9-300-001
REV: JULY 25, 2001

CHRISTOPOHER A. BARTLETT

Microsoft: Competing on Talent (A)
In the summer of 1999, a front page Wall Street Journal article was attracting attention on the Redmond campus. Under the headline “As Microsoft Matures, Some Top Talent Chooses to Go Off Line,” the article reported: “Tired of grueling deadlines, frustrated by the bureaucracy that has accompanied Microsoft’s explosive growth, or lured away by the boom in high-tech start-ups, dozens i of the company’s most capable leaders, all around 40, have opted out—at least temporarily . . .” (See Exhibit 1 for the article’s list of senior level departures.) Steve Ballmer, the company’s recently appointed president and COO, was quoted as saying that some of the departures were voluntary and some were not, opening opportunities for fresher, smarter replacements. “We have a bench that is very deep,” he said. “We have people who are fired ii Yet despite the positive outlook, Ballmer clearly up—driven—to lead the next generation.” recognized that Microsoft had to change or adapt some of the human resource practices that had allowed it to assemble and retain what CEO Bill Gates proudly called “the best team of software professionals the world has ever seen.” Just six weeks before the WSJ article was published, Ballmer had announced a package of changes that sweetened salaries, allowed more frequent promotions, and softened some of the pressures that had long been part of the ”hard-core” Microsoft culture. Still, there were some who wondered if the rumblings in the senior management ranks reported by the WSJ were not the signs of larger looming problems for Microsoft. It was a question taken very seriously by Gates and Ballmer who understood very well that the company’s enormous success was largely due to its ability to recruit, motivate, and retain extraordinary talent. In the first part of this