Compensation & Benefits

Compensation at Microsoft

Susan Moore

Argosy University

Compensation and Benefits

Professor Sal Cardiel

November 29, 2017

Microsoft was created by Paul Allen and Bill Gates on April 4, 1975 in Albuquerque, New Mexico. They then developed a partnership with IBM in 1980. Microsoft has made $90 billion in revenue and $22.3 billion in operating income this past financial year. Today they employ more than 124,000 people worldwide. Now just like any company that’s been around for a while, they’ve had their share of problems. The then CEO Steve Ballmer had lost a substantial amount in market share. And many people blamed their system of stack ranking for the company’s lack of innovation and motivation.

Since then Lisa Brummel (head of human resources) has gotten rid of the stack ranking system and exchanging it with a process that highlights teamwork and employee growth. What was their system of stack racking? Well in simple terms, it was where managers placed their employees on a scale from top to poor performers. This had employees focusing on contending with each other instead of with other companies. This also made employees not trust each other for fear of hurting their ranks. Not only that, but managers were also endangered to this ranking system. This system crippled their company and left employees hopeless and detached.

Steve Balmer then stepped down as CEO, but before he left he sent an email company wide, saying: “One strategy, united together, with great communication, decisiveness and collaboration is the only way to fly”. He also stated that the changes in employee compensation “will help the company continue to attract and retain the best employees, and better align their interests with those of our shareholders. These changes are a key step in our ongoing effort to position Microsoft for long-term success.”

After the email, Lisa decided to get rid of the ranking system. And through this, she wanted to give mangers the flexibility to distribute rewards that would best show the performance of teams as well as individuals. This did a major turn-around and gave employees a variety of career resources to help them achieve personal goals as well as their professional career. It has also helped employees delve deeper in their jobs or move to other areas that better suit them. Basically, it has opened their opportunities and it has assisted with all aspects within the organization.