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Chapter 1

People: Hiring the Best and Keeping Them

Great experience? Fabulous references? A winning attitude? Nah! Most Microsoft managers will say "hiring smart people" has been the key to the company's success and will be to its future. As with most disciplines, Microsoft attacks this one with vigor. Employee "success indicators" are compiled, analyzed, and sent around via e-mail. Thousands of employees conduct interviews, and they are trained on what to ask job candidates and how to ask it. Human resource people seek out star performers when they become unhappy and work behind the scenes to get them back in the groove. And despite the fact that they are multimillionaires, hundreds of "old-timers" (well, maybe they're in their mid to late thirties by now) come to work every day. Why do people choose to join at Microsoft and why do they stay?

In a 1998 talk at San Jose State, Bill Gates said, "We like people who have got an enthusiasm for the product, technology, who really believe that it can do amazing things. We're very big on hiring smart people, so you'd better be comfortable...having the debate and questioning that goes along with that." He's delivered the same sentiment innumerable times, and that opinion has suffused the ranks at Microsoft.

Hiring the Best

New Employee Success Factors

You need to hire someone to fill a spot on your team. Or maybe it's time to go and recruit at the local college. Before you start, sit down with your prospective employee's coworkers and any other folks who will be conducting interviews. Brainstorm and debate the qualities you're looking for to focus everyone on finding the right person for the job. Is it a strategic thinker you're looking for? Are world-class communication skills important? Maybe you're looking for passion and drive. Talk about the kind of person who will excel in the job. Agreeing up front on what's important will have everyone looking for the same qualities in a candidate.

Microsoft focuses on the following "success factors" when hiring employees:

• Individual excellence
• Results
• Teamwork
• Passion for products and technology
• Long-term approach
• Customer focus
• Functional/technical knowledge/skills
  

Each factor may have subfactors. For example, integrity, intellectual horsepower, composure, and creativity are some of the pieces that make up individual excellence. A team from Human Resources working with managers and executives from around the company crystallized these factors. The weighting might change between jobs or groups -- a junior software tester might need to focus on individual excellence and results, while a midlevel marketer might need to have a stronger long-term view of his or her work -- but the characteristics fit surprisingly well over the 30,000 employees of the company.

Microsoft holds interviewing workshops to help managers make sure that these factors are evaluated during any employee interview. A list of sample interview questions offers ways to get a candidate to show off these attributes or to demonstrate their absence. There are even tips on finding out if a "success factor" is overdone and possibly detrimental to the candidate's performance. For instance, a person who tells you he'll change any established procedure for any customer request may be taking "customer focus" a bit too far.

Your list of key attributes can be used beyond recruiting. When a new hire joins the team, sit down together and make a list of the skills you both think are important to the success of his or her job and why. Yes, you already have your list in mind. But talking it over together helps both of you focus and is a more palatable approach than a direct order. The discussion sets appropriate expectations for the new employee and can serve as a reminder of the qualities needed to succeed in the position.

Three Lessons I've Learned about Hiring Great Employees

Jon DeVaan, Vice President, Consumer and Commerce Group:

1. Always hire people smarter than you.

Don't be intimidated by them -- seek them out!

2. Take people out of their comfort zone in the interview; make them think.

After all, that's what they'll be doing when they get to the job, not reciting memorized answers to standard questions.

3. After the interview write down in useful detail why you want to hire the candidate or not.

"Bong goes the bozo bell" may be fun to say but doesn't give useful information to other interviewers.

Hire the Person for Three Jobs, Not One

The best hire is a versatile hire. If the market changes, the division is reorganized, or a new business opportunity comes along, you want an office full of people who have the diversity of talents to switch gears to meet the new challenges. If your hire is too specialized, you may find yourself with dead weight and a slot you wish you could fill with different skills.

Sam, an interview candidate in the Human Resources department, had a highly valued talent. Sam could coach anybody through anything. He could help managers work through team-building challenges. He could get the person with "analysis paralysis" to stop overanalyzing data and move forward on a decision. He could help nervous presenters conquer their fear of public speaking. But that's all he could or wanted to do.

There were a number of other responsibilities in the department, but Sam just wanted to stick to his coaching. He didn't want to design programs to take groups of people through a management exercise. He didn't want to research why people were leaving Microsoft and figure out ways to keep them. He didn't want to do team-building exercises. Still, he was hired and excelled as he coached people.

After some time, though, Sam ran out of people to help. Other important issues and projects began looming in the department. Those problems got juggled around the hallway as other team members tried to add them to their own responsibilities. Only Sam stuck to his original charter. But that charter was quite limited. Eventually, Microsoft had to let Sam go and hire someone more flexible.

It's hard to know the "next big thing" that upper management or the market will throw your team. Having a versatile group, supplemented with specifically skilled consultants, when needed, gives you a flexible and cost-effective way to meet new challenges.

Retaining the Stars

When Making Changes, a Little Human Goes a Long Way

You can make change easier for your staff. New bosses, new organizations, new responsibilities, can range from somewhat unsettling to downright scary. I had a friend who woke up in a sweat at 2 a.m. every night the week before her first meeting with her new boss. I've seen other teams spend so much time speculating on impending organizational changes that they basically did little work for a month.

Whether it's learning everyone's name and one thing about them ("Hey, Pete, how's your puppy?") or hosting a Friday happy hour in your office, show your employees you're a regular person to allay their misgivings and enable them to be productive quickly in their new roles.

When Brad Chase was the Vice President of Windows Marketing, he was put in charge of combining the Microsoft-DOS and Windows teams. People got nervous. Who would report to whom in this new organization? Where would the power lie? Who would make the big decisions? And who was this guy Brad they'd all be working for now?

Brad sensed the uneasiness in his new group, so he went from office to office meeting with each person on the new team, to discuss their career goals and interests, and to solicit input into the new organization. He told them he would try to match their interests to the business's needs, but that there were no guarantees -- mapping out organizations involves chess moves where one decision impacts another. Soon after, Brad called an "all hands" meeting to unveil the new team structure, mission, and top objectives.

As he unveiled the org chart, a chuckle rippled through the audience. The top box -- the place of highest rank -- contained not the name Bill Gates, but the names of Brad's two toddlers! Was Bill Gates at least next in line? No, next came Brad's wife, Judy, followed by Brad's administrative assistant. Then, Bill appeared along with the other vice presidents and so on down the line.

Brad's org chart showed the team that his priority was his family and gave the message that he understood if the team members weren't at work twenty-four hours a day. Two years later another reorganization was announced, and Brad received some requests to "bring the old org chart" when he met with his teams.

As the group got going, Brad would periodically take mini-polls to get their views on how things were running and would speak to team managers to get input on the biggest areas of opportunity and the biggest roadblocks. Once a quarter, Brad would hold an "all hands" meeting to discuss the results of the polls and the manager feedback, as well as the state of the business. This helped him keep in touch with his teams and let the teams know their opinions were heard and valued.

Three Lessons I Learned about Managing a Group

Dean Hachamovitch, Group Program Manager, Office:

1. No matter how big the assignment, give it just one owner.

If you make the project a group responsibility, each person thinks the others will get it done. One person who knows they're on the line is much more effective.

2. I tell my team their goal is not to send e-mail or to write a memo but to actually communicate information.

The "Rule of Least Surprises" is a good one. No one should say about us, "They did what!"

3. I try to hire the type of person who asks, "What are the tough issues?" rather than one who asks, "What will Bill Gates say?" (or any other boss).

You don't want a team that thinks, "Bill's going to sneeze, so we all need to make tissues!"

Five Ways to Make Sure Your Employees Will Look for Another Job

Microsoft, just like any other company has its share of not-so-perfect managers. Rather than "brainstorm," they like to "blamestorm," meeting to discuss why a mistake was made and who did it. Rather than supporting and promoting your work, they're more like pigeons -- flying in suddenly, making a lot of noise, and dropping a load all over everything you just did. Here are a few examples to avoid.

AGREE IN PRIVATE, DISAPPEAR IN PUBLIC

"What a wonderful idea," my friend's manager told her. "Why don't you propose it at the next staff meeting?" My friend was excited that her boss liked her work. She was excited to show off her innovative thinking. She was excited to...well, you get the idea. At the meeting she breathlessly let everyone in on her new scheme. Her presentation was met with silence -- until someone higher up the ladder said, "That's crazy. We'll never make money doing that."

People in the room -- those spineless weasels -- nodded. After all, her accuser was higher up in the organization and therefore less risky to agree with. She looked at her boss in anticipation. He had liked the idea in his office. Surely, he'd come to her rescue. Instead, she watched as he intently studied a speck on his pen. He didn't look up. She realized she had just been hung out to dry -- very publicly.

As a manager, when you tell an employee you support his or her idea, that support should not be conditional based on who is in the room. Standing up for your team engenders respect, trust, and loyalty. They'll feel comfortable bringing you their best propositions and hypotheses.

PUT YOUR NAME ON THEIR WORK

A young woman was asked to write up notes from the day's meeting. She sent them to her boss, who made some incredibly value-added changes, such as switching households to HH and Multiple Dwelling Units to MDU. He then E-mailed the notes to his boss with the opening "Here are my key thoughts from the meeting." The young woman caught on quickly and looked for a boss who wasn't afraid to let his hires shine.

A manager who thinks he or she has the right to take credit for an employee's work, just because he or she assigned it or reviewed it, needs to attend remedial social skills training, let alone Management 101 class. Even if you make substantive changes or give crucial advice, give employees credit for the work they did -- don't put your name on their results.

GIVE YOUR TEAM PET NAMES

At Microsoft, members of one technical group were briefly called Pixel Spice, Web Spice, and Server Spice after the Spice Girls rock group. This is not recommended.

REVIEW BY PAYCHECK

Every six or twelve months, depending on their seniority, Microsoft employees are reviewed by their managers. Based on their job performance, employees might receive a raise, a bonus, or stock options. Unfortunately, some bosses aren't very timely in communicating review scores and raise information to their teams. Since the new pay level appears on the employee's paycheck on a certain date whether or not the boss has actually talked to the employee, these employees end up guessing their review score based on the new dollar amount. This "management by paycheck" has encouraged more than a handful of complaints to the Human Resources Department.

When bosses won't even take fifteen minutes to discuss the things an employee cares about most, his or her job performance and salary level, they send a signal that they don't care about that employee. People need the straight scoop on their performance -- good or bad. Sometimes, the best long-run morale boost comes from specific negative feedback that clarifies what someone needs to improve. Timely, clear communication will propel you up the manager popularity rankings -- a nice way to get your name known around the water cooler.

STIFLE DISSENT

The top marketer of a business unit at Microsoft mentioned to one of his colleagues a concern he had with the group's strategy. An hour later, the head of the group asked him to come to her office. When he arrived, the leader sat facing him with three of her cronies and said, "We're concerned you won't be effective marketing this product if you don't agree with our strategy."

She didn't want to hear his opinion, debate the product direction, or find out what his concerns were. The project was eventually disbanded -- perhaps because his concerns were valid and lay unaddressed. Disgruntled, the marketer decided to leave the group. The situation should have been win-win with problems addressed and a concerned employee listened to. Instead, there were bad feelings all around.

DON'T WAIT UNTIL THEY THREATEN TO LEAVE (TO FIND OUT WHAT THEY NEED TO STAY)

Respect and appreciate your employees before someone else does. Some managers wait until their employees are so frustrated that they're on the verge of quitting to say, "Oh, great work you're doing." These bosses can't and don't keep talented players on their team.

Frank had been in Microsoft's CD-ROM area in a variety of marketing roles. He had worked with everyone under the sun, from the ad agency to foreign subsidiaries to researchers. He had created scripts to help salespeople show off the best features of a product. He had helped with research to identify consumer-buying habits -- for example, owners of Microsoft's Cinemania movie guide were good targets for Microsoft's Encarta encyclopedia. He'd interview kids to see how they liked the new products Microsoft was creating. He had even worked with the international product managers, putting together sales materials for them to translate so they wouldn't each have to reinvent the same work.

To round out his skills, Frank wanted to work with the press; so for months he asked his boss if he could work on the PR. He wanted to show off new products to reporters on press tours. He wanted to be a company spokesperson and felt he was ready to do so.

His boss repeatedly said no. The boss told Frank he wasn't experienced enough in creating marketing messages and that more senior people were in line ahead of him for the job. Fed up, Frank looked around the company and found a PR job in another division. When he told his boss that he was leaving, the PR slot in his group magically opened up just for him!

Frank would have been overjoyed at the offer if his boss had made it earlier. Instead, he felt this was a last-ditch effort to keep him on the team. Yes, that demonstrated he was valuable. But why couldn't he have been shown this before? Now, it was too late. Frank would've preferred to stay. He liked the product and his coworkers. But he no longer trusted his boss. He thought, "Is this someone I have to go to extremes with before I get what I want?" Frank moved on.

The longer you wait to recognize what your employees need to be happy, the more likely it is you'll lose them. Whether it's a change of responsibilities, a promotion, or just ergonomic chairs to soothe their backs, do what your team needs to keep them thriving on the job.

BE AS RELIGIOUS ABOUT RETENTION AS YOU ARE ABOUT RECRUITING

The old adage "it's cheaper to keep a good customer than to find a new one" makes sense with employees as well. Keeping top performers and experienced managers is usually easier than finding and developing new ones. The departure of intellectual capital -- brain drain -- coupled with the cost to recruit, hire, and train a replacement makes it just as important to keep your key players happy as it is to do all that college interviewing.

But how many companies have "retention specialists," or official "retention programs"? Compare the hours spent reviewing new resumes, interviewing entry-level candidates, and giving campus presentations, to hours spent making sure key players are motivated, learning, and happy. The former often leaves too little energy for the latter.

After a number of high-level resignations, the executives and the Human Resources Department at Microsoft realized they needed to pay more attention to their most critical employees. And so recently, "on-campus" recruiting has taken on another meaning at Microsoft. A whole panoply of HR specialists use the same lingo of compensation packages, development opportunities, and the like...but they use it in discussions with the people who are already "on (the Microsoft) campus."

WHO'S "LOOSE IN THE SOCKET"?

Managers and HR folks at Microsoft look for warning signs that their key players are "loose in the socket." In other words, a star is at risk to leave the company. They may flag top performers with any of the following behaviors:

• Low engagement in the business or low energy
• A decline in review scores
• Complaints from them to managers or coworkers
• Excessive complaints about them from the team they manage
• Spending more time stabilizing their group than getting anything done
• Stagnation -- they have not gotten a promotion in a while (i.e., stuck in a level or job)
• Turmoil -- they've been through a few bosses, group reorganizations, or other unsettling changes in the past year
  

WHICH LEVERS TO PULL AND WHO SHOULD PULL THEM?

When a top performer gets "loose in the socket," the HR manager, the person's boss, and a mentor or other people close to that employee's career meet to discuss the employee. What data do they have on the employee's performance? Has he or she been through something significant recently? Should the employee be moved or perhaps receive more training in the current job? If they need to be convinced to stay, who can do the convincing? Their boss or someone higher? A mentor? Someone they respect up in the food chain?

In one case, a manager named John in Microsoft's Internet product group told his boss he was being recruited by a local start-up, a hot Seattle company. John's boss, a Human Resources representative, and the vice president of the division met to figure out how to keep John at Microsoft. He was a seven-year Microsoft veteran and had great people skills. Plus, in the past few years, he had gained great Internet business experience that was critical to the company. They knew money wasn't the issue for John. He would almost certainly move to a job with lower compensation if he went to the start-up. They realized that it was the decision-making power in his potential new job -- the ability to act more entrepreneurial and not have to get approval from other businesses before moving on a decision -- that was enticing him. Knowing this was his hot button, the manager's boss and the VP made a list of changes that they could make and other aspects that, unfortunately, were nonnegotiable. They laid the facts on the table. John agreed to stay if the fixes were made to his job.

In another case, an employee who also happened to be a Rhodes Scholar physicist and sculptor was increasingly dissatisfied with his job. He told his boss he was going to quit to do more sculpting. "What is it about sculpting that you love so much?" his boss asked. The two discussed how the employee missed the experimentation and creation associated with sculpting. The next day, the boss walked into his employee's office and said, "If we change your job to be in charge of prototyping new user scenarios and experimenting with design, would you consider staying?" After some thought the employee agreed. His manager had been able to pinpoint the source of his dissatisfaction -- lack of creativity in his work -- and revitalized the employee by using this information to change his job.

Three Lessons I've Learned about Coaching Employees

Jeff Raikes, Group Vice President, Worldwide Sales and Marketing Division

1. Make "lowlights" a standard part of any business review.

People are afraid to give bad news, but that's often the most critical information you need to improve the business. I ask for both highlights and "lowlights" all the time, and the lowlights come first. When employees know it's standard practice to discuss challenges and what can be improved, and that everyone else is doing the same, they're more likely to paint the whole picture.

2. No matter how small a team or subsidiary is, it's still worth your best effort as a coach.

Make sure each management team is strong. Take the time to examine their business challenges and to focus them on a few key strategies. I've seen this really pay off...we expect our Polish subsidiary to sell more than $50 million of software this year.

3. What to do when you don't want to hire more people but the ones you have think they are overworked?

Help them to prioritize their work. Make their goals so unambiguous and focused that they know exactly what to spend time on and what they can drop. Everyone can find wasted efforts in the things they do every day. Help your team streamline their activities so they can make it home for dinner.

TURN EVERYDAY ASSIGNMENTS INTO EMPLOYEE COMPENSATION

Everyone knows there are different forms of compensation -- salary, stock, bonus, vacation, medical benefits. And most people know there are some additional, less obvious forms of compensation, such as an office with a view, a rookie-of-the-year award, a parking spot with your name on it. As a manager, you give assignments and parcel out resources all the time. You can turn these actions into "compensation" if you do it right.

There's a new intern coming and he needs a boss for the summer. You bought five new PCs for your group. Someone needs to go to a trade show in Dallas. Things happen in an office all the time that can be turned into a reward for a job well done.

Summer interns at Microsoft are often assigned to someone who's never been a manager before but is just about ready to become one. Typically, a summer hire needs lots of instruction, direction, and can take up a good deal of a manager's time. If you walk into the office of a manager-in-waiting and say, "You're doing a great job. You're almost ready to be promoted to manager. To help get you there, I'd like you to manage this person for the summer," the manager-in-waiting is now a manager-in-training. He or she is usually overjoyed at the opportunity, and you've found the summer hires a boss eager to spend time with them.

pardFive new PCs are sitting in boxes, waiting to be distributed to your team. Walk into a junior person's office and say, "You've been working hard on your project and I really appreciate it. We're getting some new computers for the team. Why don't you come down and take first pick." The order and manner in which you divvy up the resources can turn into compensation.

When I worked on the Microsoft Word marketing team (most of whom were in their early to mid twenties), business trips were often assigned by the location of the employee's parents. The native Texan went to customer visits and trade shows in that state. The East Coast transplants made most of their trips to New York, Boston, and D.C. Business travel became free trips home. It couldn't strictly be called compensation, but it was used to boost morale. For other trade shows and business trips, the team's manager often asked for volunteers. Sometimes he'd reward an employee who had volunteered for a grueling trip with business travel to Denver during ski season.

In some cases you may not know what employees would really value as extra compensation. Is it more time off? A quieter office? Getting out of an unpleasant task? Let them take their pick. As manager of a software design team, Dean Hachamovitch likes to give out "Get out of Jail Free" cards when he asks someone to go over and above the regular workload.

Eric LeVine, a member of Dean's technical team, was putting in long nights getting the last kinks out of Word 97 so it would ship on time. In the meantime, the marketing team couldn't get the prerelease version to work, to allow them to write a demonstration script, or "demo," of the product. If the demo didn't get written by the launch, no one would see Word 97 at its best. Eric had both technical expertise and understood customer-usage scenarios.

When Dean asked him to help the marketing team, Eric said, "That's going to hurt."

Dean thought about the standard boss lines he could use on Eric:

• You should do this, it will be good for your career
• This is very important for the company
• You are the only one who can do this right
  

Rejecting those, Dean replied, "I understand that. How about if I make you a Get out of Jail Free card. You can use it anytime for anything you want." Eric chuckled and agreed.

Dean's employee's have used their Get Out of Jail Free cards for a variety of wishes. In one case, a team member decided to leave Microsoft to become an environmental lawyer. He wrote a note, "Dean, I'd like you to write my law school recommendation," and included the Get out of Jail Free card.

SETTLERS VS. PIONEERS

Rick Thompson, the vice president in charge of Microsoft's hardware division, is known for saying that it takes "settlers" and "pioneers" to run a great business. The pioneers spearhead new products and take big risks. They fail with flourish as loudly as when they succeed brilliantly. The settlers, in contrast, keep the established businesses running smoothly. They are deliberate, purposeful, patient, and rigorous in their attention to detail. They'll use innovation to improve the business too, but not as radically as the pioneers. Both types are critical to the health of an organization.

Identify the pioneers and settlers on your team and assign them to the appropriate projects. Don't go against their natural grain. Promoting a brilliant big-idea-generator to a position responsible for eeking out incremental gains in an established business is most likely the wrong move. Putting a manager who is devoted to the details of administrative procedure on a brainstorming team probably won't yield the best results. Let each type of person use his or her strengths to get great work done.

As Rick says, "Pioneers can't settle down, and settlers would die out in the wilderness. But, together they can do amazing things."

LET THE PIONEERS GO A LITTLE WILD

At Microsoft, products are normally "spec'd out" (i.e., the product's specifications are planned down to the minutiae) before they are built. Details on customer needs, features, and the look of the product are all carefully laid out and scheduled. Pioneers, however, want to show up and immediately start building prototypes. They're passionate about an idea and want to jump on it. Let them. Don't force pioneers to abide by company policy, dotting every I and crossing each T. Let the skunk works flourish -- although as a manager you'll be "worried the whole time," Rick warns. Will cost objectives be met? Will the project get done on time? Will the thing even work? Try to relax. Microsoft gives pioneers the time and money to investigate their inspiration.

In 1998, a Microsoft pioneer had a great idea for a children's product. It combined the idea of a pager, a Nintendo Game Boy, and a walkie-talkie. This small device would allow children to send and receive typed messages transmitted by radio wave. A tiny camera could transmit pictures as well. Everything on the project was put into children's terms. For example, the operating radius of the device was measured at two to three classrooms wide, as opposed to a number of feet.

After months of research, the team concluded that while the product was cool, there was no lasting competitive advantage for Microsoft. Nintendo could easily come in and do the team one better, using its existing game-boy device and adding the new functionality. Nintendo already had the scale in place to undercut Microsoft's costs and the game cartridges to deliver extra revenue. The division managers were disappointed that the product wouldn't work for Microsoft, but no one regretted the time or money spent to come to this conclusion. Good pioneers know when to turn back.

In another case, a Microsoft pioneer found inspiration in a medical-instrument simulator that helped surgeons feel what it would be like to operate on someone. As a person moved the medical-simulation instrument, they'd feel the push back as if they were cutting through human tissue. Gross as this sounds, it inspired the Microsoftie to create a joystick for PC games. The "force feedback" joystick let gamers feel the speedup of a plane or the g-force of a turn. With little planning and an extremely tight time frame, the Microsoft joystick was created and launched. In just the first ninety days it sold 225,000 units at $149 each, a huge accomplishment. The quality of the product was a success too -- the U.S. space agency, NASA, even requested some joysticks from Microsoft.

SETTLERS NEED TO INNOVATE WITHOUT PUTTING THE BUSINESS IN JEOPARDY

Microsoft sells 25 million mice a year. If the people on that team can make the business 5 percent better, they've just delivered a major boost. Accordingly, the mouse managers look into decreasing component and delivery costs, addressing new sales opportunities at retail and with PC makers. They also try to strengthen intellectual property rights, filing patents so competitors can't copy their work. They are true settlers.

Sometimes though, the settlers on the Microsoft mouse team have a bit of the pioneer itch and come up with an idea that would significantly change an aspect of the business. When an idea like this is proposed, Rick Thompson doesn't bet the whole mouse franchise on it. Instead, the settler team will implement and bulletproof the innovation on the side. The group tests the idea, analyzes it, brutalizes it, builds it, and proves it. But by doing all this in parallel to the main work of the mouse team, they don't risk the entire business.

In 1996, the mouse team felt their "switch" component (basically the little thing under the mouse button that clicks when you press the button down) was priced too high and wanted to build a replacement themselves. Two huge global companies, Matsushita and Omron, were the only suppliers of this part, so there weren't any cheaper alternatives to be found in the market. Making their own switch seemed the best option to the mouse team. They wrote the specifications for a new switch, built it, tested it, investigated the manufacturing of it. Everything looked great. More testing was required, but the outcome seemed promising.

Instead of canceling its switch orders with Matsushita and Omron, and making plans to build and ship its own, Microsoft continued to test. If the switches were as good as they looked, the testing would delay their migration into the product for a while and delay the cost savings; but, if the switches failed, Microsoft would be happy it hadn't changed its entire mouse manufacturing process to accommodate the new component. As work on the project continued, testing showed the new switch was not reliable enough. The effort was abandoned. Because the work was done in parallel to the main business, that main revenue stream was not adversely affected.

AT SOME POINT, A PIONEERING PROJECT TURNS INTO A SETTLER BUSINESS

History shows that the leader of the revolution might not make the best day-to-day president. The inventor might not make the best CEO. The same holds true for the new product created by the pioneer. Once it is well established, the risk-taking, no-schedule, seat-of-the-pants way of managing a product or service needs to give way to a more predictable and stable delivery model for customers. The focus needs to be on faultless execution, rather than innovative breakthroughs.

After its success with the force-feedback joystick, a group of pioneers tried to use the same technology to make a force-feedback steering wheel. They envisioned another great device that would let players of driving-simulation games feel bumps in the road and the power of a hairpin turn. To do this, the team assumed they could reuse the motors used in the force-feedback joystick.

Microsoft went off to a trade show, proudly displaying ten new steering wheels for people to try. Soon, eight of the steering wheels were broken. Because people were using two hands on the wheel, gripping, pulling, turning, versus one hand on the joystick, the device was under much more stress and malfunctioned. In this case, the breakneck schedule of a pioneering team allowed a bad assumption to sneak through. Settlers would have taken more time to test the product.

The bigger problem now was that the first batch of steering wheels were being made at the factory. The hardware team had to stop the production and fix and retest the steering wheels. To make matters worse, Microsoft had promised the product to retailers by a certain day. Those retailers had paid for ads and had started their promotion efforts. Microsoft had to deliver the steering wheels on time or its mistake would cost those stores a lot of money.

"We had to airfreight fifty thousand steering wheels at twenty-seven dollars each," remembers Rick Thompson, the amount etched in his brain. But he admits that the project, if run by true settlers, might have taken so long they would have missed the Christmas selling season. Most projects probably do best with a bit of each -- the tough part is finding the right balance of inspiration and execution.

COMPETITORS CAN TEACH YOU INTERESTING THINGS, AND NOT JUST ABOUT PRODUCTS

Don't just analyze a competitor's product line, ad campaign, or technology. Check out their management practices, training programs, compensation packages, and organizational structure. Human resource consortiums and conventions are a great place to learn how to run a more successful business. There is a lot of information other companies can't tell you, but there's a surprising amount they do.

Along with the meetings mentioned above, your company can sponsor research with other companies to benefit the whole group. Microsoft, along with other companies, commissioned a study comparing the companies' management-development, training, and retention practices. From the resulting report, Microsoft made some changes and additions to its existing management and career track practices. Here are a few examples.

MAKE YOUR OWN MAP OF THE STARS

A great tool Microsoft has adopted involves drawing extremely detailed organizational charts of the company. A group of HR folks plot the whereabouts of star performers across all divisions of the company. From that "star map," upper management can see if there is too much talent stacked up in one division, while other important areas need more brainpower.

In other cases, the star map could point out star players who are "trapped" by layers of mediocre management. In one case, a talented woman buried in a subsidiary was pulled out and given a job in another subsidiary. She quickly excelled, just as management had expected. She became a vice president and continued her rise. Another star on the map was exhibiting great leadership potential but his team was so big, his boss didn't have time to help him exercise that talent. He was moved to a group where he could lead a small team himself and develop that skill.

The star map also shows where stars are needed. One lively employee did a great job organizing teams and getting them working at full speed. Management used the star map to identify teams who could use this expertise and then moved the star from group to group like Johnny Appleseed, so he could get each one up and rolling. He'd teach his management technique to the level below him so they could take over when he moved on. The star map showed the Human Resources team where he needed to be placed next.

EMPLOYEE SURVEYS

Like many companies, Microsoft's HR department conducts a yearly survey asking employees about their attitudes toward their job, their boss, and the company. From this, policy changes are made, foundering managers helped, and areas of potential employee unrest recognized.

The survey covers a spectrum of topics, and each can point out a problem that needs fixing. The survey asks employees if they have clear goals, feel challenged, and receive timely feedback from their boss. Spotty answers here may send up a red flag that a certain manager needs help leading his or her team. The survey asks employees if they know what their department's mission is, how it relates to other groups, and if there are barriers to working with those other groups. Confusion here could indicate the need for a reorganization. The survey inquires about employees' trust of the senior executives. Do they believe in the company vision? Do they believe the senior executives are taking the company in the right direction? Do they think Microsoft is missing the boat somewhere?

Overall satisfaction is examined too. There are questions on compensation and work-life balance. Employees are asked how many years they are likely to stay with the company. All the survey data is sliced and diced. Are women more likely to leave the company than men? Do junior people understand the company mission? By asking employees once a year to rate jobs, bosses, other groups, and their own happiness, Microsoft can identify and take action on a wide range of issues.

JUNIOR BOARDROOM: TRAINING THE NEXT LEVEL

Another management-development technique that Microsoft and many other companies use is to give a group of young executives the same set of problems and challenges to mull over as their senior counterparts. For example, Microsoft holds management retreats to think over, investigate, and debate issues such as the future convergence of the Internet and television or how to keep costs down as a percentage of revenue. The junior group is given time to meet and discuss the topics and then give a formal presentation to the senior group or send recommendations via memo or E-mail.

This technique trains the "executives-in-waiting" to think about broad issues that affect the whole company. It gets them used to working on strategy with peers from other areas and lets them show their talent off with (they hope) creative solutions and crisp analysis.

Three Lessons I've Learned about Changing Jobs

Christine Winkel, Product Manager, Microsoft Barney, Teletubbies, and other ActiMates:

1. Know your boss's place in the company pecking order.

Before taking a new job, see how your potential boss is viewed and respected by upper management. What are your boss's overall responsibilities? What types of decisions does he/she own? The most useless person to work for is a manager who isn't respected and doesn't have authority in the organization.

2. Know your boss's quirks.

Everyone has them. Usually, you're better off knowing which ones your boss has before you accept a job working for him/her. Speak to other folks who have worked for him/her in the past. What do they like about the manager? What did they hate? Step back and ask yourself if the boss's style, attitude, and demeanor add up to someone you can flourish under.

3. Know your boss's skill set.

It's vital to find a manager with different skills from yours. The boss will have an easier time letting some control go since you bring something else to the task. A variety of talents within a team are also important from a company's point of view. Managers who pass on new knowledge and experience enhance the skills of their team and prep them for future growth/promotion.

SETTING UP THE SALES FORCE TO SUCCEED

Holistic probably isn't the word that comes to mind when the Microsoft sales force is mentioned. So it's surprising to see how the sales organization, its initiatives, strategies, measurements, and reviews do actually fit that description, emphasizing the importance of the whole and the interdependence of its parts. As head of that sales and support organization, Jeff Raikes has built a framework to segment customers, find their leverage points, amass a mind-boggling amount of detail on the market, and then act on it, worldwide. The process can get exceedingly complex, but everything is tied back to customers, sales goals, and a few global initiatives.

ORGANIZING EVERYTHING AROUND CUSTOMERS

Because Microsoft sells software, Jeff Raikes, head of the Worldwide Sales and Marketing Division, views the market accordingly, by the number of PCs an organization has. Other businesses, of course, view markets based on what matters most to them. For Microsoft, the biggest segments are

• Large businesses with more than a thousand PCs
• Medium-sized companies with fifty to a thousand PCs
• Small organizations with less than fifty PCs
  

The Microsoft sales organization encompasses subsidiaries around the world and thousands of sales and support staff. Every aspect of this enormous group is built around "customer units," focused on a segment. At headquarters in Redmond, "customer unit" staffers create sales tools, pricing models, and support materials for their specific segment. In the field offices around the United States, salespeople are divvied up the same way and call only on accounts in their segment. The subsidiaries do the same.

DATA ANALYSIS: EXAMINING THE MARKET, SETTING GOALS

Microsoft collects huge amounts of data on each customer segment, as well as the overall market, competitors, and sales channels. First there's the usual data you might guess a software company tracks:

• How much and what kind of Microsoft software is sold in each country
• How much software the competition sells
  

Then it gets a little more detailed, including:

• How often PCs are replaced (swapping old ones for new)
• Top companies selling the software to this group
• How much Microsoft makes on each PC for the whole segment
  

Then it gets downright incredible, such as:

• The amount of revenue the third-largest U.S. reseller derived from selling Oracle databases that run on Microsoft NT software
• Information on 213,000 "value-added providers" in the United States that provide software services to small businesses. Data includes if they've been to a Microsoft seminar and how many E-mails have been sent to them.
  

The sales management team slices and dices the data every way possible, comparing countries, products -- you name it. A hundred-page resulting "yellow book" includes thousands of tiny numbers showing every permutation and combination of the data. The managers use this data to:

1. Know country by country, region by region, segment by segment, where sales are coming from. They can then identify new market opportunities to capitalize upon, and trouble spots that may need some shoring up.

2. Determine who the key players are in the channel and make sure their relationships and programs for them are stellar.

3. Figure out the number and makeup of their customer base. What do those customers look like? What are they buying?

4. Keep track of competitor pricing, sales figures, and marketing spending.

5. Identify anomalies in the data and delve into their causes. Why have sales suddenly stalled in a certain region?

6. Share best practices. Why is SQL Server selling so well in Taiwan? What is the team in that country doing and how can we learn from them?

This level of detail may seem like overkill, but when Microsoft president Steve Ballmer asked if the software sales in the western region of the United States matched population density in that area of the country, a sales manager quickly gave him the answer without referring to any notes.

CREATING GLOBAL INITIATIVES THAT EVERYONE OWNS

Each year, the top sales and support leaders in Jeff's organization use the excruciatingly detailed data of the yellow book and talk with the Microsoft groups creating the next generation of products, to determine five to seven initiatives for the sales force worldwide over the next year. These are separate from sales goals. Initiatives might focus on customers, competitors, partners, or even a new iternal information system to help the sales force become more efficient. Recent initiatives have included lowering the total cost of a PC for a corporation (i.e., software training, installation, and maintenance) and "delighting customers."

The five to seven global initiatives are then given to a task force made up of regional representatives from around the world, and from each customer unit. The makeup of the group reflects the organization, i.e., the customer units, and so it represents the market. This group makes the initiatives actionable by putting guidelines and measurements around them. They answer the questions: "What will success look like for this initiative? How will we know we've done it?" "Do we need to hit a sales target?" "Should we give seminars to a certain number of customers?" By involving representatives from around the world and from different customer units, each group in Jeff's organization feels partly responsible for the resulting goals.

Soon after the initiative group maps out goals and measurements, one thousand Microsoft sales and marketing people from around the world descend on a city to get trained, excited, and prepared to launch those initiatives in their countries. Again, this "global summit" ties back to the customer units, offering information for salespeople calling on each type of customer.

SETTING UP COMPENSATION TO MEET CORPORATE GOALS

The field's compensation is also tied back to the customer segments and initiatives. There is the usual set of incentives for selling certain products, based on the makeup and needs of the customer segment. There are additional bonuses for making progress on company-wide initiatives such as increasing customer satisfaction or establishing more frequent communication with the retail channel.

There should be no question in the minds of the sales managers exactly how they will be judged. Jeff Raikes sends out a sample presentation they use to create their annual business review. Accompanying the sample presentation is an actual video of Jeff explaining what he expects out of each portion, what he's going to look for, and what he thinks is important. The sample and video probably prepare, excite, and terrify the managers putting the data together. Doubtless, though, they have the desired effect: when sales managers know they're going to be graded on both sales and their progress on the company-wide initiatives, they focus the sales teams on both activities.

Jeff Raikes and his team developed a global market taxonomy and transformed Microsoft's sales and support organization to match it. Jeff makes sure that the organization is supplied with every piece of data it needs to set goals, share best practices, and make decisions. Tying the compensation back to the initiatives and customers completes the circle.

Three Lessons I've Learned about Getting the Best from Your Sales Force

Jeff Raikes, Group Vice President, Worldwide Sales and Support

1. Opportunities are everywhere.

Keep an eye on the whole market, even at the national policy level. To boost the use of PCs in Japanese businesses, the Japanese government decided to make PCs a business expense with a one-year, rather than a six-year, depreciation write-off. When Japanese companies start buying more computers, that's an opening for us to sell more software, so we really geared up for it.

2. Look at the real expense of hiring additional people.

Calculate three or four years out, taking into account cost increases due to annual raises, health insurance, etc. Does it still make sense for the business for you to hire more employees?

3. Equip the sales force quickly when a competitor makes a move.

When one of our rivals introduces a new product, drops a price, or changes licensing agreements, I like our folks in the field to receive a concise report within two days from headquarters explaining what the move means to customers and how to respond.

Copyright © 1999 by Julie Bick