UNIVERSITY OF PETROLEUM & ENERGY STUDIES

College of Management and Economic Studies

Dehradun

HUMAN RESOURCE MANAGEMENT

PROJECT REPORT

ON

SUBMITTED TO: SUBMITTED BY:

Mr. PC Bahuguna Alok Singh (R020211004)

Area HRM Aman Agarwal (R020211005)

UPES Chetanya Kulkarni (R020211029)

Mithilesh Singh Rautela (R020211032)

Pradeep Kumar (R020211036)

MBA (O&G) (2011-2012)

Semester : II

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HR Policy of Microsoft Company

CONTENT

1. Review of Literature

2. Microsoft: Knowledge Fuel of the

Technology World

3. Hr Strategy at Microsoft

4. Recruitment and Selection: Attracting

the Best and the Brightest

5. Taking advantage of Market Conditions

6. Employee Motivation

7. Employee Satisfaction and Loyalty

8. Employee Rewards: The Options‐driven

Engine

9. Growth & Acquisitions

10. SWOT Analysis

11. Reshaping Microsoft’s Hr Agenda

12. Conclusion

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REVIEW of LITERATURE

Human Resources Department at any organization is a crucial and indispensable part of the operational strategy. 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 recession 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.

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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 recognized7 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.

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HR Strategy at Microsoft

Microsoft Corporation has adopted11 the “Performance Culture Model`` as the best12

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 leader13 in this regard across the industry.

Some of the categories across which the surveys are done, analyzed, and the results published are mentioned

Figure 1: Microsoft ‐ HR Growth Model

1. Organisation: Organisation size, open positions, line HR ratios

2. Organisation Health: Workgroup Health Index ,Microsoft Pulse Index, Microsoft Culture Index

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

3. Talent Management: Good attrition, bad attrition, YOY and Qtr‐on‐Qtr tracking, reasons for bad attrition, % retention of high positions, % of promotions, succession panning indicator, succession planning usage

4. Diversity: % of women (target vs. actual), % of women hired, % of women talent losses, reasons for bad attrition, % of women in leadership succession slate, % of

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Managers and employees completing MS Diversity training programs, % of other diversity hiring

5. Manager Capability: Span of Control, Organisation Depth, % of Managers

6. 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)

7. Leadership Development: % of leadership hires, % of leadership attrition, succession planning index (% of successors in stages of readiness for a Leadership role)

8. 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.

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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.

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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 focussed 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

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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.

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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.

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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.

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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 manages 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.

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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 semi‐annual 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 resourcesis 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 technicalexperts, just as those with conceptual skills advance as managers.

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Reward systems are an important part of organizational culture; they communicate to employees what is valued by the organization (Robbins, Bergman & Stagg 84). 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.

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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.

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SWOT Analysis

Strengths

Existing market position Strength of brand Finance available ($60bn+) Network of Microsoft Certified Partners

Weaknesses

Maturing markets Lack in credibility compared with some competitors

Opportunities

Synergies Partnerships & alliances with PC producers Observed market changes

Threats

Antitrust legal cases from rivals Threat from upcoming online brands Unauthorised/illegal trade in pirated goods

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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.

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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 reputation 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.

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REFERENCES

HR Planning Report By, Jyoti Priyadarshini

http://www.microsoftwatch.com/content/web_services_browser/ aol_layoffs_end_an_era.html

Managing Human Resource By, Fisher and Shaw

http://www.citehr.com

http://www.hrmbusiness.com

http://www.mckinseyquarterly.com

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