Microsoft has long been an enigma to many observers. From the time that a single decision at IBM gave Bill Gates’ company the advantage in establishing its DOS operating system to the launch of Windows 98, Microsoft was the standard against which all technology companies were measured… but then it ran off the tracks. Most fingers have been pointed towards Steve Ballmer, the animated, mercurial CEO who many believe has single handedly decimated the company ever since a 2000 shouting match with Gates left him with his hand on the wheel.

Vanity Fair’s Kurt Eichenwald has been delving into the bewildering affairs in Redmond and through his interviews, research on corporate records and reviews of emails between executives at the company’s highest levels, he paints a picture of a devastated and demoralized company. Analyzing what Microsoft has done wrong can point to what your company should not do.

Stack Ranking Demolished Microsoft

In the Ballmer era, Microsoft has adopted a management policy known as “stack ranking.” This is a program that mandates each department to determine a fixed percentage of employees as their top, good, average and poor performers and has been widely cited as being responsible for crumbling Microsoft’s once famed innovation ability.

10% of a Team Doing the Finest Work Would Be Savaged

“Stack ranking” at Microsoft was conducted in a way that approximately 20% of all employees would receive top reviews, 70% mediocre ones and 10% would be savaged. Whether the entire team was doing sterling work or failing miserably, these percentages did not change, so 20% of a team working on a completely pointless waste of time would get top reviews while 10% of a team that would be working on innovations worthy of Nobel Prizes would automatically get horrible reviews. Eichenwald states that every former and current Microsoft employee that he interviewed didn’t approve of this stack ranking system and found it outright destructive for employee morale, driving out a huge number of the company’s best minds.

Why Would Anyone Want to Make Frequent Social Media Posts?

Eichenwald states Ed McCahill, a 16 year Microsoft Marketing Manager couldn’t feel anything but bewilderment about how the Windows CE project threw away their huge lead in mobile. They were years ahead of everyone including Apple, but disturbingly the Microsoft bureaucracy simply dropped the ball. Steve Stone, one of the founders of Microsoft’s technology program is just as sanguine about how the company completely misread the social media revolution.

When one of MSN Messenger’s younger developers observed college students setting frequent status updates on AOL’s AIM, he immediately grasped what Microsoft lacked: People wanted a place to scribble their thoughts. When he highlighted his concept to his managers that MSN lacked a short message option, the older men disregarded him entirely as they could not see why young adults would care about posting short and frequent status updates. Not by coincidence Facebook and Twitter founded empires catering to just this proclivity while Microsoft still kept asking why anyone would ever want to engage in such a silly pastime.

Microsoft = Sears

One of the most resounding quotes Eichenwald managed to obtain was from former Microsoft Senior Marketing Manager Kurt Massey: “I see Microsoft as technology’s answer to Sears. In the 40s, 50s, and 60s, Sears had it nailed. It was top-notch, but now it’s just a barren wasteland. And that’s Microsoft.”

What can be learned from the immolation of the once insuperable technology deity from the Northwestern rain forests? Besides not handing over the reins to the entire company based on how loudly one can shout in a boardroom, the essential aspects seem to be:

  1. Empower your employees, don’t handicap them with impenetrable layers of bureaucracy
  2. Shun the top-down management model
  3. Don’t become so set in your ways that you ignore the trending issues that will transform your industry