Reference no: EM132206939

WHY MICROSOFT’S MEASUREMENT SYSTEM LED TO PROBLEMS WITH GROUP PERFORMANCE From the beginning, Microsoft organized its software engineers into small work groups and teams so that team members could cooperate, and learn from and help each other, and so speed the development of innovative software. Each team works on a subset of the thousands of programs that together make up its Windows operating system and applications software that is loaded on over 90 percent of PCs today.82 In the past, much of Microsoft’s reward system was based on team performance; employees of successful teams that quickly developed innovative software received valuable stock options and other benefits. Microsoft’s team-based reward system encouraged team members to work together intensively and cooperate to meet team goals. At the same time, the contributions of exceptional team members were recognized; these individuals received rewards such as promotion to become the managers or leaders of new teams as the company grew. This reward system resulted in a continuous series of improved Windows operating and applications software such as Windows XP, Vista, 7 and its Office and Internet Explorer suites. Back in 2006, however, Microsoft ran into serious problems with the development of Vista, its last operating system, which had been scheduled to come out in the summer of 2006. Unforeseen delays put the project six months behind schedule, however, and when it was eventually launched in 2007, many analysts blamed the delays on Microsoft’s evaluation and reward system which had become primarily based on individual performance contributions they believed was now hurting team performance. As Microsoft expanded during the 2000s (it now employs over 60,000 people), it developed a rigid performance-evaluation system that became increasingly based on evaluating each team member’s individual performance. The manager of each team was expected to rate the performance of each team member on a scale of 2.5, 3.0, and so on to 5, the highest individual performance rating. Microsoft adopted this system to try to increase the perceived fairness of its evaluation system; however, employees still work principally in teams and the emphasis on individual performance hurt the way members of each team cooperated with each other. For example, team members became aware that they were in competition for the highest performance ratings, and so when confronted with a situation when they could help other team members— but this might hurt their own personal performance evaluations— they decided to behave self-interestedly—and this hurt overall team performance. Moreover, Microsoft is highly secretive about employees sharing information about their performance evaluations, current salaries, and the raises they receive. Indeed, employees are told not to share such information and can get fired if they share information.83 To make matters worse, the way team managers make these evaluations came also to be regarded as highly secretive and biased. Employees believed that when the managers of different teams met together to discuss which teams (as a unit) have achieved the highest level of performance, team evaluations are distorted by favoritism. The managers of the team leaders are felt to be influenced by how much a particular team leader supports him or her, so that personal assessments of the performance of each team leader—and thus each team—are biased by personal likes and dislikes. In other words, the performance-evaluation system came to be seen as highly political, meaning that each employee and each team came to perceive they were not being fairly evaluated—objectively by the results they achieved—but by the ability of an employee or team leader to “make the right pitch” to their respective bosses. So, team members increasingly pursued their own interests at the expense of team members.84 One team member, for example, commented that although she had received awards for good work, low performance evaluations from her current team leader had prevented her from moving to a new, more cohesive, and less political team. As you can imagine, when team members do not feel their personal performance contributions are recognized, and that team leaders are manipulating performance ratings for their own personal ends, teamwork does little to increase company performance. The performance gains that can be obtained from intensive cooperative interactions between employees are lost and team performance may decline if employees start to compete or pursue their own interests.85 Indeed, many of Microsoft’s best software engineers left to join rivals like Google and Yahoo! as a result of their failure to achieve the recognition they think they deserved at Microsoft.86 Clearly, when people work in teams, each team member’s individual contribution to the team and each team’s contribution to achieving the goals of the organization must be fairly evaluated. But, this is no easy thing to do.

1. In what ways could Microsoft involve group employees in evaluating the performance of their peers and their team leaders to prevent these problems from arising?

2. When individual team members felt unfairly treated, how could they have made their concerns known to their team leaders or to managers above to solve their feelings of inequity?

3. How could Microsoft devise a better system to evaluate each employee’s performance and each team’s performance?