Kurt Eichenwald, a contributing editor at Vanity Fair, has investigated what he calls Microsoft’s Lost Decade—a period of lackluster performance and diminished profitability. He lays blame squarely at the feet of a cannibalistic corporate culture. The story is getting lots of attention, particularly as it relates to the controversial management practice of “stack ranking.”
Microsoft’s CEO, Steve Ballmer, went to Forbes to reply. His response (Lost decade? What lost decade?) is full of enthusiasm for Windows 8, Bing (currently #2 in the search engine marketplace, trailing Google by only 51.2%!) and the Surface, Microsoft’s computer/tablet hybrid designed to showcase the power of Windows 8.
Which one of them is right?
Let’s start by talking about this Lost Decade thing. To begin with, how do we decide which years are lost? Microsoft hasn’t been knocking anyone’s socks off with their innovation or sales numbers. (Eichenwald is quick to point out that the revenue from the iPhone far exceeds the revenues generated by all Microsoft products combined.) But Ballmer isn’t wrong when he points out that invention and innovation take time, refinement, and resources. Those years aren’t lost, Ballmer argues. They’ve been quietly necessary.
Harley-Davidson isn’t known for being a particularly quiet company, but they’ve had their share of lost years. During the infamous AMF era, the now-iconic company was in a death-spiral. Quality had tanked, customer satisfaction was a thing of the past, and the brand was headed toward oblivion until a group of dedicated individuals took action to save the company from within. It was a hard time for the brand, a time where they were neither innovative or productive. Yet they’ve recovered, and today are the dominant motorcycle manufacturer in the domestic market.
The Vital Role of Culture
It’s important to note that internal cultural changes played a pivotal role in Harley-Davidson’s revitalization. It turns out to be pretty essential that people build products they’re proud of. Understanding the intrinsic motivations of your work force—those unconscious psychological forces that lead your employees to choose your organization as their employer—is an essential step in effecting meaningful organizational change.
And that brings us back to Kurt Eichenwald. He’s focused on the problems within Microsoft’s internal culture. The mechanism by which employees expect to be recognized and rewarded for their contributions to the brand’s success has been fundamentally broken, he argues, by the stacked ranking system. It’s not unlike grading on the curve: 10% of your people are star performers, 70% are your average folks, and the bottom 20% aren’t cutting the mustard. They need remedial education or they need to be replaced.
Rather than creating an atmosphere of collaboration and innovation, this methodology fosters fear, anxiety, and individual competition. The focus is not on being the top 10%, it’s on avoiding being regarded as part of that bottom 20%. Where the employee’s attention is focused is where the company will inevitably go. You can make a ship so safe it sinks.
What does this mean for Microsoft? The decade past may not be lost, entirely, but dangerous lessons have been learned inside of that corporate culture. If Microsoft wants the innovation, creativity, and spark that they’ll need to remain relevant, much less competitive, in today’s tech market, changes need to be made. Understanding and recognizing what motivates people to do their best work for you, their most creative, higher-order thinking, is a good place to start. The shift toward a more humanistic corporate culture is where it begins. Who knows where it will end?