Microsoft People Problems

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"I hire smart people that are pretty high bandwidth, and I challenge them to think. I ask them to be pretty committed and to work pretty hard."

-Bill Gates, Founder of Microsoft¹

"The real problem for Microsoft is going to be to learn to use the carrot when the stick has been the dominant tool."

-Jim Seymour, president, Seymour Group, an information-strategies consulting firm.²

In early 1999, the top management of Microsoft Corp. undertook a comprehensive, system-wide restructuring of the company. The reorganization was initiated by the then CEO and chairman Bill Gates and the company president Steve Ballmer. The primary objective of the reorganization was to shift the focus of the company from being product-oriented to being customer-oriented. Gates and Ballmer called this initiative V-2 (short for Vision 2) and said that the new structure was part of the "reinvention" of Microsoft. The company was reorganized into different core divisions on the basis of the target customer groups served, namely information technology managers, knowledge workers, software developers and consumers.

Some observers suggested that this initiative was undertaken because of the anti-trust proceedings initiated against Microsoft the previous year. The company feared the court would rule that Microsoft be split into two companies - one for Windows and the other for applications software, and wanted to be ahead of the ruling.

Microsoft, one of the biggest and, arguably, the most powerful company in the software industry, experienced a unique problem in the late 1990s. A large number of its top executives left the company to retire or set up their own businesses. Most of these employees had been with the company for between five and ten years and had played an important role during its phase of growth. As the company grew in size and power, it became more bureaucratic and lost some the elements of the work culture that had so endeared it to employees when it was growing. This change in culture, coupled with the internet boom of that period, prompted the employees to leave the company and set out on their own. The restructuring initiative also was meant to overcome some of the disadvantages of size, and create a new work culture at Microsoft.

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1] Kathy Rebello, Evan.I. Scwartz, "Microsoft; Bill Gates's Baby Is on Top of the World. Can It Stay There?", Business Week, February 24, 1992.

2] Jim Seymour, "Microsoft's Agenda in the Time of Cholera", www.thestreet.com.

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