Saturday, July 28, 2012

Microsoft As Object Lesson

Cory and others have covered the Vanity Fair analysis of Microsoft's collapse.  I have gone back to the article several times because it's a powerful object lesson of the way institutions decline.

First, the mighty usually fall:

"Once upon a time, Microsoft dominated the tech industry; indeed, it was the wealthiest corporation in the world. But since 2000, as Apple, Google, and Facebook whizzed by, it has fallen flat in every arena it entered: e-books, music, search, social networking, etc., etc."

Second, the reason for that fall is frequently becoming the thing that one despised or defeated:

"By the dawn of the millennium, the hallways at Microsoft were no longer home to barefoot programmers in Hawaiian shirts working through nights and weekends toward a common goal of excellence; instead, life behind the thick corporate walls had become staid and brutish. Fiefdoms had taken root, and a mastery of internal politics emerged as key to career success. . . .

"' They used to point their finger at IBM and laugh,' said Bill Hill, a former Microsoft manager. 'Now they’ve become the thing they despised.'”

The loss of joy and the political feudalism sprang from a single source:

"At the center of the cultural problems was a management system called “stack ranking.” Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees. The system—also referred to as “the performance model,” “the bell curve,” or just “the employee review”—has, with certain variations over the years, worked like this: every unit was forced to declare a certain percentage of employees as top performers, then good performers, then average, then below average, then poor.

“'If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” said a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.'”

The fragmentation produced a predictable result:

"One Apple product, something that didn’t exist five years ago, has higher sales than everything Microsoft has to offer. More than Windows, Office, Xbox, Bing, Windows Phone, and every other product that Microsoft has created since 1975. In the quarter ended March 31, 2012, iPhone had sales of $22.7 billion; Microsoft Corporation, $17.4 billion."

Microsoft's decline began with a centralized evaluation system and merit pay. Political bureaucrats who plan on implementing those systems across an entire state apparently believe they have more talent and managerial skills than the people who managed Microsoft.

I doubt that proposition. In fact, if I were a political bureaucrat looking to improve a statewide system, I'd bet that every person in Microsoft's management is smarter than I am. If I wanted to avoid Microsoft's fate, I'd spend more time with some barefoot people fond of wearing Hawaiian shirts.

(I am phone blogging, so I reserve the right to reformat the post when I access a computer)

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