Microsoft’s ‘Lost Decade’? Vanity Fair piece is epic, accurate and not entirely fair

This has not been the best of weeks for Microsoft CEO Steve Ballmer. First was the news that the company will take a giant $6.2 billion write-down in its Online Services Division, acknowledging that its second-largest acquisition has floundered and its online initiatives aren’t living up to expectations.

And today comes a preview of a Vanity Fair piece by Kurt Eichenwald, two-time winner of the prestigious George Polk Award. The title: “Microsoft’s Lost Decade.”

The actual article isn’t yet available on newsstands or online, but I’ve read an advance copy of the full piece, and it’s pretty epic.

Eichenwald talks with a bunch of former execs and documents Microsoft’s problems during the past decade — including its unsuccessful efforts to compete with Apple’s consumer devices, its stubborn insistence that products revolve around Windows, its massive online losses, the negative repercussions of its stack-ranking system for employee evaluations, and much more.

It’s a well-written tale, and an entertaining read. Unless I’m missing something, Microsoft won’t be able to point to any significant inaccuracies. There aren’t any huge surprises for anyone who has been following the company. The internal emails cited by Eichenwald, for example, have all been made public previously through leaks and court cases. (I felt at times like I was reading a synopsis of stories I wrote years ago.)

However, the piece is not a complete assessment of the company. It feels more like a caricature, highlighting Microsoft’s worst qualities and overlooking the stuff that actually has gone well over the past decade.

The biggest example is Xbox. Microsoft has spent billions to build this business. Some shareholders will contend that this spending wasn’t worth it, but the simple fact is that Microsoft has established an enviable position for itself not just in video games but in digital entertainment. With more than 60 million units sold, the Xbox is not just a hobby but the kind of presence that a company such as Apple would love to have in the living room. The Xbox is mentioned only in passing in the piece.

Many of the anecdotes also feel outdated. There’s lots of talk of Longhorn, for example, but not Kinect. No real mention of SharePoint or other Microsoft successes in business software and servers. Despite the length of the piece, and the extensive research and interviews, the reader doesn’t walk away with a full picture.

In that way, it doesn’t feel like a fair portrayal.

Microsoft didn’t cooperate with the story, which may be one reason it turned out the way it did, but it’s not like that stuff was a secret.

In the end, should Ballmer go? Eichenwald’s assessment might come as a surprise.

He writes in the conclusion to the piece, “Ballmer may be invaluable for the company’s future. Because the time may be coming when the sprawling Microsoft empire will have to be busted up, like any other company that has spread itself too thin into too many product lines. And a deal-maker like Ballmer is just the type to lead that kind of massive corporate reorganization.”

I’ll link to the full piece when it’s available online.

  • Guest

    How does the conclusion cite Ballmer as a dealmaker when the opening is about the failed aQuantive deal. And that’s not the first, anyone remember Rare?

    • http://geekwire.com Todd Bishop

      Agreed, that was a bit of a head-scratcher. To be clear, the opening of this post is mine, and the end is a quote of Eichenwald’s conclusion — the Vanity Fair article doesn’t cover the aQuantive write-down or other recent news such as the Surface tablet. It’s more of a history piece.

      • Leon H

        You’re talking about the same two people (Balmer and Gates) who sold an operating system to IBM, that they didn’t even have at the time nor could demonstrate on the day.

        The same two people than purchased the Disk Operating System (DOS) from a company in Seattle, for a ridiculous price, made some changes and sold it onto IBM.

        Microsoft was built on questionable deals, not talent. The fact remains today.

  • Guest

    I googled “Vanity Fair” and I found a fashion magazine and a brand of lingerie. I know we’re in an age when any moron with a WordPress installation can call himself a journalist, but what do lingerie salesmen know about running a software company?

    • guest

      Not unless it doesn’t even take a lingerie salesman to recognize that an ex-P&G salesman (Ballmer) has done a lousy job running a software company.

  • ragnu

    I think the point of the VF article is that the culture (read: bureaucracy) in many parts of Microsoft was very effective in stifling innovation. Other companies, like Apple, Amazon, Google, etc, have continued to innovate, which is why they are doing well now, IMO. Microsoft became way too complacent and reliant on the Office ‘cash cow’.

    That was the lesson I took away, at any rate. Culture matters. Culture can facilitate success, or it can facilitate stagnation.

    Here’s where I read the article, BTW:

    http://www.vanityfair.com/online/daily/2012/07/microsoft-downfall-emails-steve-ballmer

    • http://geekwire.com Todd Bishop

      Just so you know, that link is to a preview of the article. The actual piece is about 10 times longer, at least.

  • Former

    It’s on newsstands now.

    • foobarboy

      Of course Intel [and several other companys] also run these stack-ranking systems. I can personally testify [I was an employee once] that Intels version, called FOCAL, also results in the wanton destruction of creativity.

  • TheBoardLovesOurStrategy

    I disagree that the successes undermine the point of the article. Generally speaking those were either originally side projects (Kinect) or aren’t “sexy” enough to warrant Ballmer’s attention (Windows Server and the other server products). Those successes are all islands where people somehow are able to still actually succeed in spite of the corporate culture and leadership.

    What IS crazy though is the conclusion that Ballmer could lead the company he’s running into the ground to the promised land. First, Ballmer et al. won’t ever consider a breakup. Ever. They fought the DoJ too hard to ever be open to that. Even if they were open to it though, he lacks the credibility and trust to lead something that big. Employees would view a Ballmer-led break-up as another scheme to get him, his lieutenants and the partners more money at the expense of regular employees. Nothing that’s been good for Kevin Turner has been good for the employees (just like WalMart, come to think of it).

    The only way to end the pain is to get rid of Ballmer, get someone who understands tech in there, and break up and restructure the company to enable growth and innovation (and get rid of the cronies and rot that has been growing under Ballmer’s watch).

    • guest

      Any particular reason why you’ve stolen my tag line for your alias? It really doesn’t say much about your own creativity.

      • Guest

        When I’ve seen that phrase used here, I’ve seen it used as a very effective, ironic way to indicate that not only is the leadership terrible (Ballmer) but that the board compounds the situation by supporting the leadership.

        So, rather than just “Guest” I was using that tag for the irony. Not so much stealing as homage. But hey, you don’t want me using it, that’s fine. I’ll find another.

        • guest

          Okay, flattery works. Use freely.

          • Guest

            Thanks, I’ll probably find another but appreciate the license.

            Cheers.

  • Susan Porter

    Apple sheep are the target demographic for VanityFair. Conde Nast publishing is just in it for the advert $$. Nothing intelligent in the article at all – perfect for Apple sheep that pay to much for inferior products.

    • Guest

      And this is why the good ship M$FT is in trouble. Rather than reading the story, engaging with it and learning from it, you just dismiss the whole thing.

      This is what led to those idiotic WIndows 7 Launch Parties, the KIN, the Zune, the aQuantive buy….and the list goes on.

      Because no one that’s left there will listen to anything negative. Anything that’s not the party line is crap from idiots.

      • guest

        Your generalizations are no more compelling than his.

      • Tom Strickler

        Susan is right. I did read the article and failed to find the part where Balmer has led Microsoft to become a diversified technology company with 6 seperate billion + dollar businesses. Microsoft: Windows only-NOT. Where as rivals are all one trick ponies – Google: search, Apple: cell phone, and Facebook: social.
        And Balmer built all this with the oversight of a monopoly ruling.
        So from a simple shareholder perspective that diversified businesses offer greater potential return on capital with reduced risk and I would conclude with Susan that this is a typical ‘tard piece for the Apple sheep.
        Why didn’t the author cover this accomplished diversification from Windows and how its rivals are all desperately trying to diversify their same businesses. Sure, Microsoft doesn’t dominate every technology segment out there. Maybe, just maybe Ballmer is OK with that. Can you imagine the anti-trust heat otherwise?
        Now with the monoloply ruling’s enforcement off maybe a “smarter” article might read on how Balmer will perform unshackled.
        Consumer markets are fickle. The iPhone, Google search, and social all present significant risk in getting replaced by the “next”.
        But read on Apple sheep – Microsoft has disgruntled employees and has not dominated every tech segment. That makes me feel so much more smug for my overpriced Apple product in my pocket.

        • BahBahAppleSheep

          First, it’s not the full article: this is a “coming soon” preview. Dismissing the article out of hand is like trashing a movie based on the trailer.

          Second, labeling people that agree with the points of the article as “Apple sheep” is just sloppy “us and them” thinking. It’s like old Cold War thinking. It’s not a Microsoft-Apple battle anymore. It’s a Microsoft-Apple-Google-Facebook-Oracle-Amazon battle.

          Third, the problem with focusing on the money that continues to flow in as a sign of success is it fails to account for emerging trends and the future. IBM was doing great when PCs were emerging and they used that to justify ignoring that trend (much to their sorrow later). Microsoft’s place in emerging trends is worrisome: it’s a lot of “me too”-ism that, as aQuantive shows, isn’t working. Kinect is the one area of true innovation and leadership in that arena and that’s not making real money (yet at least).

          Finally, let’s talk “disgruntled employees”. If you listen closely, you’ll hear that a lot of what these “disgruntled employees” say comes out of a true love of the company and distress at where things have gone and are going. I know plenty of ex-MSFT folks who have left and voice these things publicly now because they were ignored or shut down when they were there. It’s a variation of the “I love my country but fear my government” thing. They love Microsoft but hate Balmmer et al. Maybe if someones listened while they were there, there wouldn’t be a need for an article like this.

        • Wayne Folta

          Apple is one-trick “cell phone” company? Um, yes, they did revolutionize cellphones in a way that Microsoft couldn’t after trying for many years. Then they revolutionized the tablet market (you do realize the iPad is a tablet, right?) in a way that Microsoft couldn’t do after trying for many years. You forgot how they remade the music industry. And how Macs are again selling well.

          In fact, speaking of Macs, Apple took in as much money on just Mac computers last year as Microsoft did with all Window productss. Not to mention that Apple has led the industry towards the laptop and with products like the Retina Macbook Pro have leaped ahead of the competition.
          You’ve also skipped how Apple has ended up smack in the middle of the gaming industry, without an Xbox competitor and having been ambivalent towards games for many years.

          Yeah, Microsoft is so diversified and Apple’s such a one-trick pony. We haven’t even gotten to the TV area, where Microsoft might be able to leverage their Xbox, but Apple has an entire ecosystem and years of experience with a TV device to leverage. Nor have we mentioned the Cloud, where Microsoft has an offering, but Apple has an ecosystem of hardware and software tying in to their expanding offering.

          • Doug

            Your really selling Apple short. Tricks:

            1. Apple I – Ushered in era of personal computing.
            2. Graphical User Interface – Really don’t need to say any more do I?
            3. iPod & digital music – Arguably the cornerstone of their recent success.
            4. iPhone – Redefined the cellphone industry
            5. iPad – Created a market that didn’t exist

            These aren’t little things either, but grand industry and world changing things. Is there anything that Microsoft has done that has truly redefined things on the scale of any of these? They’ve expanded on ideas (like the GUI), perhaps brought scale to those efforts and delivered it to more people, commendable surely, but hardly revolutionary.

          • guest

            1. Apple I – Ushered in era of personal computing.

            Contributed, yes. Ushered in? No

            2. Graphical User Interface – Really don’t need to say any more do I?

            Yes, actually you do. They didn’t invent it either.

            3. iPod & digital music – Arguably the cornerstone of their recent success.

            iPod, another late to market entry, but one that proved very popular. Digital music, again didn’t invent it but did popularize it.

            4. iPhone – Redefined the cellphone industry

            Another late to market entry. Not the first touch phone. But again one whose influence has been significant because of it popularity. So far this is your closest to accurate argument.

            5. iPad – Created a market that didn’t exist

            Again another very late to market entry. The tablet and slate markets already existed. But again Apple biggest contribution has been to make it more mainstream.

            Virtually everything on your list is an example of Apple expanding on the previous work of others but just having more market success doing so. There are many example of MS doing similarly.

  • Bob

    Xbox is still unprofitable over its lifetime. Deeply so, in fact. That it’s often cited as Ballmer’s biggest “success” only underscores how poorly he has done building new businesses generally. Again, let’s add some perspective. Microsoft has outspent Apple on R&D more than 10:1 since Ballmer became CEO. It has also spent far more acquiring outside companies. Yet MS has failed to create a single business over that time frame that is as profitable as either iPod, or iPhone, or iPad. Indeed, 85% of MS’s profit still comes from the same three product groups that it did more than a decade ago. That’s epic failure.

    • Chris B

      DirectX Box was built to destroy the console market and ensure a Microsoft monopoly over desktop gaming standards. It’s only goal was to Embrace, Extend, and Extinguish OpenGL in all markets and keep Linux out of the home.

      By that measure It’s been an enormous success.

      • guest

        Actually, it was built to avoid the threat of Sony taking over the living room. And MS turned around and pretty much abandoned the desktop gaming market subsequently. Oh, and Linux wasn’t a factor then. It was barely on the radar. But it is in the home now, thanks to Android phones, tablets, many routers, and numerous other devices. Meanwhile Apple has emerged as the real gaming threat, not Sony or Nintendo, and they’ve made billions dong it.

    • Kevin

      And what do you do Bob? I bet nothing Epic at all…

      • Bob

        If you want to debate the truth of anything I said, please do so and I’ll respond. If you just want to hurl ad hominems because you find that truth unpleasant or embarassing, then you’re on your own.

  • Jack

    Thanks for ruining the end of the story. Seen any good moves lately?

  • Bill Henderson

    When I see these “Balmer is a failure” articles, I wonder what the press would write if Microsoft dominated every tech segment. No iPhone success, no Google dominance in search and MSN was the only social media out there. I bet the headlines would read, “Balmer is a monopolist” or “Balmer is the overlord of tech”.
    And I am sure the politicos would be lining up to take their pound of flesh out of Microsoft. The multi billion dollar fines Microsoft paid for Windows dominance would pale.
    Has the press ever considered that Balmer is OK with Apple getting some more share of PCs? Or maybe its OK we did not dominate and take over the mobile phone market. Better to have Google be the monopolist in search than us.
    I think Balmer is setting up Microsoft to be here in 50 years and not dominating every segment works just fine for long term success.
    Just wondering.

    • Kate Planderokis

      So true, if Microsoft had dominate share, 70 + % in search, mobile, and social, the world would be proclaiming ” Monopolist Balmer”. For the last decade, it may have been a shrewd move to sit back and bit and let Microsoft plod along, disgruntled employees with no innovation and all. Just let Apple and Google have their large shares at this point in time.
      Once out from the court oversight and the threat of crippling penalties, Balmer could be unleashed with staggering potential results:
      Copy Apples closed ecosystem model -
      With 300+ million Win PCs shipped in 2011 at only $500 each, that would be $150 billion in revenue, now throw in 50 million tables, and 50 million phones and Microsoft could add an easy $200 Billion in revenue.
      With $100+ Billion in cash and short term securities plus AAA rated access to debt mount a hostile takeover of Google.
      Facebook could easily be replaced with next once the kiddies get bored with it.
      Just saying.

      • marc dauncey

        I somehow doubt any of this will come to pass. They’d be dragged back into court before you could say “monopoly”. All empires fade in the end. IT companies tend to stick around a little longer because everyone’s stuck using their shit as legacy systems.

        I really hope they make a success of Surface / Win8 – but I think their star is on the wane. They’ll never again have the kind of dominance they once had in the nineties.

  • Ray

    Is this the lost decade he’s talking about? Sure a good one for Apple (starting from nowhere), but not too bad for MSFT:
    http://www.sfgate.com/news/article/CHART-OF-THE-DAY-Apple-s-Profits-Race-To-Catch-2463696.php

  • http://twitter.com/al2o3cr Matt Jones

    Heh – describing SharePoint as a “success” is like calling the Deepwater Horizon a “successful drilling platform”. Yes, both have generated MASSIVE amounts of spending, but mostly to clean up toxic dreck…

    • http://www.christopherbudd.com Christopher Budd

      Have to agree here. I absolutely loathe SharePoint. It’s a solution looking for a problem. The main problem it solves in my experience is value-add partners looking to boost consulting time.

  • http://www.timacheson.com/ Tim Acheson

    It’s nonsense to characterise as decade of “downfall” a period during which Microsoft: launched Windows XP, which is still the most popular OS of all time; launched Windows 7 which is the fastest-selling OS of all time; launched Xbox 360 which is the best-selling games console; launched Kinect, which holds the Guinness World Record for being the fastest-selling gadget of any kind of all time; co-launched Halo, which is one of the most popular and innovative video games franchises of all time; etc, etc.

    Microsoft’s flagship product, Windows, was king a decade ago and still is today. Almost every computer on almost every desk in almost every home and business on the planet is running Windows, and among the tiny minority of other computers most still run Microsoft software.

    Apple failed to take a substantial chunk of the desktop OS market share. GMail failed to beat the popularity of Microsoft’s Hotmail and Messenger. SkyDrive is young but is arguably the best consumer cloud platform available and already very successful. SharePoint is still one of Microsoft’s biggest earners. Furthermore, some of Microsoft’s least successful products have been nonetheless brilliant, and some of Microsoft’s best services are still like their best-kept secrets, e.g. SkyDrive.

    There have been some missed opportunities, but even in these areas there is a more complex story beneath the surface. E.g. Microsoft gets $5 USD for every Android device that’s sold. E.g. Facebook is partly owned by Microsoft.

    • Dilbertino

      “GMail failed to beat the popularity of Microsoft’s Hotmail”? Better check last week news stories.. Gmail is now bigger than hotmail.

      • http://www.timacheson.com/ Tim Acheson

        We’ve yet to see the proof of that. I’m aware Google made this claim, but the consensus among commentators is that this is only because they include all Google account holders in that figure (and Android requires a Google account) — even if these users do not send emails through Gmail. If Microsoft included all Windows Live accounts for a fair comparison, that would be a different matter. It’s becoming hard to distinguish between fact and corporate propaganda.

      • Guest

        Hotmail? What’s that?

        Oh, that’s the free mail that I used to use in the mid 1990′s.

        Kinda like how Windows was the operating system I used to use in the mid 1990′s.

  • KenP

    When MS went on a roll, it was at the expense of an IBM that was parodied with a dancing elephant video. Maybe, a dancing hipo video would be appropriate here. They are reported to have a Balmeresqe personality.

  • Shane O’Donnelly

    Google traded in the mid 500′s in the summer of ’07 same range as today, summer of ’12.
    Vanity Fair – where is the article on the “Lost 1/2 decade for Schmidt” ?
    Google continues to attemp to diversify away from search with repeated failures. The new Nexus is reported to be priced at a net loss to Google. Desktop revenue per search continues to decline and their revenue per Android device is less than Microsoft earns from Android licensing.
    But Balmer builds multiple billion dollar business around his core Windows and he is the loser?

  • Billy Bob
  • ExMsft

    In my opinion:
    The HR department at Microsoft is the problem, they don’t understand creative minds and through their policy discourage independence. When I had first joined MSFT there were less than 3000 employees, all reporting within three levels of Gates, that’s not the case today. HR is their problem, they hired way too many middle managers straight out of business school who focused on creating fiefdoms rather than putting out good product.
    As someone who left on good terms and still has many friends working there, I highly recommend three things:
    1. Replace the current HR management teams with tech savvy human resource managers who are kept OUT of the loop on yearly reviews and only brought in to hire or fire. Let managers manage and do the reviews based on INDIVIDUAL merit. Microsoft HR (when I worked there) had too much power and even then needed to be reigned in. The golden handcuff days are over, people want jobs where their work is appreciated, not constrained or limited by people that don’t understand the technology and create stack ranked systems based on spreadsheets and bartering. When I worked there the more “bad reviews” the more upper managers claimed the benefits for those of their choosing… There was a finite number of stock grants or merit pay, the less used at the bottom, the more available for upper managers (who put back room pressure on underlings).
    2. The same applies to Microsoft’s Corporate Marketing group. Way too many fiefdoms and power players limiting, controlling and restricting creative talent. If HR wants to get into the review process, set them loose on corporate marketing and weed out the power players.
    3. Don’t force developers, program or product team members to move up to get higher pay. Just pay them more and let them remain out of the management regime doing what they do (and want to do) best which is to code, plan or manage a product.

    • guest

      Agree with allowing developers (sales people, etc) to chose to stop at a level, have that be okay from a career perspective, and still provide room for salary increases. Many maturing companies across the industry implemented changes to allow that decades ago in order to retain senior people who were still valuable contributors. Also agree that MS’s Marketing is simply broken. Changing the VP there seems to have actually resulted in it getting worse instead of better. The whole thing needs to be replaced/reinvented. Disagree on the role of HR. They’re an admin group. They do what senior management tells them. They may do it poorly, but they don’t decide how many managers are hired. etc.

  • Ray

    Based on this reporting, the article isn’t fair…it’s a hit piece. Where are the suggestions of alternatives to the stack rank system, for example? In business school, all the large companies I studied had similar systems. What system does this author suggest instead? And where are non-disgruntled ex-employees? An article based mainly (or entirely?) on disgruntled, fired employees will undoubtedly have a negative bent. I’m sure it’s designed to sell magazines…not to be a fair piece. If it were fair, it’d be a lot less sensational and many fewer magazines would be sold.

    • Gus

      Fair? Dude, your GPS is whack. A fair is a place where you eat candy apples and get pickpocketed. This place is something different.

  • Microsoft_BOB

    The market will move to whomever has the most shares. Microsoft’s Trusted Computing strategy starting in Windows 8 will truly show where people stand going forward as you will no longer have hundreds of different PC platforms. This will shrink to maybe a hundred who are “blessed” by the big M to run their code.

    Then you’ll see reports of Mac OSX market share going up as people looking to replace their computers will still have issues finding what they want in a computing device and hardware manufactures not delivering.

    Microsoft has always been late to the party and always bet on their size to be able to push their way to the keg. Problem is that they aren’t the only big guy at the party anymore.

    Microsoft isn’t nimble. MSN had blinders on for AOL and Yahoo and completely missed Google stealing their cupcake. Today alone, there are reports of Apple and Olympus coming out with competition for Google Goggles. Microsoft is just now getting the idea to deploy a tablet. They do all these acquisitions who’s technology just becomes mediocre at best. Danger made great strides with their platform until Microsoft bought them… Then they rolled out the Kin before killing it only a few months later. That’s huge mismanagement.

    The people who work at MS Research aren’t slow. There are groups there at one time that kicked out some really interesting products that never see the light of day outside TechFest or internal dogfooding. There is no Agile principle there except maybe in bug fixing. It’s definitely not present in product design.

    Otherwise, I would agree with the article in that what is killing Microsoft is management. If it wasn’t for India outsourcing, the company would have capsized from being so top heavy. I won’t go back until the culture changes.

  • http://twitter.com/DaQuantumFro DaMarico Fowler

    It seems that the profile of the company is accurate but up to a point; the big issue is the ranking system which should overhauled. All the other issues of focusing on Office and Windows versus other avenues is valid, but should be viewed in the context of the time. The truth is that Windows and Office made money and make money that’s why they get attention. Could Microsoft have done an e-book reader, yes; would it have been received well, maybe. SONY’s e-reader hasn’t done as well as Amazon’s. In hindsight a lot things should’ve been done, the question is where do you go from here. And to go back to the subject of the post, if Vanity Fair left out the things that have gone right or look to bring change then that’s a shame. To many of you keep trying to fight the old wars or score points nobody is counting; the world’s moved on and so should you.

  • Glad to be EX-MS

    As am MS Manager for 10 years I can honestly say the article is dead on! Trust me when I say it is indded the most bearaucratic, ass-backwards, brown-nosing, back-stabbing, self-centered workplace culture I have ever seen. It hasn’t been about innovation for a decade. It has been about how to be seen and by whom as well as how to throw others under the bus so you don’t end up one of the 10%. I actually was made on more than one occasion to give a “underperformed” to someone who did not deserve it simply because at the end of the day we just had to have one more underperformer to make the numbers work. Once we just voted as managers from a list of 7 potentials, essentially by drawing straws.
    The most soul-crushing, integrity destroying, snake-pit I’ve ever worked in.

  • http://twitter.com/tlamb3 T. Lamb

    It’s easy to criticize a “stack ranking” system and come up with an example that proves how it fails such as taking a 10 person team where everyone is a rock star, yet a certain percentage of them have to be rated lower than the others.

    However, in reality, this isn’t the case. It’s a rarity at Microsoft to have that small of a team as well as have teams where everyone is a rock star. If teams are 50-100 people large, the law of averages if going to play out and you’re going to have some people that are doing awesome, others that are doing OK and others not so good.

    It’s also easy to criticize the system that’s in place without providing an alternative. What are people suggesting? No review system at all? If there is a review system, what would it be? (And please don’t just say “reward the entire team”, because what do you do about people that under perform?).

    Regarding Ballmer, I agree he should have been let go several years ago (or voluntarily stepped down). One of the primary responsibilities of a CEO of a public company is to derive value for shareholders. The stock price has been in the crapper for 10 years so clearly Ballmer has failed. The obvious argument is that “smart CEOs shouldn’t pander to wall street”. I agree that CEO’s shouldn’t think short term about only optimizing stock price, but over the course of say 5 years, there have go to be results for the so-called strategy that’s in place. 10 years of ridiculously poor stock price means the CEO has failed.

  • guest

    Congrats to Vanity Fair on being just about the last media outlet to cover the story of Ballmer’s failures and MS’s resulting decline in relevance, growth, market cap, etc.. Not only are they regurgitating items first reported by others, they’re even recycling the “Lost Decade” when referring to this period. It’s always impressive to criticize a lack of innovation while showing none yourself.
    More important, where were Vanity Fair and the others 5-8 years ago when people like Mini-Microsoft were voicing concerns about the direction in real-time and heeding that warning might have prevented what has subsequently transpired?
    Ballmer should have been fired at least five years ago. He had already failed on numerous dimensions by then, albeit many of them non-core, but it always just a matter of time before he failed at something life-threatening to the organization. With the twin failures in smartphones and tablets, he appears to have done just that. As Steve Jobs said, nothing will change at MS while Ballmer is still in charge.
    MS can’t out-Apple Apple or out-Google Google. Fire Ballmer for being too stupid to realize that and instead incinerating tens of billions trying. And fire the board who have recklessly supported him until it has jeopardized the company’s very future. Start over.

  • http://www.facebook.com/graham.wheeler Graham Wheeler

    MSFT defenders like to point to XBox as a great MS success, but rarely point out that Ballmer effectively fired the people responsible (J Allard and Robbie Bach).

  • None Mouse

    The core asset of Microsoft is its people, followed by its brand. Human capital needs to be motivated or at least not demotivated by the performance review system. The core problem at Microsoft is its performance review system.

    There are two problems with the performance system at Microsoft.
    1. The forced bell curve
    2. The stack ranking system which has nothing to do with your performance

    The forced bell curve states that performance rating buckets (1-5) will have fixed percentages of employees:
    7% of all employees will be given a 5 (worst),
    13% will be given a 4,
    40% will get a 3,
    20% will get a 2,
    20% will get a 1 (best)

    The stack ranking system states that your ranking into the forced bell curve depends on
    1. What results were accomplished?
    2. How the results were accomplished?
    3. Your proven ability

    However, stack ranking is not a perfect science.

    #1 is evaluated subjectively by people who often have no clue what you do.

    Typically done by management higher up, typically without your manager’s input and without your own self-evaluation completed (they do stack ranking in July, and you write your reviews and discuss with managers by August-September – varies across teams).

    In addition, upper management negotiates with each other to get more 1s and 2s for his/her employees. Remember the forced bell curve here. 7% must be slaughtered and 13% more must be branded in line to be slaughtered next year. A weak upper level manager will not fight well enough and will get bad scores for his/her employees.

    The manager himself/herself will not take the bad score though, he/she will merely find someone in his/her team to be given that bad score. So unless you know people higher up very well, you aren’t going to get the top scores.

    #2 is not actually used to determine your performance. Rather it is used to explain the reason you got the review score you were handed.

    For example, your weak manager needs some excuse to explain away your bad score or to explain your good score. He/she will pick and choose feedback you received from your peers as part of the exercise meant to determine #2 and use the selected feedback to justify your score. So you could have all positive comments and one “area to improve” comment, and your manager will use that one negative comment to justify your 4 rating.

    #3 is very subjective. This number is used to determine the number of stocks you will be awarded. Once again, if you are a favorite of one of the top management, you will be handsomely rewarded. They decide, with no objective criteria, what your potential is.

    If you want to fix Microsoft’s review system, get rid of the forced bell curve and make the performance review very simple – Did your team succeed to meet its goals this year and how significant (%) was your contribution to that success?

    If you want to fix Microsoft -
    1. Eliminate all non-doers. Microsoft has over 180 Vice Presidents. It also has thousands of General Managers, Directors and Senior Directors. Most of them do nothing useful. They build empires. Hence they hire people. They also hire people to give the newbies the 4 and 5 scores which they don’t want to give the friends they hired through “networking”.

    2. Get rid of the forced bell curve and simplify the review system.

    3. It is a technology company, not a puppy mill. Layoff all people who have no computer science/engineering background who are also not experts in their own non-computer fields with MS/PhD degrees or significant prior accomplishments in their field.

  • TrustMe

    I have as many complaints about the calibration system at Microsoft, but at least you should get your facts straight:
    1) It’s not a bell curve.
    2) There was an announcement recently that the ‘bottom 20%’ became the bottom 15%. I.E. instead of being required to tag 13% of employees as 4, and 7% as 5, the new distribution is 10% as 4′s and 5% as 5′s. This small movement actually makes a difference because the worst travesty of the system is when someone at the bottom of the 3 bucket gets forced into the 4 bucket because of the forced curve. That means 1/2 the bonus, 1/2 the stock, and being put on a ‘watch list’ regarding their performance.
    3) The system actually has a lot to do with your performance. The challenge is making sure employee’s performance is measured accurately, honestly, and in comparison to your peers. An outspoken manager can get better numbers for their own people if their peers aren’t good at standing up to the bullying, or aren’t as prepared for the calibration discussion.
    4) HR is not the problem. Lisa Brummell has done huge things for Microsoft’s HR and its people. The problem is that a lot of the ‘dead wood’ (i.e. last year’s 4′s and 5′s) has been ‘managed out’ of Microsoft and this year good people are having to be labeled as failures. In the past, there were plenty of actual underperformers to give the bad numbers to. And, we hired more underperformers every year. Now, hiring is scaled back, people don’t leave as often, and that means it gets harder every year to find actual underperformers.
    5) The worst part of the system is that it results in peers looking out for themselves, and in many cases undermining each other. The goal was to create a healthy competition. The result has been levels of trust plummeting, and no-one does their best work when they are worried about what their peers are up to.
    6) If you have a bad manager, or a amanger who doesn’t know how to play the game, you are screwed. You are at their mercy when they go into the smokey room to ‘fight for you’ againt their peers.

  • http://www.danablankenhorn.com/ Dana Blankenhorn

    When MSFT really got going they sort of promised to build a new kind of corporate culture, a faster version of HP, where the brightest minds would think big thoughts, build great things, and get noticed.

    It didn’t happen. Gates was too much of a control freak, the antitrust case flooded the zone with lawyers and nay-sayers, and Ballmer turned out to be Gates without the vision.

  • Jerome B

    The quote in the Vanity Fair article that is most telling is from the Microsoft
    engineer who said “One of the most valuable things I learned was to give
    the appearance of being courteous while withholding just enough
    information from colleagues to ensure they didn’t get ahead of me on the
    rankings.” When engineers like this are interviewing potential new
    hires for Microsoft, they undoubtedly will act in a way that ensures the
    worst possible people are hired so the interviewer’s ranking will be
    better. When those new hires are interviewing people, the same process
    will repeat so the quality of employees at Microsoft will get worse each
    cycle. The end result is a company full of dummies and the release of
    products like Windows 8.