I'o.t'r& Cdrbl'. ^''re lerder lrPdrlelopn'n s" t"t'e toc
rcvrew Mrcrosott s te) Peopre more s)'+enrah'alv "'{t
;;;;.;;'";,;;",of "*"..ni""". wourd
i# in;'r"":"i.i ."-*nl*i ,*" *"rv uneven," said McKema' "Ihe review meerng
i."pp"" t.*,r.ere was noi a loioI folow-uP Bui at least a seed aas Pldted'"
""""1y"".
!!rth rhe supDorl oi Herbold, the E^e'uhve and Mmagement GrouP beg io develoP etrrv
a more
;-..rL"i r'", p".pr" revier',"-as a combination dreer ptamrns'
r,,^"i";;;if-;;
,i".iir,.l'"1,."--a pb stoimg prc$am vps were asked to identitr' iher hish-Poimtial people
rhis lisi was
,""""rr, ir." i",, *as c;n:oli;ated into a confidential companlvide iNenlorv'
ffi;i'i;; ""i ;; ;,ii C",".. i "* s,n-*, and olher toP executives' but ihe HR sroup saw the
mmagemeni
preparatlon a.,1iist iuuilon oI the list as lmportanias itsusebv ioP
and
'Ihe program recciYed an imPorlant boost in mid 1998 when Sleve BalLner be'aoe Prcsidenl
staded.(ar)'ic
-"i"L',a"""r'rp i*a.pmot ;ne of his toP prLorltier
Balrmer
t:.19h-,Poienh'r
lFrdei'
, ,"1- roe".u,
".r", "
i' H;;;-;;;* "'t"."nLot\e_l''lornore"'Frrdenhr\'nBpotcrnJl
rne" i"terestecr in HR He's interested n'Do t hare ihe

rilltpeople
".fur""a, "nt
ir the right places makingihe riShidecisions for the comPmy?"'
high poteniial list was segmented into ih'ee "i{aves"r Wave 1
(100 emPloyees
In 1998, the
,'";il;"; ;;' J;i;eleciive and comPr-ised those $'iih nearterm w Potenhal rhis lst aas
.,rptullv.eyie$'ed!vGalesandhisl6'PersonBusinessL'adershiPTeam(BLT)with'a'hVP
:;;;-";;;; ",.,, c.no ddre' d de'-r.os8 dc\eropmelr p e' tvddde 'dbou 20r in
!
I;;;"-r:".'-;"; erpo)ee, hr' 1id e+rb.red ''ro'3 "'der5h'p Porpnrrdl
e-plotees"lvho had been identified as earlv caree!'iigh Poientials forbisscr
"""a,aatesforkeveenera]nranaeementorfmchonal]eadelshiPjobs,Wave3(300to400)ln.]uded
;;,;;;'-;;;"r"";
.r, t'n- ir,"v .,*""tr, l"ldl llaves 2 md I we'e revierved in jndil who
idual business evlew meelings
$ere plavjns kev iechni'ar or
I E;;;;* ;1'; ., *p"'.,e ca ie6or) tor ' udNidual coniribr'rtors"
for or likell io manage large $oups)
irrctional readership rores, bu tivlro were not resPonsibie
Mj.Iosoll,SHRStaifconc]uctedlrohlesealchthataboutT0%ofaperson'sdevelopm.nt.ame
r."- ii"-;.r, ti."l' *"- "***ryin,20% care from mentoring relationshjFs aith other PeoPle'

12
t Nri.rosofr, cospeting on Talenr (A)

partlcrlarly their managel and ,,We,re

10% from formal raining. conlinunrs b create more ario$-s
I o"\"opnenl ..r'er -ai t\.l.i.n-. \,\" re uhodu.irts
pmgrans" increasing mentorship, and looking at hore job tansi.rs-to inrernationat assjgMenis,
for exampi-to broaden ourpeople "

Reltietu nnd Re-toard in the '90s

"Mifiosofties rvear golden handcuffs," said one mmager. "They are rhe stock options thai vest
ea.h y€ar." ln 1999, one analysi estimaied that ai least 10,000 curreni Microsoft employees had
options ryodh more thd $1 million. "Old hmed' aromd since the 1986 public offeins had seen ihe
stock appre.iate more th 750'fold (see Exhibit 12 for stock pr(e .hart) The 22 iop e\ecuhves anrt
direciors owded 31% of the slo.k lrorth 9138 billion in mid 1999. Whar surprised many \\.as the
number of employees irho .onlhued to rvork ai Mi.rosofi eycn when ihet were financially secure
beyond their wildest dreams. "Sonetimes I feel Like I'm ruMhg a volunreer ors izaiion,,, said one
vlce president. In faci, when people did leave, IIi.r.soit's rcsealcf sugge\icd rt rvrs us!il\.becaLlse
they were burned our or ihe challenge had run out

As Nli.rosoft gren-, mana8ement feli the need for more strocture ln the reyictr, dd Ieedba.k
process ihai was tied to ihe reivard system. They feli ihis process plaired a ke], roie in ensdrng
open, honest communi.ation, individual and orgmizaiional learning, and ih. diffusion ofcore nomr
and ralues. One najor concem lvas the noiiceable decrease in the udeEtmding of irhai ii took to
succeed ai Microsoft. As a resuli/ around 199,1 Doug McKema, head of Execuiive d Nlana8emeflr
Developmml, set out to ideniify ihe .ore skills, capabiliiies. and values rhat lvere clc ro old rimers
a.d ihose al lhe 1op,bltless visible to new.omers or those deeperin the orgeizanon.
To develop whit be.ame klown as the Microsofi "compelency model," tIR spe.ialists asked 50
long time senior execuiives to des$ibe what made N.Iicrosoft suc.essfoi. About 110 value ideas were
identified, which McKenia arra).ed on a deck of caids. M.Kenna rhen asked Bill Cates to rake rhe
.ards d group and rank them in ieims o{ their import ce to Mi.rosoft. From this p.ocess emerged
six "su..ess facto.s r iaking a long term approach to people md technology, gerting resrlts;
individual excellence, a passion Jor products and iechnology) customer {eedback, and reamwork
Some, like a passion for products dd technologl or individual eicellence, were alreadv $idetr
uoe-,.o.1 and qeepi) embpcopo u 'er.. r,e rpom lojt dbd.I "qe no.e ecea.i.
erphasized values dd tended tobe more aspiraiional.

Frcm ihese six core values \,rcKersa d his ieam developed 29 individual competenctes required
for their successtul implementation, rviih each one descibed behavioraily a1 four differerli l.vels of
perfomance. (See Exhibit 13 for examples.) To atlolr manaSers io brln8 these concepts inio the
.eyiew process or reoriiing inieniea,s, HR created 29 ceds a-ith each desired compeiency pinr.d
on one side md questions helptul in deiecting or defining ihat compeiency on the opposiie side. ln
addilion, manage.s I{ere given a "tool kit" on holv to use ihe .ompeten.ies in different sorts of
situations-in m inteNiew, a perfom ce reviel{., or in a careerde\-elopment session, for example.
Commented Doug Nl.Kerula:

It's the quality of conversaiion beiween the mmager ed the employee that counls. We
n'anteli io create a flerible iool that managers could use io get better lords or io ihink more
clearly about whai it is th.y ryanr ro talk io rh€ employee abc,ut We resis ied crealjng a lis t thai
we would hand over to front llne mana8ers ad sav, "Theret the answers ro your quesrions
fhis is whai you have io be good at." lle don'i wmi to provide our manasers wth answers,
4r d -qmlo derl

13
 Microsoft CorPeOng on TalEnt (A)

lLsed across the compan/ to b ng greater 'Laritl and

The competency modeL became wLde\ re'ru'rinr
, n.sieno ro molr o r.pe orp P'o'e '':"g' -''"' 3 ''on ''"""' '"' '""' ' oF r'"-lv'
,"i-^'",.. . ,",t,"t ''; Lo 5 -no" r-rrooc"
..i" p'-'ia tn" a"-u"a -'t'nued it the 'ate oI seaeral
l;;;;il;,"i; fii,o;:ia a".t, r,"a
month
-J
hundred requests a

tslR reward pra'tice occurred

jn May 1999 when
Anoiher brs change to Nhcrosoft s tradihonal
int€nse compeaihon ior h,ghrv t"'^"a
t"d '"i i't""t r"a tr'" "J*p""v to t"crease the target lPvel for
; ;;:;;::; :;.,'P;:;;i''"' ,.'" c, a l,,"- .o'"ined
P
"..
our olier accepiance raie rehaDs enremelv
hish-eo% tor industry hires "{ t-'1 t'
..::1.:;"J-;,; r a narket that '" i"'"'"'in[rv comPetitive itt hard ro ask a sieai
peopre to make an inveshnent in
::".lI."," i; ;*" " ;";'; at ' \!e sttrr berieve ;isking io make a moie
iil::::;;;;;;**;;increase thevarue o{ their skrck' verustwant 'ash
imPondt Pan oi the mix
ladder
a C'oublins ol ihe number oi noneiecunve
At the same ijme, Mi.rosoft announ'ed almost
,.,lij ili#ii. n,".,*,o,"-,.6,1, i'"r*' osroriem 'ue rr'quentr' lath Prorotio*'
io
"Ndw those \dho are doi"g *"fl rxely to r'J"ttmuteJ ererY 18 month; to 2 ycars 'omPared
"te
iq'rLiu'' 'il'' ' "rliut" relvard and a maior moiivation "
"i:Ii.':;t;",;"/';j;""a
Protecting the Past, Building the Future
oao rodo,- " 'el' /d 'ano"n'"'io'
.h-.c 'iglrhrL "nge' to Vhro_oL' 4e'r_'siabl'
pr.i...!r.y i'.. "-prv tt" t"t""t 'u''r*t"t'ro' ol,*".::"ffi: li:T,:i'-T5::,i::j*1"Jri:
Mo Pr'
-'"t".t tLc tumur resolr.e pot! es*"r't'"' uPPo
t"'"" ""* t'l'*' As m ascmeni ('resiled with m moeasejn-its
l,i5i." ; p-oo,"n'r. . r,."".''r" -rio"d""'e''oi rrcr'!ser'o'.eoaPo
""-
i",'J'j,:,il..-"" 'h'rl'oF
b'arn 'B'o ""''' ''";a'pe' or rhF omo'n' r"""'d'r

bala'e in their iives thal ivorks lor thcm' '\nn

as a
Sieve has bec. teiling leoPle to find
a
*' rhn r'"'ou ou"p' ho r\on6d o -r,'r tone
." ',",,";"r3"
r.- ' '*p-' r'i"'"'u' i" sJ 're'Don'pu-
rv'nd'?
"^.,.
"."'.,,. ".a."r"-*"d '""
Ile ju'stdoesn'r work a'eekends mvmore'

rhe proposed chmses !* -:"*q "i-T#:'J:$: i:fi:l::ft :il"?"i il:l'"ITIl:

(-h. vere hired lor therr drlv' and Passron (ald \ ':i:'i,
rllEms ) Secondlv'
rotaDthemontheshould*",rOp.-."",r,!fr,L"-ititmctogoto-e,
le preisures' aodlines' dd dem ds ihat
lfe Falitv of the busines" -- tr'"t tn-" "*Ldli*avs wrll ne\er elmrnate Lhe Prcssure
.edured cat.aordinarv eilort ("For *; 'ooker
: : rJ"- ,. "-"
;llroi., r o wleiher
p
"';"r'
an) ";:1i"" l:::,:_ :l ii:;; "':liTi "',J"::'Jl"l";:
srt
queshoned
$ €re eome
*ty rt*" o t" t"-1"1'L"" 'ai"nrug"' i'It sa \er LLeI'3t' balan'e"'
aar,ld not .ompromise lL"
conceded Wilhms.)

A..cphns tha, srress

',^ ,",, I'ti" i:'j'Ill
Tiil'i:lil'.'"11'iilnTff.T:".i'i:' il:
-ampus s pres k @oke '. '-::!f "j'i..::; "rr."'." -" no bars on the door or
dereloDmcnt of stJfl Said one s'nior hur ;";;;."'""*n*,
'Let me oui' rel me out "' In ract' rurnover was
;=.i'l:ffi;;;;;;", ;rth peopre mside preadins'

'14

14
ft ,.-*rr cof,perina on rarent (A)

tutuing ai hall indushy norms md the company received 15,000 job applicatioc a monih. To sune,
this indicated the sysiem was not broken and should noi be tinkered wth.

15
 Tale (A)
MicrGoIr coip'ling on ft:

DePartures
Exhibit 1 A List of Senror_Level
SLalus
Ttile

subsoquenlly
Leave oi absencel
VP, Consumer and Commerce
John Ludwig,38 Group wiih
BesEned ro do volunteerwod(
VP, Human ResoLrrces

Cam€rcn l$Yhrvold 38 icer
Chief {echnology Otf
VP, lnt€racliv€ Media GrcuP
dinosaur
Leave ol absence lo dtg
bones and golly{ishrng
CEO oi
Besigned 10 become

TV
Prcsideni, Microsofi \i{eb
VP, Microsott Office Division
::"l,Y"'JJ,,
"" ^"

leave ot absence since 1997'

"fl""$i:ff
rerumed rn 1999 as a Pan'nme
BEd Siverberg, 45

June 16' 1999'

Source: wa,streelJoumal'

Fhancial Daia: 198&1999

Exhibit 2 Summary Miciosoft
1999
1995
1986 1990
($ millions)
$19,747
$5,937
$1,183 10,010
s197 2,034
393
61 7,1A5
1,453
279
39
17,801
31,575
5,635
1,442

I
I

i
I 16

I
l
! 16
l
 Nric.molt conPeiins on ralenr (A)

t\hibitl r'J",plel r, ,-, leFot,",l,Tir u thrir'e \ohr

Candidale's CONFIBI,4ED lnterview Schedule

NA[IE: DrewThoropson
POS]TION: So,iware Design Engineer
DATE: T!esday, October 19, 1999

TII\4E INTEHVIEWER

8r3O a.m. [,,lary Seybold

9r3O a.m. Keith I\4 ller
10:30 a.m. Gary Irorgaf
11:30a.m. Gyan Prakasha
1:00 p.m. Leslie [4eans
2:00 p.nr. Ben Allenb

bAs Appropriate t,4anager

I Fronr: Gary l\,lorgan

Sentr
To:
Tuesday October 19, 199912:20 Pl\,i
fi4ary Seybold; Keilh lv4iller:Gyan Prakashi
Lesle MeansiBen Alen
Cc: Nancy Ciregna; Llike Snead
Subjecii BE: 10/19 Drew Thompson CONFIRMED lntervlew Schedule

HIR E,

First we Aied a riddle. He was calm and poised and was ab e lo analyze ihe problem in a
struciured way. Responded we1 to hinls.
Then I asked him lo code itoa. He spent a lew moments th nking, and then described some
ol lhe approaches avarlable, lncluding recursion, and rhe tradeolls he expected to hit ior each. He did

He lhen coded up an iioa solution. lttookhim longer than lexpected (35 minutes), buthis
lnitialsolulion was quiie good. A thoug h he dld ihin k to handle neg atives, he had one bug th at broke
his negaive handling. Afler lpointed oul that he had a problem, he iixed rha1, and had a nearly
textbook example of iloa.
As lar as coding, I wou d rale him above entry level bui below whai I would have expected
altertwo years. I atribute this io ihe rype of work he was doi.g al his previous employer.
When llaked to him, he sounded highly motivaled and very interest€d in improvng his
cod ng abililles He also understands the big pictr.rre well and where he would lii ln. I think he wou d
be a good addiuon al an enlry level and would expeci h rn to advance lai y quickly.

Source: Mi.rosoit CoIP. (DissuEed Da!a)

'17

17
 Mi.rosoft Conp.tinB on Talent L4)

Iahibit 4 Microsof t Campu$ Pictures

Lake Bill

Luch outside Red W.

Sour.er Ml.iosoftCorP.

18

!8

oi
 Mi.rosofi, Conpeting on Talent (A)

Exhibit 4 (.ontinued) A Tl,pical Microsoft Office

lxhibit s Non Executne Ladder Levels (job riiles for representaiive pos ions on th. manageiai
and iectmlcalhack)

Soflwarc Design Engineer (SDE) 29-35

Developmenl Manaqer 31-34
Soflware T€st Englneer (STE) 31-33
STE [4anager
29-33
Group Prog€m I'ranager 32-34
3t-34
Group Prod!ct Manager 31 34

Soxrce: N'Lcrosoft Corp. (Drsguised Data)

,9
 Mi'rosoft: ConPetins onTalPnt rA)
?

Exhibit6 Microsoft Perf.rman'e Revies'!orm: Key Conteni Sections'

PMT1 PINbCN'8R IfrNPA\mG

A E&tnk P.ltaltun? Axrffit abkc)ues

n':-ts.e+r macorrEchll ur pro"rr DrJe
""
I
('' P\oP'd
B'-".""-";;,-";.,''":,.,,"."""""
: L-. ;".: ";"; ; i" - 5i. Ddr '. oi h6 eoone.. ob" n e o'e ';
f"iors LhathelPed or hinderPi nPrr'rman'e
"o Ie$onal
Situatjomllactos les resu""''v'"p[ eue"tslrt'ot
t'etped hind{ed Fdlomane
. cir"..".i"*." ""gg*tioft;r ho{ Perfoman" 'ouldbe imProv'd
B rlaitu r-rom,fn rl,'I,rN?ar R?rr" Perod

. i"* ," --." t.' a;hievins ea'n objecttue lor exaflPle'

"..i1"o- iesoumes, io.h orolher Lirds or suPPort
o Training !r develoPment ne'ds
".. .", -"b dva .' iooe-
".
iiy;;;;;;.;";;..bi".t'e"r"'ra""ov'*'i'r"u'ton o)o"8''P-o's"*'ton'asreri'vour
ndiaidu3l.ontribuiion
;;;; .;;,;*", **"s"r, i.'rude *'Ps var a re ialing r' u dssrand md varur diversit' in vourorsarr
'
C{BDlrOI1\lN
TMTz COLtrEmdN
a- a3tat'1 nn'Ptarhde'P'apn''
. b+'o'
f}f"r-P oa? - hono3" I
"a o1o su da''" i'" a d h" t'na' tt Pt Pto r r p a- :dP''
, t o - . a.a P'o tdt 8.-DP'oat o " tnLatt 3
..;-'"" th'tnlr ":n
.,".,,",'-* Ro'r' ae o"'ea:'h-?a)to

": '; Dr.,$

a ldfl,iinrrld -':, fisin'l wnklssr
Strsn

''s
.,i- po1
P o
" ro,o-".'
;''"
" """
r8ee'De e e"o"'D Pa'd"d "' I
.:i;:';'T':l-"..".""'.\oiJrL'|abirities(''s'attibutessrrrs'lnovJredse'e:Penen'e)inatm'Yrimil
!dreerde!eluFnrnt

B hdntu DFelctment Plnn lot N?ir R!'i? P'i'd

'"": ne'P{ Fenod sbens$s ro }e relPrased rveakne$es to hr
"' ;:;;i; ;;;;.;p.snt obre'n'es ror Lrt nert

. iJ.,,r' r*. ***' t"' a'ii?winE er'n obiecti!''ror eiuPLP

"
iesour..s, tooL,orDtherLinisoislPForr
"'
. Trainins or p?6onal dele)aPmentna'ds
or ll. vi'-'on co'pa*o's canbe
herPhriin deveroPing obredi"s
. *;"";;;;i;i;';;.r.
C Dis.r$ Ca:arlnt.r* trfld Cotrl:
eq 'd "r'. d'" nD
'
orndrcRstrmeerns'ts_p-t"i''r'"*'ut"r'lit-"onortleempLovec:rgeFt(minterests'
g."r,,""a-*-'. r'*a--:'l;::l'"::1";*nl"t;:iff::i.,?;;Hr,lJ['"T"*i"Jl'*":'
n. mrh rhnE tuthPenPl' Le:bI asi+an'e
thP PmPllveer suPPon or
r.amna. sro Lrl, rnd ccntrLbuh*' r'i"' *ire'''*t' "t
-;*st io
the na;assr"n Pmrjde
lMr3. Gdqdcoll]),Ns
A F ntla:tt Conrenti
'"".'*;;;;;;;.,.-.",".(oikissiFnment'L\eRevie,Process'orth"ompanrasaNrore
S n?,trd. car frisl
'*._-,r,"'""r.-,o.".'"nf,sncregi;din8emlloveetir'onPlisnmaEand/orPerforman'etrc s

basis oi ai
'Both ihe.cviewer and the emPloI€e
{ere requrre(l t' comDlete L\e revres'Iorm ahich becane L\€ su'h
tom;as also linled io oL\er resour'es md helP
least tho ort on-one leedbact *sloro lhe on tine
iii."..i s".-i'-.;;r.;nPetm'ies, Re'eivins Ene'tive leedbac!' md Manasins Emprovee
Givins;nd

20
 N1i.rosofi Co petingon ralenr (A)
$

IART4, OVERALLRITINCA\DSICTATIJRts\

Excepliona perlormance rarely achieved. Ma*ed by precede.t selt n! resu ls beyond the scope ol the
posiloi. Demonslraleslhe highesislandads ol pedorhance excelence rearivero iidivlduaLswilh
cofrpalab e leve s ol resoonsib lilr/
Con s isle nlly exceeds al posilion requiremenls anC expeclalions. Accofiplishmenls are hlghyvau€d and
haybewelbeyond lhescopeollhe posilion. Demonslrales higher srandards ol p€domance excel ence
relative 1o rndlviduals wiih comDarab € levels ol r€soonsiblrllv.
consslently exceeds mosl posltion requ rements aid €xpecralons Ac.omp shmenrsareollen
nolewonhy. o!€ra lpedormance is.onsislontly above levels.f qualily and quanlty elative lo indvlduaLs
r lh comparable levels ol responsbillly.
Er.eeds 6ome poslion requirefrenlsand expeclaiions. Su.cesslully accompi ihes alloblecrives. Oveal
pertormance conslslently halches leve s ol qua iry and qua.lit re alive to rndly duals wirh comparab e

M€ers posllion reluneme.ls and expecrarions AccomFtishes mosl o, at objecires Someaspe.tsoi

overal perlorBan.e fray reqlke addil onaldevelopmenr or improveFenr ro match leves ol qua ity and
auanlitv relalive lo ndivldLals wth co6oarable levels ol €sDonsrb lliv.
Falls beow penomance slandards and erpecrations ol lhe lob. Demonslrates one ormore pedormai.e
delice..iesthal hlnder acceplable pedormance relalive loindividuals wthc.mparable le!els ol

Does nolmeetminmum requiremenls ln citi.a aspects ol lhe job and has numerous pedormance
deli. encies thal .revenl su.dess al M.6son

InPlo].e overalt Rrrins (pmplo)'eet.pinion oJ rh. overrl rriins):

Reviewer Ov€rall Rating

Source: MicrosofiCorp.PisruisedData)

21
 MicrGofh Cohp€tins on Talent (A)

Erhibit 7 Salary Ranges and Opiions Ceitings, by Level

1998 Base Satary Ranqe StockOplion

(S€r on 50'h Percenl'te) Appllcation lvlaximum

29 42-s3,000 1,000
30 50.62,000 2,000
3l 60-75,000 2,500
32 72-90,000 3,100
33 85,110,000 3,800
34 100-135,000 4,600
125-r80,000 5,500

Source: Microsolt Corp. @issuised Daia)

Exhibit E Microso{t Recruiting and yield Daia-U.S. and Wortdwide

1998 1999
3,319 4,264
6,848

Acceptance Rates-UnitedStaies Only

1996 t9e? 1998 1999

61% 6A% 70% 727a

89% aa% 90%

Source: Micosoft Corp.

Microsoli Conpeting on Talenl (A)

Exhibit 9 Enployment Headcouni By Geo$aphy, Age, md Gender

USA

1975 3 3
1980 40 40 29.2
1985 I,016 470 30.4
1990 5,635 4331 30.5
1995 17,801 12,193 33.5
i099 31,575 21,667 34-54 15,952 5,715

Microsofi Corp.

1999 6,121(20.3%)

F.xhihit 10 Atrririon Rates

Micosoft Worldwlde

1994 1995 1996 1997 1994 1999

9.3% 4.54" 7.6% 6.9%

Software and IT Sefl.ices Industry

19S5 '1996 1997 'r998 1999

13 7'/" 16.41" 17.24" 15.31" 16.4v"

Saratoga Institute--Sorfia'are md IT Serices

 -:.:l:tr::!r':i4.j.f@nr-?ry4iry--*---'_

Comp€tinE on Talent lA)

Mt.rosoft
t
a

Exhibit 11 SamPle Survey Questions

.

Your lob
1.I work toward clear soals.
i iam "pprcp, aiely inrohFd n de'F'on' rhcr 1r''- mv worl'people' etc ) to do mv job effectivelv
: i i,*'ri'" .!**.i." r (e.s., lools a'cess to inJorrrition'
"eed

You!I!o4edl4!e-144!4ccr
'. MyndnagcrhFlPsmedelermhepnonbe5lot m\ work'
2. My mdaEer"ed h,Bh but Jchrerabre sLanddds or Perlomdnce'
3 My mamger is good ai Plainmg

\ ou Plole.sional Det eloomert

\'4ino'ofL'
I I ha\ e rparrrcrnilv enhdnced my skll' in the PdsL yed d'
) r ..,, n,e"oDDonuhes io .ak" on
_e-. chdllerSing ali8nrerE'
t ,itl need n up tutue ho bp " v"luab'e 'onn'burol dr
\'4(ro$n
l. i k"" *ri,' "r.u'

YourWolk GlouD
I Mv wolk sloup works tow d clear goals
i.r "-"it "i" i,..v " orl aoup helP' me ro be Produchv"'
dore
3. Ihe" peopl" 1 worl wrrh cooPerarc to 8Pr ihc io\
I

Cooperation Eetween GmuEq

decisions and aciions that wil1affect our
.
1. Othei grouPs keeP my work SrouP informed 'hout
has a clear undemtandins of its
,. ffiJ; -, Broup inteEcis wiil oiher sroups, every $ouP
].
l
slque roles and resPonsibrLties'
., 6"1" r".a *-a|,Uo. between mv sort goup aod o'her grouo' wii}l relaled goal''
'"

Reward$
on voui-iob?
Hos do voJ rale \ our tota I comPensa rion rbd'e Pa)' bonu5' "roc\)
I
. tour
:l toral t dsh ' orPensaion U'dv 'bmu')on robr
-. Ho. u o'urd l ou i,re "le tv dnd/o' oL\e' in'erl'vc Pdy on ) ou oD'
:. r'." a.1.-i,",t or bonus oPPorrur
il ",.ounr
li,
|: Business Stratega
lii cd link beh^/een my work and Mioosoft's obiectives'
tl 1. I see a clear
overall succ€ss'
i i. iil"" . .r*La*",-dins or'how mv division contribuies to Microsol{s
as a €omPmy'
L 3. I beliwe we are heading in the dght direction
!l
Source: Microsoft CorP.
I
I
l,
T
II
I 24

t
t.
t; 24
ii
 Mi..osolr conpeiins on Tatent (A)
$

Exhibit 12 \,licrosoft Siock Histo.y: 19861999

Source: MSN Money Ceniral

Slock p ce summary data

Il,O 3/31/1986 al S21
Eighi splils 1986 1999
$10,00U invesred L]1 thc lPO worth 97,780,000 at end 1999.

25
 Mi.osoft ConPelins on Tal.nt (A)
;

Erhibii 13 Microsoft ComPetency Toolkii (examPies)

Success Facio. lndividual Excellence

C;;;"il). Inlellectual HorsePol\'e. (is bright, iniellectuillv sharP' md learns qui'kl) )

. AnaLyzes, exPlains, and

. Bapidly ide.liiies lhe
orgairizes complex draws ogicalconcLusions
informalion frorn a based on complex dala

area idenliiying key determines slralegic

issues, assesslng
irnpact, and dmwing
r Leans new skills and
ass rnilates complex
nlomation involving concepls and ideas,
uniamiliar situations and and lnlegEtes and
asslmilates high y
comPLex iniormalion

' Oulck y adlusls his/her

lh nkin!1o assimilaie
new informalion or

. ls abe to apply aid

exp a n ogic related

Sample interview questions:

was it difficult?
. T{tl me about vour mosi intelle.tualtt challenging oi difficult Probiem Why
How did you work throuSh it? Ho$'did iltud oDt?

. TeU mehowyou went aboui leaming ihe busiDess at yourlastjob \\hai wouid vou do il) leam
lhe business at lvlicrosoft?

Success Factor Long'Term APProach

Dev'elopng ieopte Lp.oiidcs ,ob rele,ani tearnins' de'eloPmental
exPeriences' d
;;;;;,;;;"
Ieeoba \.o "m"'c" n"''td' rper'orn"nce)

. Actively coaches direcl ' Holds managers accountabLe

repods how io g-ol lhe
mosl earnrng irom their
clirenl assignmenl. . ldentliies key peope in
. Gives direct rePoi( candid,
. Provdes siretchiobs thoughtlulfeedback on
their strengths and
ior direcl .ePorts 1o
helP lhem develoP
for developing peop e in
their group,'organlzalion.
his/her organ zation to
assume hrghlevel
resPonsibil lies, and is an
advocale for them whe.l

advancemenl ocaur.

26

26
i Mi.rosofr conpeiing on Talent (A)

Simple intePiew questions:

. Tell me about one of the mosi high potenrial people you/ve had an opportunity ro work wilh.
-.
What did you do to suppori that person,s development?

; Tell me how you have ideniified and developed high,porentiat people wfthin your orgnization?

. Te]] me about a rime you had ro disipline d employee. WIar l\/as your approach to the
conversaiion? What was you. straregy? Whar was ihe ootcome?

27

21
 Misoeot: comPeling or Talenl (A)

Endnotes

Some Top Taient Chooses to Go Off Liee"' Wall S?eet loulaql'

' David Bmk, "As Microsoft Matures,
lwe 16, 1999.
" Op- cit.

(Readingr Addison wesley' 1996)' P 44'

"'RandailE. Slross, Tle Miclosorft w,v

'' Randall E. Stuoss, "M! Gaies Builds His Brain Ttust," Fortufle'Decembet E' 1997 '

Supercmart"' IoTi'ne'
' Randal E. Stross, "Microsoft's BiB Advmtage Hiring Onlv the
November 2s,1995.

''Elizabeth CorcoEn, "stdiing Seedllngs, But Close to the Tre' Microsoft Is th€ Model for
Ex Empioyees," rfie Wdsir iigtofl Post,Irly 7,1996

2a