Ballmer: Don’t Restructure Microsoft, Renew it

Bad Relationships

Bad relationships don’t benefit anyone

Like many in the investor community and the public, I have read the news stories of impending “restructuring” at Microsoft with a mix of relief, anticipation, and impatience.  It’s like watching a friend, who has been languishing in a bad relationship, finally decide to end it.  I’m thrilled to hear that it’s going to happen and now’s the time to get on with it!  And similar to a broken relationship, I would expect that person to shed some of the bad habits they picked up over the years and either, reacquaint themselves with lapsed good habits or create new ones.  So it goes with Microsoft.

bloated fish

Bloated = Bad

The company is a bloated mess.  Just read one of the myriad articles decrying its decline.  It’s behemoth and unwieldy- slow off the block and even slower to respond to competition.  Microsoft doesn’t need a “restructuring,” it needs renewal.  As part of this process, whatever it is ultimately called, there will be layoffs or “RIF’s” (reduction in force) in the Microsoft parlance.  But lopping off a couple of waving tentacles is not sufficient- that just gives you wounded tentacles spewing blood or red ink everywhere. Ewwww.

There is a far better way to do this- and it’s going to sound radical but bear with me.  Voluntary RIF’s.  Yep- ask for volunteers to get off the boat and give them the life raft to do it in.  Microsoft is famous (and should be commended) for its historically generous layoff packages.  There is usually a substantial severance, medical premiums coverage, sometimes the acceleration of stock grant vests, and placement assistance.  Lately, the number of my former colleagues and friends privately hoping to be RIF’d has reached epic proportions.  So, Microsoft, I’ll borrow from another epic company- Just. Do. It.

Volunteers

Any volunteers?

Microsoft should implement a voluntary severance program.  It should be company-wide, across all levels, and should have a significant magnitude- I’d like to see 20,000- 30,000 spots.  Make the severance offer similar in scope to the existing packages:  1 month pay for every year of service (up to 12- 15 years), automatic vest of stock grants in the 2013 calendar year, insurance premiums through 2013, and job placement services.  But there is no carrot without a stick, so people who take this option can’t work for the company again for 2- 3 years.

Still reading?  Good!  I’ve mentioned this to several people who have said, “Microsoft will lose all its best people.”  That’s both true and it’s not.  Microsoft will loose a LOT of great talent, but that’s in part because it has an incredible pool of talent.  20+ years of technical and industry leadership has stocked the pond at Microsoft chock FULL of incredible talent, but the pool is painfully overcrowded and few, if any, of those people truly get to flex their muscle or stretch to their potential.

Some fish will jump to better bowls

Some fish will jump to better bowls

Further, because of the generous severance, over the next 6- 12 months, there would be a hot bed of innovation happening right here in the Northwest, where after a recovery period, Microsoft would be in a fantastic position to reacquire, invest in, or partner with the companies created from this watershed event.  If Microsoft handled this momentous event with tact and generosity- they would win on the brand front, on the people front, on the innovation front (long term) and give the remaining business and people a chance to breathe again.  Imagine being able to take a full, deep breath after years of recycled stagnant air- that’s what it would feel like for those who choose to remain.  Further, I believe this could be  a powerful boost to the local economy, if supported properly, and I would recommend Microsoft host events and provide logistical or tactical support to the newly created “expat” community.

Next objection, “But what if everyone from one group or product signs up to leave?”  Yes, yes, yes!  What if everyone in one group is so burned out, used up, out of faith, or out of ideas that they all want to leave?  That doesn’t sound like a tragedy- that sounds like an opportunity to find a meaningful, healthy way to trim the company’s sprawling scope.  “But what if it’s profitable?”  So what?!  Profitable today is not a growing business tomorrow- a dangerous myopia that Microsoft has clung to, far too many times.

“What about those left behind?”  Another good question!  There should be a reward for that choose to stay- give a 5% base raise to everyone who elects to stay.  In another post, I’ll share my ideas for how to completely overhaul Microsoft’s calcified and damaging review system- but suffice to say, it’s gotta go.  Also, not a single CVP slot should be backfilled for at least a year- there are over 100 (a completely mind-blowing number) at the company.  Being an executive (CVP or higher) at Microsoft is rarified air- it’s like being “made” in some kind of technology Mafia.  You have so much power within your organization and so much money as an individual, it is difficult for even the best and most grounded of them to have a good grip on reality or to make decisions beyond what serves their personal best interests.

This wouldn’t fix it all- there would still need to be thoughtful restructuring of remaining businesses and a rebalancing of people and priorities.  Microsoft would probably need 12 to 18 months to see this kind of radical change through and it wouldn’t be easy.  But it would be WORTH IT.

Steveb has to show new leadership

Steveb has to show new leadership

Lisa Brummel could oversee the greatest company transformation ever

Lisa Brummel could oversee the greatest company transformation ever

Finally, I’d say, this is Ballmer’s chance to restore his reputation and legacy to the company and to investors.  If Steve B. and Lisa B. (Chief People Officer) had the wherewithal to oversee this type of transformation, my view of them would be radically improved.  I’d induct them into the leadership hall of fame.  They would be viewed as visionaries within the tech community, business schools would write case-studies on their incredible transformation of the company, and the tech community in Seattle would be forever changed for the better.  The alternative?  Their successors do it and it’s ugly, messy, and takes years to recover from.

Microsoft will fare far better in the long run by taking brave and bold steps to unleash both its people and businesses to grow and thrive unencumbered by the hulking overhead of 100,000 souls.  Microsoft has an amazing history, and I desperately hope that its best years are still to come- but that will only be the case with courageous and visionary leadership.

As always- please share and comment!  I appreciate your readership and support!

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About jenlocati

JENNIE LOCATI started her blog, WysWords as a way to share her experiences as a professional woman, wife, mother, and irrepressible “do-gooder”. Her diverse life experiences have taken her to Kenya as a Peace Corps volunteer, through the halls of Microsoft, the trading floors of Wall Street, and most recently back to the world of Global Public Health with PATH, one of the most respected non-profits in the world. Jennie shares her many misadventures, occasional insights, and unique perspectives in a voice that is self-deprecating, honest, and authentic. Read more at www.wyswords.com

Posted on June 11, 2013, in Big Ideas and tagged , , , , . Bookmark the permalink. 25 Comments.

  1. Great article! I was acquired by Microsoft in 1995 and the company has changed for the worse since that time. From 1995-2000, I felt part of a team that believed in delivering a great product. In the last several years, I’ve fallen apart from my team under the terrible review model that pits team members against each other, makes employees lose focus of what’s best for Microsoft and its products in favor of focusing on their career, and crushes middle management from pressures above and below that leave them little choice on how to run their teams.

    I quit my position three weeks ago (gave over a month’s notice) and it’s been such a huge relief.

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  2. Despite different recipes or ingredients tried, it’s the same chef in the kitchen. And one wonder what’s wrong with the food.

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  3. Wonderful article and I agree completely with your thoughts. My only fear would be that with a voluntary RIF only the good managers would leave and the really bad managers, who out number the good 10 to 1, would be left and make things a nightmare.

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  4. I enjoyed your article and suggestions of renewing Microsoft, and I believe you hit on two of the biggest problems: the massive number of employees and Steve Ballmer. Many of the employees are very bright, but a good number have stuck around far too long and pound new ideas that rock the boat into submission. Ballmer has been late to a number of markets in search, smartphones and tablets to name a few. The video of him mocking the iPhone in 2007 goes right to the root of the problem; he failed to recognize the massive change to small, touchscreen computers. Keep up the excellent writing!

    By the way, I work for a company that builds high-end, custom computers and Windows 7 is outselling Windows 8 about 10 to 1.

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  5. Richard Spink

    I think it will never happen. Microsoft will eventually run over the cliff ( as will Apple, Facebook and Google in their turns) then perhaps good things will emerge from the wreckage. MS pissed away all its lead over the last 15 years – mobile, desktop etc. it is Ballmer’s fault. It is at the re-arrange deck chairs stage, just like iBM in 1989.

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  6. I’ve never understood some of the thinking at Microsoft.

    I remember reading stories about Steve B. ( or was it Gates ) forbidding iPods in their home. If I was the CEO, I would allow my kids to have an iPod and study their use and ask them why they like it. Is it better than the Zune, or only more “popular” ?

    Sidenote: I only know one person who ever bought a Zune, and it was bc he hated Apple, and he could get one in what he called “doo doo” brown color.

    Another story, from the old days, was that when Steve Jobs came back to Apple in the late 1990s, he had an IBM ( or was it Dell ) laptop on his desk. No one knew if he was using Windows or his own NEXT OS, but he was willing to use another OS bc he didn’t think the Mac OS 8/9 was good enough for his needs.

    It’s seem’s that MS has been run by “money men” and “strategy people” but no “product people.” I’ve been using Word on PC and Mac for over 20 years. I’ve seen hundreds of features added but no rethinking about simplifying the user experience. 90% of users need ease of use, not 500 options. I really hope MS addresses these people when/if they finally release Word or Word LE Touch for Metro (or whatever it’s called now). I’ve wanted that since I had an XP Tablet/Convertible in 2003.

    I remember reading about silo fighting against a touch version of Office years ago. MS is their own worst enemy sometimes.

    Windows 7 Phone looked great until people found out that they couldn’t get Windows Phone 8

    Windows Phone 8 looks great now.

    ** What was up with that weird iPhone mock funeral? Is that what they call a morale booster at MS? I doubt the people working on the iPhone would waste time doing something that silly

    I guess my point is that I agree with your whole premise. Out with the old, in with the new, especially management. Less management politics, more freedom. Less 1990s thinking, more 2020 thinking.

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  7. Nice ideas but without change at the top nothing will happen and the decline will continue. At this point in their corporate history Microsoft is designed to fail from within.

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  8. Jennie, this is a great article but I’m not sure it would work the way you imagine. Driving a 100.000 + employees company is not an easy job especially within a so diverse company as Microsoft. To me the changes to be done are deeper than what you suggest. I feel like Microsoft should redefine its purpose and trully stick to it. I would love to see Microsoft evolving not against competitors (other brands or older brands) but above competitors (defining new market). I don’t understand how such a big company can still work within a management hierarchy organization where sometimes people spend more energy to please their manager or to be internally visible rather than to do the job or to be creative. Bringing back some cohesion on how and why msftees work together should help to reenergize the company because the people are incredibly smart and energetic even SteveB.

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  9. Reblogged this on @stevebanfield and commented:
    Not sure there’s much to add to this great post. As a MSFT veteran from 20 years ago (yes, that long) I hate to see the company struggle under the weight of it’s organization and past successes. Having lived through Sony’s various attempts to accelerate change within a bloated organization lead by disconnected leadership I can only agree that MSFT needs something truly radical to within it’s ranks to be successful in the future.

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    • Thanks Steve! I do feel envious of those who were lucky enough to experience the company 20 years ago- it seems like it was a pretty magical environment and I know many folks who speak so fondly of that time, and had a sense of really having impact on products and in the market.

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  10. There’s no way you could drop 20-30 thousand tech workers on the local market and have them all absorbed at once. Nor is it likely many of them would create startups (especially since entrepreneurship is not a cultural value at MS). I think you’re under-estimating the amount of misery this would create regardless of how it would help the company. It would be much better to slowly release folks rather than shocking the system. Also any complex system risks totally failing if undergoes such a major shock. There has to be someone at the top making priority decisions about what groups are more valuable than others. For instance, how much do you want to destabilize Windows Phone at a crucial point in its life cycle? What is the right size staff to maintain existing profitable divisions?

    If I were going for radical restructuring I’d be tempted to just out right split the divisions up and let them operate as smaller companies. Each could sink or swim on their own and would be potentially freed from central policies that have not delivered.

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    • Thanks Ben- Totally true, a 20-30K layoff in the Puget Sound region would be difficult, if not impossible to absorb, but Microsoft only has about 60% of it’s staff here in the US (depending on FTEs/Vendors, etc.,) and even if the total number was below that, I think you would see a lot of innovation come from it. As I said- the one thing Microsoft has done incredibly well over the years is attract great talent.

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      • And I like the idea of splitting up or spinning off business has great merit too. There are several ways to attack this problem and be successful.

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  11. Is it ‘loose’ or ‘lose’ employees?

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  12. Great write-up, bold, provocative, and “just crazy enough to work”. Microsoft needs something dramatic to change, and this would do it. I think there would be significant damage from doing something like this (product groups scrambling to fulfill their 3-year plans with a sudden dearth of people, revenue targets dropping as sales departments are rebuilt), but the long-term benefit from this “ordered chaos” would be far worth the near-term (2-3 year) pain.

    Jennie for VP! ;-)

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    • Thanks Korey! It’s true- my post is an oversimplification, the complexity involved would be pretty daunting, but I still believe it’s worth trying. And as a by-product, I think we’d see some great innovation come out of it.

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  13. Larry Sindall

    This would be a great letter to the editor of the seattle times. The Steve B era has done nothing to enhance Microsoft. The stock has been stuck in stagnation over the last several years and continues to be just another company name on everyone’s stock portfolio. Microsoft has run into a sand bar and can’t seem to reverse engines and get going again. When the captian of a ship runs a ground he usually loses his job. Maybe it’s to late to save his reputation, but Steve B should be the first one to volunteer to RIF. He should be on the beach at Maui drinking some Chi Chi’s. I do hope that what ever happens they can bring back the way things were.

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  14. “Lately, the number of my former colleagues and friends privately hoping to be RIF’d has reached epic proportions.” Oof?

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  15. An overhaul or renewal of the MS structure has often been suggested. I agree it is sorely needed, but the risks are great if done wholesale and simultaneously throughout the company. If I were in a position to implement structural change, I would do it sequentially a business unit at a time and fit the restructured business unit into a reorganized/restructured parallel executive structure. Observe the results, modify as required, get needed metrics, review, and continue the process perhaps with more than one business unit at a time. I as an outsider can’t presume to detail the schedule and all the other intricacies of such a reorganization but I agree it would take 18 months or more to implement. The outcome of course would only be as good as the the people who directed it. The executives in MS are excellent people and have likely looked at this issue for years but I would say to them – Do not delay, there will never be a more perfect time to start than now.

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    • Although I didn’t touch on it in my post because I was focused on the people angle, I agree that a measured approach would be needed to evaluate the businesses and think about how to cut/restructure them. The difficulty with doing it one at a time, is that despite being silo-ed there are often heavy tech interdependencies, so you’d have to, at a minimum do some disentangling first- which probably needs to be done anyway! Thanks (dad)! So lucky to have a reader and supporter like you!

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  1. Pingback: Los MBA han arruinado a la Xbox (y a Microsoft en general) | Disruptive Sketchbook 2.0

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