The honeymoon is over for Microsoft Chief Executive Satya Nadella. Quarterly earnings fell as the company’s traditional bread-and-butter cash machines faltered. Growth in cloud services was not enough to soothe investors, who have been driving share prices down amid a storm of doubt. It would be crass to call it karma. The hit pieces have…More
Am I the only one who has noticed that the “mainstream” Internet media and social media must be fed on a constant diet of high-profile events involving victimization? It has replaced the reliable staple of “missing blonde teens” on cable television from a few years ago. I don’t mean to sound cynical. But indignation about such things…More
Microsoft’s historic layoffs — 18,000 jobs total, at least 1,351 in the Puget Sound — will give us a sense of how strong and deep the Seattle economy is during what has been a frenetic upswing. Each layoff is a tragedy for the individuals and families involved. For the metropolitan area, Microsoft’s move comes at…More
Executing a turnaround of a proud institution requires deep knowledge and respect for its past, plus an unsentimental and incisive understanding of what’s not working. It takes the ability to lay out a vision, not merely from A to Z, but from A to B to C etc. — everybody knows Z, it’s the execution…More
Microsoft is no longer a cash cow suffering from a “lost decade,” or so it would appear. The company beat analysts’ expectations for its fiscal third quarter, with solid performance in its cloud unit and purchases by individual customers, not just business. New CEO Satya Nadella even sat in on the conference call. This…More
If Microsoft begins a turnaround now to regain its innovative edge, the hinge won’t be the retirement of Steve Ballmer or any new device. It will be the elimination of the employee evaluation system known as stack-ranking.
This was the origin of the poisonous culture that has damaged the company, setting employee against employee, department against department.
Far from providing an honest evaluation of performance combined with benchmarks and coaching to improve, it required that a certain percentage of employees be deemed falling behind the bell curve — as in, find another job — even if they were excellent. Kurt Eichenwald described it in his influential Vanity Fair article, “Microsoft’s Lost Decade”:
Supposing Microsoft had managed to hire technology’s top players into a single unit before they made their names elsewhere—Steve Jobs of Apple, Mark Zuckerberg of Facebook, Larry Page of Google, Larry Ellison of Oracle, and Jeff Bezos of Amazon—regardless of performance, under one of the iterations of stack ranking, two of them would have to be rated as below average, with one deemed disastrous.
In an interview earlier this year with my colleague Janet I Tu, Ballmer seemed to begin backing away from the system as part of the company’s reorganization.More
The Microsoft CEO sweepstakes is under way. The Seattle Times’ Janet I. Tu recently wrote about the qualities needed in the successor to Steve Ballmer, as well as the top candidates rumored to be considered for the job: St. Alan Mulally of Ford and formerly Boeing; Paul Maritz, chief executive of Pivotal, former head of VMware and a one-time top Microsoft executive; Nokia chief executive Stephen Elop, and Tony Bates, former Skype president and current Microsoft executive vice president for business development and evangelism (who makes up these titles?).
Who do you think should lead one of the premier companies of the Puget Sound region? If you have a write-in choice, please use the comments field.
Read on for some of the best business and economy stories of the week and the haiku from your economics columnist and macroeconomic evangelist…More
According to Reuters, three of Microsoft’s largest institutional shareholders want Bill Gates to step down as chairman. The story says, “The three investors are concerned that Gates’ presence on the board effectively blocks the adoption of new strategies and would limit the power of a new chief executive to make substantial changes. In particular, they point to Gates’ role on the special committee searching for Ballmer’s successor.”
One can make the case against Gates by saying the author of The Road Ahead missed the on-ramps to search, smart phones and tablets. Whatever the alleged sins of CEO Steve Ballmer — stack ranking, excessive and toxic bureaucracy — were countenanced by Chairman BillG. On the other hand, Gates is the co-founder and first chief executive of the company, and one of the most respected technology leaders in history. He remains widely beloved in the company and a connection with its old glory. He is the largest individual shareholder. Also, having a separate chairman and chief executive officer generally makes for more healthy corporate governance.
But if that last assertion is so, why has Microsoft’s stock price stagnated? This cuts to the heart of the effort — or trial balloon — to move Gates aside and presumably bring in an imperial chairman-chief executive.More
Some top institutional shareholders are reportedly pressuring Microsoft to put Alan Mulally on the short list of candidates to succeed Steve Ballmer as chief executive officer. This is sure to gladden some hearts in Seattle. Mulally was the one who got away. He was the beloved head of Boeing Commercial Airplanes who was passed over when the CEO position went to outsider Jim McNerney. If Mulally had become the head of Boeing, this narrative goes, “things might have been different.” As in, better for the Puget Sound region. Mulally left to run Ford Motor Co. with great success. Ford was the only one of the Big Three that didn’t require a federal bailout to survive.
This involves some selective history. Boeing moved its headquarters to Chicago in 2001 under then-CEO Phil Condit, who wanted a “neutral location.” It’s unlikely that Mulally, in 2005, would have reversed that decision. Mulally also saw the early development of the 787 Dreamliner, and it’s impossible to know if the airplane’s delays and troubles would have been avoided had he stayed with Boeing. It’s also impossible to know if he would have resisted pressure to move some Boeing work out of the region. Maybe so. Maybe not. McNerney is said to “dislike Seattle,” especially the unions. Whether that’s really true or not, Mulally likes Seattle and skillfully handled the United Auto Workers at Ford.
The deeper question is whether the skills of a successful, large-company chief executive translate to any company. Cars aren’t airplanes, but both Ford and Boeing are large manufacturing concerns. Yahoo’s Marissa Mayer was previously with Google. On the other hand, Lou Gerstner, famous turnaround artist of IBM, had been chief executive of RJR Nabisco, and had also worked for American Express and McKinsey & Co.More
My two weeks away were timed for the part of summer “when nothing happens.” So much for that.
• There’s a school of thought in classical economics that in the long run monopolies always commit suicide. Why? They become so dominant and wedded to the enormous revenues of their monopoly that they are insulated from competitive forces, new ideas and market discipline. Thus, for example, they miss the next new thing, price their products at a disadvantage and fail to see, forgive me, the road ahead. If this is so, whatever the merits of the federal case against Microsoft, it behaved as a classic monopolist and paid the price. It failed to snatch the escape clause of this theory, which enables today’s oligopolies: Capture the government to perpetuate your power.
• Of course Steve Ballmer was forced to walk the plank. His statements, and my sources, made it clear he intended to stay as long as he wanted. Yet according to Kara Swisher of All Things D, “Ballmer’s timeline had been moved up drastically — first by him and then the nine-member board, including his longtime partner and Microsoft co-founder and chairman Bill Gates — after all agreed that it was best if he left sooner than later.” A potential proxy fight was one danger. The recent disappointment in earnings, and the broader washout of Windows 8 and the Surface tablet were likely the final straws. He lost the confidence of Gates, the backbone of his power.
• Microsoft is a very big deal to the Seattle area economy. For one thing, it employs 42,000 here in well-paying jobs. That alone is a rare asset in today’s America. Apple employs only 16,000 in Silicon Valley. In addition, it has been a magnet for software developers and spun off much talent which, in turn, started new companies. Why did Jeff Bezos put Amazon in Seattle? Maybe he likes the weather. But he also had his pick of top technology talent. Microsoft helps explain why Seattle punches so far above its weight class. We lack two world-class universities, one of Silicon Valley’s big advantages (we do have one, badly underfunded). But we have Microsoft. Thus, whatever happens under a new chief executive will have wide consequences for the future of the Puget Sound economy.