When we last left Yahoo!, Jerry Yang (CEO) and the rest of the board had just spurned Microsoft’s $44.6 billion takeover bid for the supposedly greener pastures of potential deals with AOL, News Corporation, and/or Google. The rejection of Microsoft’s bid also put the current board on a collision course with Carl Icahn in what looked to be a battle for control of Yahoo!’s board of directors.

Trials and Tribulations

After spending millions to buy 68.7 million shares of Yahoo!, Icahn was set to nominate his own slate of directors for Yahoo’s board at the company’s annual shareholder meeting. Icahn would use Yahoo! shareholders’ fury over the botched Microsoft deal to win votes for his board nominees and take over Yahoo!’s board. Yahoo! made a preemptive strike however and managed to appease Icahn by granting him three seats on Yahoo!’s board of directors in July. But what of the purported deals with AOL, News Corp, and Google?

Well, to date, the AOL and News Corp deals never materialized, at least publicly. However, Google and Yahoo! agreed to a partnership whereby Google would deliver ads on Yahoo!’s network. The kicker in the deal was that Google would pay Yahoo! more than Yahoo! could make with its own ads, meaning Google was essentially buying market share from Yahoo!.

This deal would be investigated by the U.S. Justice Department and opposed by Microsoft and online advertisers, who were arguing that the deal would be anticompetitive and result in higher ad prices. In the end, Google and Yahoo! were unable to appease Justice Department investigators by offering to cap the number of ads that would be displayed on Yahoo!’s network and Google walked away from the deal rather than fight a lengthy legal battle.

Just before Google walked away from the deal, Yahoo! reported 3rd quarter earnings. Operating income decreased 53% and revenues were virtually flat compared to the same quarter in 2007. In addition, Yahoo! announced it was laying off 1,500 employees as part of its efforts to cut costs. All told, the Microsoft bid, Icahn ordeal, and proposed Google partnership cost Yahoo! $73 million in fees for outside advisors according to a filing with the SEC.

In the wake of this double-whammy, Yahoo’s stock tumbled to around $10 per share from its 52-week high of $30.25, which it reached when Microsoft was attempting to acquire the company. Yahoo’s share of the search market also continued to decline, falling to 20% in September compared to 22.9% a year ago, according to comScore. What is Yahoo! to do? In a word, grovel.

“To this day, I believe the best thing for Microsoft to do is to buy Yahoo,” Yang said at the Web 2.0 summit in San Francisco, the Associated Press reports.

Still?!

To which Microsoft CEO Steve Ballmer replied, “We made an offer, we made another offer, and it was clear that Yahoo didn’t want to sell the business to us and we moved on. We are not interested in going back and re-looking at an acquisition. I don’t know why they would be either, frankly. They turned us down at $33 a share.”

Could Ballmer be using his public comments to further drive down the value of Yahoo!’s stock before making another bid? Or is he stating his actual beliefs on the matter and only interested in “some kind of partnership around search?” Only time will tell, but it certainly seems like Microsoft is moving forward with new strategies for challenging Google.

Microsoft Moves On

Several of these strategies include new or extended partnerships. One such extended partnership is with long-standing Microsoft partner Hewlett-Packard, where Microsoft will install its Live Search toolbar on all HP computers in North America starting in January 2009.

Microsoft is also negotiating with Verizon to become the default search provider on the company’s cell phones, according to the Wall Street Journal. Though the terms of the deal are still being discussed, early indications are that the two companies would share ad revenue generated from web searches made on Verizon cell phones.

Yahoo!’s Future

What does Yahoo! do to secure its future as a viable Internet property going forward? Well, it’s changing leaders for one. In mid-November, Yahoo! announced Yang would be returning to his post as Chief Yahoo! as soon as the company found a new CEO. In addition, over the last few months, Yahoo! has rolled out a number of initiatives, releasing its own analytics package (similar to Google Analytics), updating the design of Yahoo! News, launching the APT (formerly AMP!) digital advertising platform, and announcing the Yahoo! Open Strategy, which aims to make Yahoo! programs open source.

While the change in leadership and these initiatives seem like steps in the right direction, we believe Yahoo! will need to pick a new CEO that brings fresh strategic ideas to the table and the company will need to develop significant proprietary innovations in search technology that convince users to switch back to Yahoo! for web searches. Yahoo! will probably need partners in this turnaround effort too. Microsoft is open to a partnership and combining search algorithm, mail, and instant messenger research efforts would save both companies substantial amounts of money. Such a partnership could also make Yahoo! the default search provider in Internet Explorer, Office, and other Microsoft software products and web properties. Whatever course Yahoo! chooses, hopefully it won’t be too little, too late.

(C) Medium Blue 2008

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It’s been a busy week here at The Microsoft Observer. With the Windows 7 launch behind us, Microsoft looked ahead to the launch of the Office 2010 productivity suite and released its beta out to the developer community. Also, the company’s shareholder meeting in New York City had interesting news around both Windows sales since the launch and its mobile device strategy.

Office 2010 Beta Released To Developer Community Microsoft on Monday released the beta version of Office 2010to its MSDN and TechNet subscribers. As for the general public, they just have to wait. (read more at: http://microsoftobserver.com/office/office-2010-beta-released-to-developer-community/)

Microsoft Gives Developers Early Look at Internet Explorer 9 Microsoft showed off early work on Internet Explorer 9, a browser that will feature improved performance, new features, and the possibility of new standards. Stephen Sinofsky, president of the newly renamed Windows and Windows Live division said the company was looking at new standards like HTML 5, and noted how far behind IE is on the current ACID test, a test designed to expose browser flaws. (read more at: http://microsoftobserver.com/online-services/microsoft-gives-developers-early-look-at-internet-explorer-9/)

Microsoft Releases Office Mobile 2010 Beta for WinMo Phones Alongside Microsoft’s launch of the Office 2010 beta, Microsoft on Wednesday launched a public beta of Office Mobile 2010. The set of applications will allow users to view and edit their Office documents, use their phones as a PowerPoint presentation aid, and connect with their SharePoint Workspace Mobile accounts. (read more at: http://microsoftobserver.com/office/microsoft_releases_office_mobile_2010_beta/)

Microsoft Hosts Shareholder Meeting; Windows Sales “Fantastic” Speaking Thursday at the company’s annual meeting, Ballmer said Windows 7 sales are “fantastic,” but provided no numbers to support his claim. The Wall Street Journal estimates that Microsoft has sold 40 million copies sold since the new operating system’s Oct. 22 release. (read more at: http://microsoftobserver.com/xbox/600k-modded-xbox-systems-banned-from-xbox-live/)

Microsoft’s Ballmer Admits Misteps With Windows Mobile Slow Windows Mobile development is causing all kinds of problems for Microsoft, but CEO Steve Ballmer says the company has learned from its mistakes and is poised to carry out its mobile strategy more effectively. (read more at: http://microsoftobserver.com/windows-mobile-phone/microsofts-ballmer-admits-misteps-with-windows-mobile/)

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Microsoft Goes SAASy

Flashback

Used to being the unchallenged leader during the early days of information technology, Microsoft never had it as easy since the advent of the internet. No matter the hot new internet technology, Microsoft was forever caught napping. It was never the innovator and forever a laggard in terms of success. Google trounced it at search and online advertising, Yahoo at instant messaging and consumer mail, Blogger, Wordpress and Typepad were far better at blogging software, it never even appeared on the battle ground of social networking with MySpace and Facebook ruling the roost.

But there were certain markets, especially corporate markets, in which Microsoft continued at have a strangle-hold, which kept its cash registers clinking, and at a frantic pace at that. These were the PC OS market with its Windows series, MS Office for Office suites, and its prize cash cows – MS Exchange and MS Sharepoint for enterprise messaging and collaboration.

Now, the above mentioned software are essential for every enterprise, and 5 to 10 years back, Microsoft did undoubtedly offer the most robust solutions available. In those days, since every body was eyeing the juicy big business enterprise segment, with their thousands of users implementations and IT budgets bursting at the seams, it was for that audience these software were developed. So although Exchange and Sharepoint required dedicated servers, complicated implementations and dedicated IT to man and maintain the system, nobody really minded, because these mega enterprises had the money and staff to spare.

The Present

But there was a segment which minded it, the small to medium size business (SMB), segment which had neither the staff, nor resources, nor the inclination. Since not many alternatives were available, they either had to bear the burden, or do without these technologies altogether. But in recent times, things have started to change. In the past 3 years or so, a new approach has emerged, spurred on by technology improvements and increased bandwidth – the software as a service approach. And its primary market is the small to mid sized business segment.

In a recent SaaS survey conducted by Cutter Consortium, nearly three-quarters (72%) of the people who responded reported that they are using Web-based solutions to fill unmet needs. More than a quarter of the respondents (28%) are hoping that these solutions will cut their costs by 20%-30%.

It is true that there was some initial skepticism initially about the viability of SAAS solutions, in that it involves letting go of some control and allowing the organization’s critical data lie on a third party SAAS vendor’s servers. But the benefits of this approach have been so overwhelming, and due to providers like salesforce.com and HyperOffice providing SAAS solutions effectively over the years, that organizations across the board, from small to mega enterprises, have been converted.

Microsoft Plays Catchup

With the enterprise market saturated, Microsoft has also been eyeing the relatively untapped small to mid sized business market in the past few years. Considering the success of SAAS with this segment, Microsoft has introduced offered a succession of software offered as a service in recent times, under the Microsoft Office Live banner. But the real success story with this segment was “hosted Exchange” and “hosted Sharepoint” solutions offered by independent vendors; many of them certified Microsoft partners. First, a little refresher:

What is Hosted Exchange (and how it differs from Exchange Server)?

Every company needs dedicated company email for its employees, as well as some basic productivity solutions to lubricate everyday working (task management, calendars, address books). To cater to these universal needs, Microsoft developed Exchange Server whose major features consist of electronic mail, calendaring, contacts and tasks. The front end client for Exchange through which employees access all this information is usually Outlook, but Exchange also supports mobile and web based access (called Outlook web access or OWA for short). But implementing Exchange is hardly easy, as it includes setting up a dedicated server, undertaking a complex Exchange implementation, in addition to additional anti spam and anti virus implementations for the security of the server. Also, dedicated staff needs to be hired to monitor the system and keep it running, and to manage a myriad of complexities that may arise, since Exchange is a vast solution.

Under hosted Exchange however, all aspects of implementation and maintenance of the Exchange implementation are outsourced to the servers of a specialized “hosted services” provider. Customers still get the most of the features of Exchange – dedicated email, shared calendars/contacts/tasks, and premium features like mobile and web access to information (typically at an extra cost). But unlike an in house implementation, where everybody accesses Exchange over the local network, in this case it is accessed over the internet. This approach is especially beneficial for small to medium businesses which are saved the huge costs of in house implementation and instead have to pay a reasonable monthly subscription.

What is Hosted Sharepoint (and how it differs from Sharepoint Server)?

Apart from basic email capabilities, companies also need the ability to manage the company’s information, stored in documents, and the ability for employees to work together on this information. This is what SharePoint, Microsoft’s browser-based collaboration and document management platform does. It can be used to host and create a company’s web site that includes shared workspaces and documents, as well as specialized applications like to do lists, discussion boards, wikis and blogs. But Sharepoint’s power is coupled with its complexity. It’s implementation is no less cumbersome and costly than Exchange. Moreover, it is not end user friendly. Subject matter experts cannot share their knowledge directly; they always have to either go through IT intermediaries, or undergo specialized training which consumes time and diverts attention from competencies.  Knowledge is not dispersed freely through the organization, but is choked by having to pass through the IT bottleneck.

As with hosted Exchange, under hosted Sharepoint, all aspects of a company’s Sharepoint implementation and management are outsourced to third party vendors. Customers can still access all of Sharepoint’s features over the internet, but for a reasonable monthly fee.

Microsoft Takes the Big Services Plunge

As long as the hosted market was not sizable, Microsoft was content selling Exchange and Sharepoint as software products, and let its partners and independent vendors do the hosting. But considering the bourgeoning of the SAAS market lately, and its future outlook, coupled with tough competition from “alternative” collaboration and messaging offerings like Google Apps, Gmail and HyperOffice, MS finally In Oct. 2007, Microsoft finally took the plunge when it announced hosted Sharepoint and Exchange for enterprises with more than 5,000 seats – titled Exchange Online and Sharepoint Online. In Feb 2008, it went one step further by opening these services to all organizations, irrespective of size.

The Hot News – Microsoft’s “Hosted Service Bundles”

Keeping with its recent rapid movement, on July 8, 2008, Microsoft made another announcement, introducing a novel, if not controversial strategy. In addition to offering its hosted services as single offerings, it announced that early in 2009, it would also offer them as “bundles”, a combination of services at a reduced total cost.

Microsoft has introduced two “bundles”, titled the Deskless Worker suite and Information Worker suite. The deskless worker suite is priced at just $3 per user per month, and will include Exchange Online services as well as read only access to Sharepoint Online services. This is supposedly targeted at workers who typically spend only a very small part of their day in front of the computer. The information worker suite is priced $15 per user per month and includes a full range of offerings including Exchange Online, Share Online and Live Meeting, Microsoft’s web conferencing software.

An Assessment

Great Solution?

At first view, it would seem that Microsoft has come out with a great offering. The entire range of Microsoft’s best of breed enterprise applications, rolled into one, available at a very affordable monthly fee. Exchange online for email, calendars, address books, task management and access over the web and mobile; Sharepoint Online for collaboration and customized portals for teams and partners; and LiveMeeting to conduct audio and video conferencing with multiple participants no matter where they are. All at the customers disposal, in a single offering, at an imminently reachable $15.

A good opportunity to validate the parts – as in they have the right idea messagin, project collaboration, document management, Outlook sharing, couple with online meetings.

Think Again

Whenever something seems so perfect, it always makes sense to bring ones guard up, and look closer. The first phrase to reconsider is – “rolled into one” or “all in one”. Does it mean that all of Microsoft’s great offerings have been integrated into a single, seamless solution, with all aspects communicating with each other? Or does it mean something else.

Well, it means something else. All in one refers more to “all in one pricing”. The services remain exactly as they were; only they will cost less when purchased jointly. Individually, Microsoft sells hosted Exchange Online for $10; SharePoint Online for $7.25; Office Communications Online for $2.50; and Office Live Meeting Online for $4.50. So a joint pricing of $15 means a saving of $ 9.50 per user per month.

Moreover, even the separate components of Microsoft’s new offerings are bare bones solutions, requiring implementation and configuration, before a workable solution is set up. This is effort most small to mid sized businesses are not equipped to make, nor do they want to make. Although the pricing of Microsoft’s bundles may be very tempting, a major reason companies go to “hosted service” providers in the first place is that in addition to hosting they also offer “managed services”. All aspects of configuration, integration and maintenance are their hassle. If all the components – Exchange, Sharepoint, LiveMeeting and Office Communications; are to be integrated into a single seamless solution, that will require massive implementation.

So, although Microsoft’s offering looks enticing from a distance, it is hardly the end to end, ready to use solution businesses are really looking for. Microsoft offers all pieces of the puzzle, but they remain separate pieces that don’t fit together. Even the measly priced Deskless worker suite has attracted a lot of flak. The verdict is that it caters to an imaginary class of worker who needs only read only access to company information. Although real life workers of this class don’t access the company’s information systems as much, they often interact with the system in critical ways. An example is a nurse who may need to keep the hospital’s drug stock updated.

Hosted Service Provider’s Perspective

With Microsoft jumping into the fray, and at very competitive prices at that, traditional providers (Microsoft Solution Providers) of Exchange and Sharepoint hosting are certainly feeling the heat. Setting up Microsoft infrastructure on their servers, and further selling it as a service offered them a steady and ongoing revenue stream. But Microsoft offering such services directly will certainly cut into their pockets as they can hardly hope to compete with Microsoft’s pricing.

Microsoft was well aware that the latest announcement would pinch hosted service partners bad, and not intending to cut them out of the picture completely, it made another announcement intended to keep them interested. Partners can resell Microsoft’s new hosted service offering and pocket a percentage of the ongoing revenue. Partners will receive 12 percent per user, per month, up front for a first-year contract, and 6 percent per user, per month, of the ongoing subscription fee. So in the first year, resellers of hosted services will receive 18 percent margins on the subscription value, and 6 percent for subsequent years. But in spite of this carrot, partners are still smarting, because reselling Microsoft services won’t be nearly as profitable as letting out on premise implementations. 

Some Microsoft solution providers are worried that this puts them in the feast-or-famine mode of trying to find the next project to generate consulting revenue as opposed to recurring revenue streams associated with keeping Exhange and SharePoint servers running.

There is Hope

Although hosted service providers who provide bare bones hosted Microsoft products will feel the competition from Microsoft’s new offerings, but there barely are any vendors who do just that. A vital part of what these companies do has always been adding value by offering integration, consulting and management services on top of the basic Microsoft products they host for their customers. And this need for integration, management and consulting still remains because Microsoft will merely offer basic hosting of its products, while end customers need ready to use products, without the hassle of implementing and managing the application.

So, these companies can continue to do what they’ve been doing all along and still attract customers – host Exchange and Sharepoint on their servers, and build solutions on top of that and offer them to customers as services. Alternatively they can resell Microsoft’s hosted services by adding value added services on top of that, and attract a premium price. One example could be offering support for email on iPhone and Blackberry that stripped down hosted Exchange does not. Or a company could integrate all the components of Microsoft’s bundle – Sharepoint, Exchange, LiveMeeting and Office Communications, into a single seamless solution with a centralized console.

The Search for Truly “Complete” Solutions

Although with this announcement, Microsoft didn’t quite deliver what it seemed to offer, the need it sought to address is nonetheless very pertinent. The need for a truly end to end, integrated messaging, collaboration and web conferencing solution, with each component fitting seamlessly into the whole and communicating with every other component. Solutions which don’t require any hardware, downloads or maintenance and are ready to use from day one. Solutions which come at an affordable monthly subscription.

So, do end customers have to wait for a couple of years before somebody else takes up this challenge? The answer is a resounding “certainly not!”. Although Microsoft may make it seem like it was the first to serve this compelling need (not that it really did serve the need), it was for the precise reason of pressure from rival products that Microsoft took the “bundled hosting” plunge. Google for one offers many compelling alternatives to Microsoft’s Exchange and Sharepoint with Google Apps, Google Pages, Gmail et all. But even Google’s star products are piece meal, and it hasn’t so far come up with a truly integrated end to end solution. Moreover, it doesn’t have a web conferencing solution at all, which would be vital in a totally complete solution.

But there is a another category of solution providers, who may not be as big as Google and Microsoft, or get that kind of frenzied airtime, but they have for years offered very compelling solutions to small and mid sized businesses. Many of these solutions would put the biggies to shame, and are in intimate touch with the real needs of the small to mid sized business segment. To present my case, I shall discuss the web based application HyperOffice. HyperOffice has been operating in the “Exchange and SharePoint Alternative” domain for years, and they’ve built their solution bottom up, based on experience. It would not be wrong to say, that they’ve been doing for years what Microsoft promised to do just now, and did not do even that.

Now to assess HyperOffice on the basis of the parameters we have defined for a truly end to end solution.

Exchange Features

HyperOffice includes business email, shared contact management, shared calendars and shared task management. It also includes Outlook integration and can be used to power the Outlook accounts of your employees as if Exchange were running in the background, only that its not. Users can access their accounts on their desktops using Outlook or online using any Mac or PC browser and all information is automatically kept in synch. Moreover users can also access and synch their accounts from mobile devices like iPhone, Blackberry etc.

Sharepoint Features

As an alternative to Sharepoint, HyperOffice includes a publisher tool which can be used to set up dedicated intranet and extranet workspaces for employees, departments, partners or clients. The publisher allows for deep customization of the workspaces according to user needs. Users can finely manage the appearance, layout, pages, interlinking of these workspaces. In addition they can choose from a range of collaboration tools to add to each workspace – document management, calendars, address books, to do lists, task management, forums, IM, polls etc.

HyperOffice also includes a rich online document management tool. It allows for easy online storage and organization of all file types and allows people to collaborate on documents using features like versioning, notifications, locking, overwrite protection etc.

Web Conferencing

Keeping with growing travel prices and increasing openness of companies to web conferencing as a mode of communication, HyperOffice has recently introduced HyperMeeting, its web conferencing tool. It is as robust as any web conferencing solution, with the ability to conference with upto 125 participants, file distribution, presentations, application and desktop sharing, whiteboard etc.

Integratedness

The best thing about a solution like HyperOffice is that all parts fit perfectly into the whole. This makes sense, because even in a business, all parts are forever interacting with each other, and so it should be with a collaboration solution. Consider the following scenario – A web conference needs to be set up. Since it is a meeting, invites need to be sent out to all the participants. So an automatic invitation tool will be involved. The invitation tool will need to talk to address books so that the right recipients are selected. Moreover, to ensure that participants don’t have clashing schedules, calendars will need to be compared. Before the meeting is undertaken some documents may need to be distributed to the participants, and collaborated on. So the document management tool would be involved. The conference may relate to an important milestone in a project. So the project management tool would be involved. This is only one situation in which one can envision different parts of the system having to interact with each other; there may be a myriad of other such situations. The synergies that are to be had in such a system are tremendous.

In HyperOffice, different parts of the system come together simply, logically and effectively. It’s no wonder that it’s been nominated for many awards under the “design” category. The solution allows users to set up workspaces for individuals with tools like email, personal document libraries, address books, calendars, to do lists, links, reminders etc. On the second level workspaces can be set up for groups with looks like document management and collaboration, shared calendars, shared address books, group tasks, web conferencing, forums, polls, chat etc. This is a great example of the coming together of messaging, collaboration and web conferencing features.

Moreover, HyperOffice includes a myriad of other features which can only come after years of experience working with clients. These are the ability to integrate the solution with Outlook, mobile access for devices like iPhone and Blackberry, and the ability to manage documents and drag and drop upload documents directly from the desktop.

Another great aspect from an administration point of view is the ability to manage everything from a central console. All aspects of collaboration are contained within HyperOffice and users don’t have to look in different directions and learn a myriad of software for different uses.

Tailored for SMBs

Big names like Microsoft and Google always eye the bigger customers of the range of around 5000 seats because of the juicer profits to be gotten from those clients. So both the products and the services offered around these products take shape with that segment in mind. Smaller companies like HyperOffice, however have been developed specifically for the small to mid sized business segment, and refined through years of experience. The onus is on developing ready to use products with easy “push button” functionality.

HyperOffice just needs a signup and can be set up almost instantly. It is an end-user’s tool, as just about anybody can get on the system and publish information or use the tools. No technical expertise is required to implement or use it. Moreover, they also offer free training and support services to assist companies along the way. If a customer chooses, they can easily scale down the solution, and choose only a subset of the tools offered based on its needs and comfort level, rather than the entire suite.

Conclusion

In conclusion, although Microsoft has opened its hosted solutions to all, they still remain suitable for organizations which are largish if not large. Vendors could also resell Microsoft’s bundles by throwing in integration and management services, but then they will ask for a premium price and the low price tags won’t remain. Frankly, even in their hosted avatar, Microsoft tools are still not suitable for small businesses because they never were developed for this segment, and the effect will always be of trying to squeeze a big foot in a small shoe.

Clearly, the lesson for growing organizations is that although Microsoft and other big names have rather belatedly gotten on the “Small to medium sized business” bandwagon, one has to cut through the hype, and look in all directions for the best solution. And more often than not, the most compelling solutions will come from elsewhere.

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Microsoft is one of the wealthiest and most successful companies in the world. Even more important, from a human resource perspective, is the fact that Microsoft is an employee-driven organization. While other organizations base their success on better manufacturing techniques, or better technology, Microsoft’s success is based on the effectiveness of their employees. Essentially, Microsoft value their staff and realize the importance of their staff. This focus on employees may, in the future, expand to all organizations. Microsoft then, is worth studying as an example of best practice in human resource management.

This study will focus on Microsoft’s employee management methods including how they recruit and how they retain their staff. By looking at how Microsoft operate, there is opportunity for other organizations to consider how they manage their employees and to consider whether their staff are also valued.

Firstly, the study will present information on the human resource practices at Microsoft. Secondly, the study will analyse these practices with a view to showing why they are effective.

HUMAN RESOURCE MANAGEMENT AT MICROSOFT

Recruitment and Selection – In the Beginning

Bill Gates is the driving force for Microsoft and from the beginning of the company he believed in recruiting extremely intelligent staff, favoring intelligence over experience, “his preference for hiring extremely intelligent, not necessarily experienced, new college graduates dated from Microsoft’s start-up days, when he and cofounder Paul Allen recruited the brightest people they knew from school – their ‘smart friends’” (Bartlett 1).

From the beginning Gates realized that his employees were his greatest assets, shown by his quotes including “it’s the effectiveness of our developers that determines our success” and “take our 20 best people away, and I will tell you that Microsoft will become an unimportant company” (Bartlett 2).

Microsoft’s recruitment strategies reflect their philosophy. They sought the smartest and the most driven people and did so aggressively, as Steve Ballmer says “whenever you meet a kick-ass guy, get him” (Bartlett 2).

The recruitment strategies in the beginning included sourcing people from the elite educational facilities such as Harvard, Yale, MIT, Carnegie-Melon and Stanford. Microsoft recruiters would visit these universities “in search of the most brilliant, driven students” (Bartlett 2). Experience was not required and it was in fact, preferred that new employees had no experience.

Once selected, these students had to undergo a thorough selection process. The first stage was an interview “by at least 3, and sometimes up to 10, Microsoft employees” (Bartlett 2).

These interviews were designed not to test knowledge, but to test “thought processes, problem-solving abilities, and work habits” (Bartlett 2). Technical interviews are described as being focused mainly on problem-solving, with interviewers posing problem scenarios. To test the composure of the candidate and also their creative problem-solving skills, unexpected questions were also included. Two examples of these questions given are “how many times does the person use the word ‘the’ in a day” and “describe the perfect TV remote control” (Bartlett 2).

After the interview, interviewers would e-mail their decision on the interviewee with the words ‘Hire’ or ‘No Hire’ and comments on the problem area, the future interviewers would then use these comments to further investigate whatever issues there were with the interviewee (Bartlett 3). This interviewing process was essentially a ‘make or break’ one, where interviewees were pushed to their limits, if they thrived and survived this meant they would also thrive and survive in the Microsoft working environment.

After this series of interviews, if the majority of interviewers were favorable the interviewee would finally meet with their manager and this manager would make a final hire/no hire decision. The very last step is an interview by someone outside the hiring group, this person is independent and so unbiased in their opinion. This person is meant as a final check that the person is a good Microsoft person and also to prevent managers from hiring the wrong people because they have a need to fill a certain position (Bartlett 3).

The importance of hiring the right people is also shown in Microsoft’s ‘n minus 1’ strategy which means less people are employed than are required. This policy reinforces that hiring the right people is more important than hiring just to fill a position.

Recruitment and Selection – Later Stages

Microsoft retained the same basic principles as they expanded but had to change their methods when the number of new employees required could no longer be sourced only from universities.

The recruiting practices continued to be active rather than passive, with Microsoft ‘head hunting’ the best staff. These staff were found, monitored and recruited from other companies by over 300 recruiting experts, “once someone had been identified as ‘hard core’ – Microsoft’s euphemism for the kind of highly talented and driven people they sought – the pursuit was relentless, if subtle. Regular telephone calls at discreet intervals, conversations at industry conventions, invitations to formal dinners – recruiting team members employed every means possible to keep the lines of communication open” (Bartlett 9).

Microsoft also took advantage of breaking opportunities such as company layoffs, one example is with the AOL down size, “when we heard AOL was downsizing Netscape’s operations in the valley, we assembled a team to identify the best talent and go knocking on doors” (Bartlett 10).

Employee Satisfaction and Loyalty

Microsoft attempted to cater to the needs of its employees from the beginning. Recognizing that the majority of employees were just out of college, the Microsoft company operated like a campus. The former director of human resources describes this saying, “how do you make young kids who had never been away from home – or only as far as college – comfortable? We wanted to keep the atmosphere at work one they were somewhat familiar with, and also make sure it gave them a sense of social belonging” (Bartlett 4). This environment also included every employee having their own office they were free to decorate as they please and the provision of subsidized food and drink (Bartlett 4).

Employee satisfaction was also afforded by the opportunity for growth, “development also occurred by encouraging horizontal transfers, and employees were encouraged to develop themselves by switching jobs” (Bartlett 6).

It is noted that few employees leave the organization by dismissal, with the majority leaving voluntarily (Bartlett 10). Concern over high attrition rates in the 1990s led to surveys to find the cause of the problem and for changes to be implemented. One of the major changes was the requirement for top management to coach lower levels, assisting in their development by doing so. This became known as ‘turning over the keys’ (Bartlett 11). This is important because it allows people an opportunity to develop further. Also critical to the changes was a new focus on empowering people and of defining clear goals. These changes were all designed to increase employee satisfaction and commitment to the organization, while maintaining the same spirit the small company began with.

Employee Rewards

In the early days Gates was a firm believer that employee ownership was critical in raising motivation and employee retention, in lieu of high salaries he offered employees equity (Bartlett 7). Once listed on the stock exchange, this continued, with the company offering stock options to employees based on performance.

Critical to this is the link between individual performance and reward, with semi-annual performance reviews linked to pay increases, bonus awards and stock options (Bartlett 7). Performance goals employees were measured against were specific measurable ones, these performance objectives shortened to SMART: Specific, Measurable, Attainable, Results-based, and Time-bound (Bartlett 2). This formal review system also included more common evaluations by managers to ensure no unexpected deviations. The system also included the process of employees evaluating themselves, these self-evaluations then being sent to the manager who does their own evaluation. The employee and manager then meet to discuss the review (Bartlett 8).

Stock options awards are based on whether the employee is considered a long-term asset of the company and awarded on this basis. This is an important symbol of Microsoft’s commitment to retaining good employees.

ANALYSIS OF HUMAN RESOURCE MANAGEMENT AT MICROSOFT

Recruitment and Selection

It is reported that companies must be aware of where they are going in the future and how the current configuration of human resources relates to this (Noe et al., Ch.5).

As we have seen, Microsoft employ different recruitment practices than many organizations based on their need for the very best people. Microsoft actively recruit suitable employs and focus on the right type of person rather than the right type of skill level. In ‘Human Resource Management: An Experiential Approach’ (Bernadin & Russell) human resources are described as an important source of competitive advantage. Microsoft use human resources for competitive advantage, basing their success on having the very best people in the industry and inspiring them to be the best. It is this that leads to Microsoft’s unique recruitment practices. Based on the importance placed on having the best people in the industry, their aggressive ‘head hunting’ techniques are justified.

What is most crucial here is that Microsoft’s recruitment practices meet their human resource needs. It is an important sign of the focused approach of Microsoft, with their actions always leading towards their ultimate goals.

Some important factors to be considered in recruiting staff include that the recruiter should be from the same functional area and that candidates should not be deceived about the negative elements of a job (Noe et al., Ch.5). The interview process at Microsoft reflects this with the new employee being interviewed by the manager. The recruitment process also goes further than just informing the employee about the negative aspects, instead the recruitment process actually tests the employee on the negative aspects, putting them under the same type of pressure they would be put under on the job. This is an effective method, as it can be ascertained, that if the employee is successful in the selection process, they will be successful within the organization.

Employee Motivation

McNamara says that “the key to supporting the motivation of your employee is understanding what motivates each of them.” The important thing about Microsoft is that they employ people who specifically will be motivated by the environment they provide. They do not employ skilled people and expect them to be motivated, they employ intelligent and driven individuals and give them the environment and the opportunity to develop beyond their current level. The fit between employee and organization is important to motivation and this is what Microsoft ensures.

A recent study reported in the Journal of Applied Psychology reports that employees working on projects are more efficient when their goals relate to the overall team goals rather than individual goals (Kristof-Brown). Microsoft ensures that the goals of the organization are understood via its strong culture and by employees being clearly aware of what is required of them.

Motivation can be described as providing a work environment in which individual needs become satisfied through efforts that also serve organizational objectives (Schermerhorn 395). Microsoft achieves this by incorporating their goals into their human resource management programs. The people recruited and the systems within the organization all serve to motivate the type of people that Microsoft values.

Employee motivation can also be related to Maslow’s hierarchy of needs theory. This theory has the top level of the needs theory as self-actualization needs, which is a persons need to be self-fulfilled. It is described that the way to achieve this is to “provide people with opportunities to grow, be creative, and acquire training for challenging assignments and advancement” (Daft 530). This is exactly what Microsoft provides for its staff and also exactly what it expects, for them to be the very best they can be. One employee of Microsoft describes this saying “the only way to achieve here is to push the envelope of what you can do. Every day try to do better. Work smarter. Work harder. Innovate more. People are focused 100% on performing their job as successfully as possible (Bartlett 5). The link can also be seen here between the type of people that are employed and what is expected. Microsoft hires the very best people, for these people to achieve self-actualization they need to be pushed harder than most and given greater opportunity to achieve than most.

Employee Loyalty and Satisfaction

We have seen that empowering employees is one of the new approaches being utilized by Microsoft. It is noted that empowering employees requires a culture that reflects this (Billsberry 292). In the Microsoft case we see that a change of culture is actually the reasoning behind the introduction of empowerment, suggesting that the change is considered and will be successful.

Employee loyalty and satisfaction is also assisted by Microsoft’s consideration of its employees. We saw that in the early days, the company largely consisted of young graduates and the company built a culture around the needs of this group of young graduates. This process has continued, with Microsoft always attempting to cater for the needs of its employees.

The latest attempt is by providing greater opportunity for younger employees, by having older employees coach them.

Three aspects of tasks that affect job satisfaction are job complexity, degree of physical strain and perceived value of the task (Noe et al., Ch.10). Microsoft manages this by providing the high complexity high achievers require and by ensuring the perceived value of the task is high. This high value is communicated via the high-achieving culture the company maintains.

This issue can also be looked at in terms of an employee’s role. There are three factors associated with roles: role ambiguity, role conflict and role overload (Noe et al., Ch.10). Role ambiguity is kept low by Microsoft because of the consistency in the culture and in what is required, role conflict is also kept low. Role overload is kept high, with employees pushed to their limits. In most organizations this would be a concern, but Microsoft’s awareness of this means that they specifically seek employees who will react well with role overload.

Employee Rewards

In ‘Ideas That Will Shape the Future of Management Practice’ (Bohl, Luthans, Hodgetts & Slocum) human resources is described as being the way of the future with it being argued that we will see a more mature articulation of the importance of people as a firm’s only sustainable competitive advantage. The change is described as giving high reward for high performance with the focus on a partnership.

As we have seen, Gates recognized the importance of his people from the beginning and this is reflected in the reward systems, that not only rewards for current achievement but rewards stocks to those that are seen as valuable future assets of the company. This can be seen as a prime example of the focus on a partnership, those that are seen as being valuable to the company, are rewarded with shares that will increase in value even as that person assists in moving the company forward.

Important to the reward system is also the fact that there are two reward paths available, one for those following the technical path and one for those following the management path. The skills of employees can be divided into three areas: conceptual skills, human skills and technical skills. Typically, conceptual skills become more required and technical skills less required as one moves up the corporate ladder (Daft 15). Microsoft is a company valuing technical skills, due to the nature of its product. In most organizations, employees with conceptual skills would be rewarded by moving up the corporate ladder, while those with technical skills would not advance. Microsoft, however, offers two advancement path, allowing those with technical skills to advance as technical experts, just as those with conceptual skills advance as managers.

Reward systems are an important part of organizational culture, they communicate to employees what is valued by the organization (Robbins, Bergman & Stagg 84). By having these two reward systems, Microsoft effectively communicates that both sets of skills are valued. This is also an important sign of Microsoft’s consistency. They recruit people for technical ability and so not rewarding for it would be dissatisfying to employees.

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