INDEX

 Preview
 Elements of Effective HR Strategy
 Microsoft: Knowledge Fuel of the Technology World
 HR Strategy at Microsoft
o Recruitment and Selection: Attracting the Best and the
Brightest
o Taking advantage of Market Conditions
o Employee Motivation
o Employee Satisfaction and Loyalty
o Employee Rewards: The Options‐driven Engine
o Growth & Acquisitions
 SWOT Analysis
 Reshaping Microsoft’s HR Agenda
 Conclusion
 Preview

Human Resources Department at any organization is a crucial and indispensable part

of the operational strategy1. It can directly affect the results of the organization, and
make a very important difference between the success and failure of any
organizational strategy or goal, both in the long and well as short term. An efficient
HR department should be able to access, forecast, predict, design, and implement its
strategies in direct sync with the business goals and strategies of the organization for a
mutual and coherent environment, or completely fail at one or more steps to create
imbalance and instability within the organization. With the present economic cycle of
recession2 at probably its worst for close to 15 years, it is all the more important for
the HR department to act as a strategic partner of the business, so as to ensure that the
long term and short terms visions and goals of the organization from the financial and
human capital perspectives are perfectly aligned and harmonious. At the same time,
an efficient HR department can also help in accurate environment scanning and
forecasting, and use its knowledge and resources for near exhausting set of scenarios
for the organization to plan for.

Elements of Effective HR Strategy

Before selecting a strategy or transitioning into a new one, it is important to study the
organisation's business goals and its competitiveness in the industry.

Microsoft: Knowledge Fuel of the Technology World

Microsoft is considered by many to be an ideal place to work. The company has won
several awards for innovation, for their commitment to diversity, and for their flexible
work arrangements. It has always been a leader in the market with regard to its
compensation. With a total strength of about 80,000 employees across the globe, and
a total revenue exceeding $15 billion, it is one of the biggest and best known
technology companies in the world.
Employees have access to the most current resources, from an intranet with source
code libraries to periodical libraries to state of the art research labs. Their work is
personally challenging and on the cutting edge of technology. The organization
believes in providing the employees whatever tools and technologies they need to
achieve the best results possible; and the employees are expected to create software
and entertainment products that could sell millions of copies worldwide. The office
campuses at most locations are considered the benchmark of technology hubs, with fir
trees, forested trails, snow capped mountain vistas, basketball courts, and even shuttle
buses for employees to make use of. Employees at Microsoft are recognized as the
intellectual fuel and are provided with various benefit plans and resources, which are
designed to retain them. Lisa Brummel, who joined as the Chief of Human Resources
at Microsoft, in 2005, started reshaping the company's HR strategies to make them
more innovative and customized to individual employee needs. The focus was to
project Microsoft, from an HR perspective, as an employee driven organization. As an
organization, Microsoft offers a lot of flexibility to employees – the flexible work
arrangements and flexible benefit plans offered at Microsoft are often considered Best
Practices by many employers.

HR Strategy at Microsoft

Microsoft Corporation has adopted the “Performance Culture Model`` as the best
approach to drive its success. All the critical people metrics are categorized and
measured as per the Growth Pyramid shown in Figure 1.
The amount of investment made in external and internal surveys is very substantial
and projects Microsoft as a leader in this regard across the industry. Some of the
categories across which the surveys are done, analyzed, and the results published are
mentioned
below.
1. Organisation: Organisation size, open positions, line HR ratios
2. Organisation Health: Workgroup Health Index, Microsoft Pulse Index,
Microsoft Culture Index
3. Staffing: Hiring stats – types of hires, channel wise hiring stats, positions
closed internally, hiring spends, lead time, % of hiring plan, net adds, offer
acceptance rates, reasons for offer decline
4. Talent Management: Good attrition, bad attrition, YOY and QtronQtr tracking,
reasons for bad attrition, % retention of high positions, % of promotions,
succession panning indicator, succession planning usage
5. Diversity: % of women (target vs. actual), % of women hired, % of women
talent losses, reasons for bad attrition, % of women in leadership succession
slate, % of Managers and employees completing MS Diversity training
programs, % of other diversity hiring
6. Manager Capability: Span of Control, Organisation Depth, % of Managers
7. Learning & Development: Field Readiness Index, number of employees
trained on employee development programmes, number of managers trained
 through management excellence framework (that provides for management
development through career events, continuous learning and building
connections)
8. Leadership Development: % of leadership hires, % of leadership attrition,
succession planning index (%of successors in stages of readiness for a
Leadership role)
9. Rewards: % of budget used on rewards

Besides this, they periodically run market surveys to ensure their competitive
positioning on compensation.
While tracking the above metrics has shown more robust action planning to improve
scores on each of them, there are two that that have made their People Review process
much more meaningful ensuring both organisational readiness and talent
management. These are the SPI and the SPU:
The Succession Planning Indicator (SPI) that is designed to help measure how well
the organisation is positioned with weightings assigned to Ready Now and One Move
Away successors for leadership positions.
The Succession Plan Usage (SPU) is an index designed to assess both the quality of
the previous years’ succession plans and whether an organisation is effectively
leveraging its succession plans when filling open leadership positions. It indicates the
percent of leadership team positions that were filled during the past year by someone
who was on last year’s succession slate.
In present times of recession and organizational restructuring, what businesses seek of
HR is to: a) understand the talent needs of the business b) help develop strategic plans
regarding employees c) identify talent issues before they impact the business and d)
very importantly, help identify new business strategies.
At Microsoft, the HR department is made accountable for maximizing the value of
their people asset to drive business success. Core HR functions, processes and
practices are divided among vertical tower structures for easier and more transparent
flow of information. The relatively independent functions also enable the business
needs to be more closely aligned and measured from a function unit perspective.
1. Talent Acquisition & Development
2. Management Development
3. Leadership Development
4. Management of the evolution of the Microsoft Culture
At Microsoft, the organizational culture is often termed as facilitative by the
management – there are significant investments made in the development of
employees, and most current support is provided for optimum career growth. The aim
is to receive the best talent which is passionate, capable, and growth oriented.

Recruitment and Selection: Attracting the Best and the Brightest

Beginning from its initial days, Microsoft has believed in recruiting extremely
intelligent staff, favouring intelligence over experience. Co-founders Bill Gates and
Paul Allen shared a preference for hiring extremely intelligent, not necessarily
experienced, new college graduates dated from Microsoft’s start up days.
Microsoft’s recruitment strategies reflect their philosophy – Microsoft is an
aggressive recruiter and is often the first company to offer jobs to elite graduates at
campuses and career fairs across the world.
At the beginning, the recruitment strategies at Microsoft included sourcing people
from the elite educational facilities such as Harvard, Yale, MIT, Carnegie Melon and
Stanford. Microsoft recruiters would visit these universities “in search of the most
brilliant, driven students”. Experience was not required and it was in fact, preferred
that new employees had no experience. The selected recruits would undergo a
selection process which was focused more on problem solving and thought process &
composure testing exercises rather than the actual technical interviews. This
interviewing process was seen as one which would push the interviewees to the limit
of their creative and analytic abilities rather than their familiarity with a computer
programming language. The importance of hiring the right people is also shown in
Microsoft’s ‘n minus 1’ strategy which means less people are employed than are
required. This policy reinforces that hiring the right people is more important than
hiring just to fill a position.
Microsoft retains the same basic principles as they have expanded but had to change
their methods when the number of new employees required could no longer be
sourced only from universities. The recruiting practices continue to be active rather
than passive, with Microsoft ‘head hunting’ the best staff. These staff are found,
monitored and recruited from other companies by over 300 recruiting experts.
These staffs actively recruit suitable employees and focus on the right type of person
rather than the right type of skill level. In ‘Human Resource Management: An
Experiential Approach’ (Bernadin & Russell) human resources are described as an
important source of competitive advantage. Microsoft uses human resources for
competitive advantage, basing its success on having the very best people in the
industry and inspiring them to be the best. It is this that leads to Microsoft’s unique
recruitment practices.
What is most crucial here is that Microsoft’s recruitment practices meet its human
resource needs. It is an important sign of the focused approach of Microsoft, with its
actions always leading towards its ultimate goals. Some important factors to be
considered in recruiting staff include that the recruiter should be from the same
functional area and that candidates should not be deceived about the negative
elements of a job. The interview process at Microsoft reflects this with the new
employee being interviewed by the manager. The recruitment process also goes
further than just informing the employee about the negative aspects, instead the
recruitment process actually tests the employee on the negative aspects, putting them
under the same type of pressure they would be put under on the job.

Taking advantage of Market Conditions

Microsoft also took advantage of breaking opportunities such as company layoffs; one
example is with the AOL down size. The CEO announced that when they heard AOL
was downsizing Netscape’s operations in the valley, they assembled a team to identify
the best talent and go knocking on doors.
Employee Motivation
The key to supporting the motivation of your employee is to understand what
motivates each of them. While the recruitment and selection process at Microsoft
aims to employ people who will be motivated by the environment they are provided,
the HR department at Microsoft takes great care to understand such needs and try
fulfilling them for the employees. Opportunity and environment to allow the
employees to progress and self develop is a part of the work culture that the HR staff
is expected to adhere to. The fit between employee and organization is important to
motivation and this is what Microsoft ensures.
A study reported in the Journal of Applied Psychology reports that employees
working on projects are more efficient when their goals relate to the overall team
goals rather than individual goals (Kristof Brown). Microsoft ensures that the goals of
the organization are understood via its strong culture and by employees being clearly
aware of what is required of them.
Motivation can be described as providing a work environment in which individual
needs become satisfied through efforts that also serve organizational objectives.
Microsoft achieves this by incorporating their goals into their human resource
management programs. The people recruited and the systems within the organization
all serve to motivate the type of people that Microsoft values.
Employee motivation can also be related to Maslow’s hierarchy of needs theory. This
theory has the top level of the needs theory as self actualization needs, which is a
person`s need to be self-fulfilled. This is exactly what Microsoft provides for its staff
and also exactly what it expects, for them to be the very best they can be. The link can
also be seen here between the type of people that are employed and what is expected.
Microsoft hires the very best people, for these people to achieve self‐actualization
they need to be pushed harder than most and given greater opportunity to achieve than
most.

Employee Satisfaction and Loyalty

Microsoft attempts to cater to the needs of its employees by recognizing that the
majority workforce comprises fresh graduates just out of college. This is the premise
behind Microsoft setting up its offices as ‘campuses’ rather than plain workspace and
parking space setting that was the norm before Microsoft. The environment it
provides also includes every employee being free to decorate their office as they
please; and the provision of subsidized food and drink.
Employee satisfaction was also afforded by the opportunity for growth, development
also occurred by encouraging horizontal transfers, and employees were encouraged to
develop themselves by switching jobs. Top management is required to coach lower
levels and assisting in their development. These practices are designed to increase
employee satisfaction and commitment to the organization, while maintaining the
same spirit the small company began with.
For many organizations, empowering employees is seen as a relatively new approach
to handling and motivating employees – one which requires gradual changes to the
corporate government and the work culture. However, in case of Microsoft, it can be
seen as an inverted view – wherein the idea of employee empowerment was an
inherently intrinsic part of the work culture since its inception.
Three aspects of tasks that affect job satisfaction are job complexity, degree of
physical strain and perceived value of the task. Microsoft manages31 this by
providing the high complexity high achievers require and by ensuring the perceived
value of the task is high. This high value is communicated via the high achieving
culture the company maintains.

Employee Rewards: The Options-driven Engine

As an organization, Microsoft still follows the firm belief of its followers in linking
employee ownership with employee motivation and retention. Critical to this is the
link between individual performance and reward, with semiannual performance
reviews linked to pay increases, bonus awards and stock options. The formal review
system also includes more common evaluations by managers to ensure no unexpected
deviations. The system also includes the process of employees evaluating themselves,
these self evaluations then being sent to the manager who does their own evaluation.
The employee and manager then meet to discuss the review.
Stock options awards are based on whether the employee is considered a long term
asset of the company and awarded on this basis. This is an important symbol of
Microsoft’s commitment to retaining good employees. In ‘Ideas That Will Shape the
Future of Management Practice’ (Bohl, Luthans, Hodgetts & Slocum) human
resources is described as being the way of the future with it being argued that we will
see a more mature articulation of the importance of people as a firm’s only sustainable
competitive advantage. The change is described as giving high reward for high
performance with the focus on a partnership. Microsoft recognizes the importance of
its people and this is reflected in the reward systems, in the sense that not only current
achievements are rewarded but also rewarded are stocks to those employees that are
seen as valuable future assets of the company. This can be seen as a prime example of
the focus on a partnership that Microsoft aims to foster with its employees.
Important to the reward system is also the fact that there are two reward paths
available, one for those following the technical path and one for those following the
management path. The skills of employees can be divided into three areas: conceptual
skills, human skills and technical skills. Typically, conceptual skills become more
required and technical skills less required as one moves up the corporate ladder.
Microsoft is a company valuing technical skills, due to the nature of its product. In
most organizations, employees with conceptual skills would be rewarded by moving
up the corporate ladder, while those with technical skills would not advance.
Microsoft, however, offers two advancement paths – allowing those with technical
skills to advance as technical experts, just as those with conceptual skills advance as
managers.
Reward systems are an important part of organizational culture; they communicate to
employees what is valued by the organization (Robbins, Bergman & Stagg). By
having these two reward systems, Microsoft effectively communicates that both sets
of skills are valued. This is also an important sign of Microsoft’s consistency. They
recruit people for technical ability and so not rewarding for it would be dissatisfying
to employees.
Growth & Acquisitions
During its lifetime, Microsoft has pursued an aggressive policy of take‐overs and
acquisitions. This shows that as an organization, Microsoft is ready to adapt quickly
to market conditions in order to appeal to its consumers.
The company has carried out over 60 acquisitions in the last fifteen years. Its 1999
acquisition of Hotmail reflected its strong belief in the business and HR strategic need
to deliver high quality services to its customers, even in the face of strong
competition. The approach has allowed the company to acquire competencies it may
have lacked if it had followed a strategy of internal development, and allowed it to
bring high quality products to market within a relatively short timeframe.
Concurrently, Microsoft has strongly pursued a policy of internal development,
placing a high level of emphasis on research and development. The company state in
its January 2009 quarterly report that the concept of Service oriented, customized, and
integrated innovation was key to strategy, which aims to deliver even greater value to
customers. Hence, Microsoft has invested a great deal in product and service
development.

Reshaping Microsoft’s HR Agenda

Lisa Brummel, who took over as the HR Director in 2005, started the process of
leaning and reshaping the processes and demographics at Microsoft. While the
primary reason was the slipping company stock prices due to development problems
with its key product Vista, the secondary reason was to plan for the very probable
scenario of a slowdown due to growing presence of competitors like Google and
Yahoo!.
As an HR Director, Lisa started surveying all of Microsoft’s upward of 80,000 global
employees for picking up trends about work culture and employee skills and
competencies, and started mapping that with the business forecast for the next few
years. Some of the changes that were introduced at Microsoft since that time have
resulted in business machinery operating on leaner labour costs as compared to in
most part of the last 20 years.
One of the recent headlines about Microsoft downsizing by 10% its global workforce
generated a strong response from various quarters. However, in terms of HR strategy,
this is an environment which is helping Microsoft achieve its strategy of becoming
leaner and more efficient – a move that was started by Lisa and her team a few years
back. It may be noted that the full time employees who are planned to be laid off only
comprise35 30% of this total cut, which about to about 2,400 – coming into a phased
plan spread over 2 years, this amounts to 300 employees per quarter. Most of the
brunt will be felt by the elect to work, part time, and vendor contracted workers. In
terms of HR strategy, this can actually work in favour of HR department since the full
time employees at Microsoft would get the underlying message that the company
values their full time staff, and even in difficult times of recession, almost all of them
were left untouched. Another underlying advantage is that all those employees who
were not being seen as a value proposition with the future business strategy could be
laid off in the name of recession. What was not noted by the media from the
announcements that came from Microsoft same week helps to affirm my belief – there
was an announcement that Microsoft would be moving 30% of its vendors off
Microsoft owned location, and that Microsoft would not be renewing its leases in over
70 locations worldwide – a move, which in my opinion, shows that Microsoft is
looking forward to become most cost vigilant and cost conscious organization than it
is traditionally being seen as.

Conclusion
An effective HR department not only acts as a business partner of the organization,
but also helps in shaping the business strategy. The way the business and HR strategy
have been intertwined at Microsoft is an example of how the businesses that are run
with common goals and vision make money for their investors and employees.
The amount of investment that Microsoft has done for its employees and how well the
HR Managers have been able to align the work culture to the business strategy is clear
from the results the company has posted year after year. From being a geek’s
playhouse in 1980s to being a company that is a household name everywhere in the
civilized world, Microsoft is a company which is admired and envied by even its most
ardent rivals.
Recent changes that have happened at Microsoft, sometimes attributed to recession,
indicate a move that could change the way Microsoft is looked at. The results of such
activities can only be seen once the economy is back to upward motion. However, for
the time being, the practices and principles that Microsoft stands by can be admired
and acknowledged in true earnest. The loss of public face and reputation36 is a parcel
of any layoff exercise, but an organization which could stand and survive through
such times must have doing something right which others did not.