Wednesday, October 22, 2008

Microsoft FY09Q1 Results

FY09Q1: wow, I wonder what's going to be on everyone's mind during this quarter's webcast with the analysts?

  • "How has the global economic crisis affected Microsoft?"
  • "What product groups are the most affected? The least?"
  • "How has your forward looking assessment changed for FY09?"
  • "What kind of efficiency measures are you putting into place?"
  • "According to reliable sources (ahem) the Microsoft hiring freeze through major parts of the corporation is real. How does this hamper Microsoft's ability to hire the best talent and to retain the best talent?"
  • "Are you going to buy Yahoo! since it's so much cheaper?" (Please keep Mr. Ballmer away from any recording device during this question.)

etc. etc. Any big questions you're looking to be answered?

Pre-announcement portion: my suggested post-analysis sites for quarterly results:

Interesting angle Microsoft has come with during the global economic crisis: when money is tight, drop those custom solutions and go with Microsoft to save money and be more cost effective. Nice. Post-analysis postings of note (to me):

Mr. Joe Wilcox:

Mr. Todd Bishop:

Mr. Joe Tartakoff:

Mr. Brier Dudley:

It will be interesting to see the $500,000,000USD savings in action. There was some probing by the analysts on that but just a broad answer in response.

Sunday, October 19, 2008

Is Microsoft Recession Proof?

Is Microsoft recession proof? No, of course not. While it can be buffeted back in forth in a mild recession and get through without group parties here and there, it's pretty unclear what kind of Microsoft will emerge at the other end of a deep global recession. Just a quick post about the immediate staffing impact as we head towards quarterly results.

First: thank whatever deity you hold dear that we didn't go forward with that Yahoo! acquisition. How crazy would that look now?

At this point, organizations are being told to eliminate inefficiencies. For different organizations this means some pretty radically different action items. For some parts of Microsoft, this means hiring freezes. While hiring freezes aren't any fun (more below) you probably prefer them to full-blown Reduction in workForce (RIFs... though I guess that would be called RIWs or RIWFs).

What we need, though, is one big RIF.

There is an unfortunate consequence to hiring freezes for Microsofties: those ready to move on to a new position are stuck because there is no where to go and, even worse, those who have already gone through an interview loop are having their offers frozen out. Also, any attrition is not going to be backfilled and the org loses that headcount. Let's talk about this.

Now first of all, I'm all for reducing Microsoft's headcount. I was for that, what, 40,000 hires ago? Microsoft's key asset and key overhead are the Microsoft employees. You reduce that right, you save a bunch of money. And it is not just a one time saving.

I'm all for good and bad attrition. But I'm concerned about implementing unhealthy policies vs. just a one big 10% or 20% reduction all-around (we've identified 10%-ers already right - at least 10% Situation I-ers). If you do this big and once and you can still backfill future attrition and let people move around the company into new positions.

It's unhealthy for Microsoft to lock people into their jobs, which might be the reality for the next half-year to a year. I want the most talented Microsofties to - as their current commitments come to a close - look around the company and find new challenges to move to. It makes for stronger careers building our future leaders and creates stronger results. It also makes bad teams fail sooner by loosing key contributors. What's even worse, perhaps for planning, is that people will be locked and not moving on during a natural product cycle rhythm coming up (major product groups, for instance, going into stability), and these same people, once headcount reopens in the future, will be abandoning their commitments mid-way. Uncool. Unsurprising.

As for being told "Hey, we're not going to let you fill your attrition." Well, what group, let alone empire builders, is going to move on bad contributors now? Better to limp along than have reduced capacity. Not even that alluring, "Wouldn't you want to move-on that plateau'd L61 person with a hot college new-hire?" works now.

Some comments on this. First a common hit on most teams:

time to talk about layoffs. Hiring is frozen and teams are being told to reduce head-count through attrition. Sounds like layoffs to me.

What happens when you want to move internally and have already interviewed (oy!):

Any updates on the hiring freeze anyone? I desperately want to get out of my current team but teams I have interviewed with are withholding offers because of this damn freeze...

An excellent manifesto on hiring freeze for talented contributors:

What the Hiring Freeze Means to Me - An Open Letter to HR

I am high performer, a gold star winner, have a relatively high level and I have a problem.

In an all too common scenario, my group was re-orged and I was given a new manager. As is many times the case, this manager is well regarded for his technical skills but is absolutely an abysmal manager. He has little aptitude or interest in actually managing his people and still operates like he's an IC.

Multiple members on the team have gone to the new manager, as well as the skip level manager to discuss the situation.

The skip level manager now has a dilemma - does he support the manager, and help him grow into the role?

If he does, it will clearly take 6+ months, and this is on top of the 3 months it took the team to muster the courage to escalate to the skip level manager to begin with. If the manager stays and doesn't improve, myself and the people on his team will surely take a hit at review time at the end of the year.

In our case, the manager doesn't know what to do. He's thinking about it, and in fairness we recognize he's in a tough spot.

All the while, though, the clock is ticking, and the high performers on the team are looking for the exits. We're demotivated, demoralized, and are placed in a position where we cant realize our potential.

Most people reading this are likely nodding their heads. This happens here. Alot.

Typically when this happens, employees see this as an opportunity to explore another part of the company, and round out our experience.

But not today. There's a hiring freeze, no internal transfers are allowed, and we're stuck.

We've done the appropriate thing, we've talked with our manager and our skip level manager. We're now in a weird limbo.

Of course this comes at a time when we're in a down economy, and in many respects lucky to have our jobs. We're sure as heck not going to rock the boat any more than we already have.

This seems to leave to options. The first is to suffer in silence, the second is to leave the company.

Neither of these options are good for us or for Microsoft.

Our group is not alone.

I'd ask you to consider four things:

(1) New rule - anyone new to people management is on a trial basis for the first year, to be reviewed and renewed quarterly.

(2) New rule - anyone new to people management shouldn't be given a team of more than two people. If they do a good job with two, go to five, and so on.

(3) Make managers of managers responsible for their appointments.

If you put a bad manager in place, and you don't resolve the issue after 1-2 quarters, you take a percentage hit on bonus and stock.

This will result in people spending more time in the decision making process for this.

(4) Allow for internal transfers, atleast for higher level positions. When you take high leveled, high performers and you put them in a position where they can't be high performers due to poor management, they either leave or grow demoralized and become less productive to accomodate a bad manager.

Eventually, this second group also leaves, with the ones that don't downgrading to average performers.

A snippet to re-enforce that:

Internal is frozen, too, for the most part. I see Live and MSN technical openings, and various business-oriented ones. I had just seen a couple positions for which I wanted to do informationals. Before the hiring managers and I met, they both called me and said that they had just been told that couldn't hire anyone for the time being.

It's really my time to leave my team, because the three year timer is ticking and I'm topped out in my org given the kind of work management wants it to do. I'm capable of more, but the level of work isn't there. When I've tried to just go get it, I've caught flack from management - because I was taking on actual business risk that scared them, instead of the safe work our team usually does. I don't like the online services biz, so I hope the powers that be finish evaluating the business climate and open up a few more product heads in profitable divisions sometime soon. My preference is PM or dev in Exchange, as I'd like to contribute to that. But at this point, any core product would be interesting.

I think that this is an opportunity for major change vs. aloof delegated inefficiency hunting, but major change has to come from SteveB. If need be, the global climate gives Microsoft cover to make big revamps. E.g., "...the economy made us do these big cut-backs vs. us doing what we should have been doing all-along." It is too soon to expect this during this week's quarterly results, but within the next quarter, as the impact to reduced global PC sales becomes apparent, we should be ready to announce some major overhead reduction (e.g., not towels but rather less butts for said towels to dry - win-win). And remember: you cut once and you cut deep. Incremental pain is unhealthy and all that you're doing is poisoning your teams and setting up a huge round of bad attrition once things turn around.

I imagine each one of you wants to make your team better and more productive and streamlined, and have ideas for your team and beyond. This is an excellent time for our HR leadership to re-engage Microsofties plus finally join the 21st century and implement team-focused awards. Yes, we would still offer differentiated awards, but team achievements must be recognized with the same level of attention that our super-star hero culture is given. Who doesn't want an excellent team to be rewarded, let alone dysfunctional underperforming teams torn apart?

So, if your team had to get by with 10% less budget, how do you think it would be best addressed?