Application Assignment Week 03

On page 106, of “Fundamentals of Organizational Structure” it cites Microsoft as an example of a company that removed the shackles of bureaucracy by splitting the company into several different “BGs” or business groups (Daft, 2007).  According to this article “Managers of the divisions are charged up by the new authority and responsibility.” (Daft, 2007)

Unfortunately, I think several things have changed at Microsoft in the past 5 years. According to a recent article in Vanity Fair by Kurt Eichenwald, entitled “Microsoft’s Lost Decade,” the dotcom bust in the early 2000’s let to the “bureaucratization of Microsoft” (Eichenwald, 2012).  The economic downturn led to more cost cutting measures, an increased awareness of efficiency and a reluctance toward risk.  

“’There was this institutionalized system, and it was like designing software by committee,’ said Prasanna Sankaranarayanan, a former Microsoft engineer. ‘Things moved too slowly. There were too many meetings.’” (Eichenwald, 2012). 

Using the techniques detailed in “Do You Have a Well-Designed Organization?” by Goold and Campbell, I think Microsoft should explore the “Redundant-Hierarchy Test”. (Goold & Campbell, 2002) Breaking out the different business groups was a good first step, but over the years, each of the business groups developed their own bureaucracy that has become bloated and inefficient.

Another issue that Microsoft faces in the Vanity Fair article lies with its political structure. “By 2002 the by-product of bureaucracy—brutal corporate politics—had reared its head at Microsoft. And, current and former executives said, each year the intensity and destructiveness of the game playing grew worse as employees struggled to beat out their co-workers for promotions, bonuses, or just survival.” (Eichenwald, 2012)  Microsoft had instituted an archaic employee review system called “Stack Ranking.” (Eichenwald, 2012)

“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, two people were going to get a great review, seven were going to get mediocre reviews, and one was going to get a terrible review,” said a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.” (Eichenwald, 2012)

This type of ranking systems leads to a significant amount of in-fighting and paranoia on the part of the employees. It also does not appropriately reflect the actual performance of the employee, but rather how that employee arbitrarily ranks against his/her co-workers. Microsoft ought to focus less on the bureaucratic politics of the business, and focus more on the distribution of decision rights. (Nohria, 1991)  Much like it did with the development of the business groups, Microsoft ought to empower the mangers with the freedom to rank their employees how they see fit.

References

Daft, R. (2007). "Fundamentals of Organizational Structure." Organization Theory and Design (9th ed.), pp. 88-125 (Chapter 3)

EichenWald, K. (2012, August). How Microsoft Lost Its Mojo: Steve Ballmer and Corporate America’s Most Spectacular Decline | Vanity Fair. Vanity Fair. Retrieved September 29, 2012, from http://www.vanityfair.com/business/2012/08/microsoft-lost-mojo-steve-ballmer

Gould,M., & Campbell, A. (2002). "Do You Have a Well Designed Organization?" Harvard Business Review.

Nohria, N. (1995). "Note on Organizational Structure." Harvard Business School.