Microsoft: The Perfect Example of an Irresponsible Business

Vanity Fair’s exposé of Microsoft, published today, leaves me not knowing where to start. There are so many things wrong. If I owned stock in Microsoft (and I do not) I would sell it now. They have pretty much done everything it takes to stop innovation and growth in a company. Let’s see if I can say how they’ve done it and why they should stop—anything that is not already obvious.

For my book, The Responsible Business, I interviewed current and ex-Microsoft employees, many at executive levels. I also interviewed suppliers and corporate customers. They painted a stark picture of a dysfunctional company, but that was not the story I wanted to tell. I used those interviews as a contrast with Apple and Gore, of Gore-tex fame, to describe ways to manage, lead and strategize responsibly. The state of Microsoft came as no surprise to me, but it was discouraging. Not that I care so much for Microsoft, but I am deeply committed to American innovation and business leadership.

Here are the eighteenth-century work practices reported by Kurt Eichenwald, author of the Vanity Fair piece, that led to a decade of lost potential. Microsoft makes sure that, in every round of reviews, some people fail, and that those at the top are not necessarily the best, but only the most clever manipulators of their own image and visibility. Managers negate creative expression, punish those who dare to be imaginative, and ignore the insightful ideation of their young, social, media savvy workforce. And, oh yes, they do not really care what customers need. As a result, Apple makes more on the iPhone than Microsoft does from all of their products combined.

But why should we care, if we are not shareholders or really big customers?  And even more, why do I say that Microsoft’s failure is irresponsible?

1. Stack Ranking. This is grading on the curve, which Harvard Business School also still does. Even with the “cream of the crop,” which you get at Harvard and often at Microsoft, you make sure there is a bottom of about 5-10 percent. An equal percent are “chosen” to be at the top. Everyone else is comfortably in the middle. Success becomes all about being safe in the middle and those at the top find themselves at risk (as you will see in item number 4, below).

Why is this an irresponsible business practice? Human beings do not grow and live meaningful lives when they are focused on competing with their peers for recognition and position. And competition definitely makes it impossible to focus on helping real customers. It activates the reptilian brain and that results in constant fear. As a nation, we already spend too much time in survival mode. Innovation in America depends on creative people who are uniquely valued and developed for who they are and what they can contribute. Our global success depends on innovation and organizational cultures that support it.

2. Coach to the Review. Because of the ranking practice, all Microsoft leaders coach their people on how to pass the review—they “teach to the test.” People work to become expert at manipulating the system and staying in the game. People who are good at gaming the system, not necessarily performing well, are able to stay out of the bottom. To develop this dubious skill, they need good gaming mentors. These are abundant because they are perceived to be as successful as those they mentor. Is this how you want your managers to spend their creative energy and mentoring time?

Eichenwald asked Brian Cody, a former Microsoft engineer, whether his reviews were ever based on the quality of his work. Cody responded, “It was always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers.”

Again, why does this matter? We are teaching people to pay attention to how they look, rather than become authentic and honest. Trust is a primary source of health and happiness. We know from research at The Trust Institute that we become manipulative and underhanded when we start “presenting” ourselves to others based on an image we think they expect of us. To succeed at building such an image, it is necessary to lie and cheat. When we create whole organizations that behave this way, we undermine our healthy societies.

3. Hierarchy Extraordinaire. Hierarchy was not emphasized by Eichenwald. Instead he focused on bureaucracy. The ex-Microsoft executives I interviewed said that each manager had an average of six people reporting to them, and that the hierarchy extended downward to deeper and deeper levels. This “model” reminds one of network marketing structures. It is the way you “count coup,” which is a warrior’s way of counting heads taken in a battle. It is how you get status in a tribe, including the Microsoft tribe. No wonder there was so much bureaucracy. I will say more about the irresponsibility of this practice in a moment.

4. Squash Personal Agency Tied to Customers. In 1998, one Microsoft group came up with an innovative idea and, after thinking about ways to position the product, felt they had a chance to leapfrog some competitive offerings. They presented leadership with a prototype e-reader ready to go. But when the technology group presented it Bill Gates, he promptly gave it a thumbs-down, claiming it wasn’t right for Microsoft. “He didn’t like the user interface, because it didn’t look like Windows,” a programmer involved in the project recalls.

The substitution of product personality traits—e.g. “looks like Windows”—for critical thinking about markets and customers is not a good practice, especially within leadership. The sign on the door effectively reads, “no innovations allowed” unless they look pretty much exactly like what we already do.

The irresponsibility of this stance is highlighted by a comparison of Microsoft with Gore Products. In The Responsible Business, I speak about Gore as a jazz organization where no hierarchy exists. Leaders are elected. Each person’s contribution to the company is evaluated by a team that they have chosen themself. The entire evaluation process is based on improving the performance of a customer in their industry and work. It is all externally focused, not about the business but about the business’s customers and their businesses and successes.

5. Punish Strategic Competitive Thinking. The Microsoft group that came up with the competitive e-reader was sent to innovation hell. They were made to report to someone who would keep them in line and to work on projects that did not matter. How was that irresponsible? Reread everything I’ve written here so far.

Microsoft does not connect to real customer lives in product offerings. Their leaders missed the market that Facebook saw for young people who wanted to stay in touch. A young engineer told them that Messenger could be evolved to compete effectively and that they already controlled a big segment of the networking market. He was ignored. We don’t know if he left, was fired, or lost his spirit and did as he was told.

The crazy thing is that Microsoft’s practices work against the best interests of the company and its shareholders. The fiduciary responsibility should be called into question. No protection should be acceptable for Microsoft leadership, given the implications to the value of the company and the impact on society. I wrote The Responsible Business precisely because I wanted to offer the powerful alternatives to this kind of management. These responsible alternatives have been proven over four decades not only to make a better society and healthier planet, but to build great businesses. The Microsoft story would be tragic, if it weren’t so blatantly stupid on the part Microsoft’s leaders.

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