Microsoft Compensation and Rewards Management Study

Submitted to: Miss Sabeen Iram

Submitted by: Sleem Younas 10022120-046
Aqeel Zahoor 10022120-040
Wasim Abbas 10022120-033
Bilawal Husain 10022120-078
Department: Business Administration
BBA (Az) Semester 8
th
section
University of Gujrat
City Campus
2014




Microsoft Corporation is a software company based in Redmond Washington.
Microsoft flagship products are the Windows operating system, is the single most
popular operating system for home desktop use. Its other desktop products namely
Microsoft Office, Internet Explorer and Windows Media Player, are either bundled
directly with the Windows operating system, or are often sold together with
Windows as preinstalled software on new computer systems. Additionally, the
company manufactures and sells computer hardware such as keyboards and mice
and owns or possesses interest in several content distribution channels such as
MSNBC the MSN Internet portal, and the Microsoft Encarta electronic
encyclopedia.
Microsoft Windows operating system started life as an optional addition to the
MS-DOS operating system. The idea of a graphical user interface was pioneered
by Apple Computer's, Apple II and Macintosh. However due to prior work with
IBM Microsoft successfully convinced the hardware giant to ship Microsoft
Windows preinstalled on IBM personal computers.
Our Commitment to Our Customers
At Microsoft, we're motivated and inspired every day by how our customers use
our software to find creative solutions to business problems, develop breakthrough
ideas, and stay connected to what's most important to them.
We run our business in much the same way, and believe our eight business
divisions offer the greatest potential to serve our customers. They are:
I. Interactive Entertainment Business:
Key entertainment experiences that span gaming, music and video across
multiple screens, including Xbox 360, Xbox LIVE the controller free Kinect for
Xbox 360 and Xbox Music and Video, as well as PC and mobile interactive
entertainment.
II. Microsoft Business Solutions
A portfolio of Microsoft Dynamics products and services, as well as Microsoft
Health Solutions.
III. Microsoft Office Division
Productivity, collaboration and enterprise social products and services,
including Office, Yammer, Exchange, SharePoint, Project, Visio, Perceptive Pixel,
and Microsofts speech technology investments.
IV. Online Services Division
Microsofts search, portal, advertising and personal communications services,
including online information offerings such as Bing and the MSN portals and
channels.
V. Server and Tools Division
Microsoft infrastructure software, developer tools and cloud platform, including
products such as Windows Server, SQL Server, Visual Studio, System Center and
the Windows Azure Platform.

VI. Skype
A division of Microsoft enabling communications from the living room to the
board room, through its consumer and enterprise products Skype and Lync.
VII. Windows & Windows Live Division
All Windows businesses, including Windows, Windows Live and Internet
Explorer.
VIII. Windows Phone Division
Microsoft software and services for Windows Phones worldwide.
We are committed long term to the mission of helping our customers realize their
full potential. Just as we constantly update and improve our products, we want to
continually evolve our company to be in the best position to accelerate new
technologies as they emerge and to better serve our customers.
How Compensation & Rewards management helps Microsoft in achieving its
objectives?
Microsoft, with more than $70 billion in global sales and net income in
excess of $22 billion annually, is one of the worlds leading technology companies
and has maintained its position as a pioneer and industry leader. Microsoft
occupies a unique space within the technology sphere, competing for talent against
other global technology leaders with significant talent acquisition resources, as
well as against smaller tech startups that promise employees the freedom to
innovate and the possibility of a lucrative payoff should the startup succeed.


Performance Management and Reward History of Microsoft Corporation

Microsoft Through all these years uses different C&R strategies to enhance the performance of
not only in business but also in developing and using the best talent. Microsoft strategies towards
it objectives alignment, their internal external alignment, employees contribution and
administration and highly unique. In 2013 Microsoft use all its previous strategies in a new way
that help them in achieving organizational objectives with the help of these 5 major key points
objectives alignment, their internal external alignment, employee contribution and
administration.
During the tech boom of the late 1990s, the number one compensation strategy was deploying
stock options. However after the technology crash of the early 2000s and the subsequent loss in
value of many tech stocks including Microsofts this strategy had to be re-evaluated. In 2006 the
company implemented the myMicrosoft system shifting the focus from stock options to stock
awards.
In 2011, Microsoft implemented a new model that aimed to further simplify its rewards system
and differentiate the firm in the market. Its one rating, one reward principle introduced a clear
link between an employees performance rating and his or her rewards, helping make this
relationship clear to employees.
Most recently, in November 2013, Microsoft announced dramatic changes to its performance
approach to better align with the goals of its One Microsoft strategy. This fundamentally new
approach to performance and development eliminates ratings and therefore the clear connection
to rewards and provides managers and leaders with flexibility to allocate rewards in the manner
that best reflects the performance of their teams and individuals.
Giving Stock Option
Lead with bonuses
Rewards based on performance
Evaluate individual and managerial performance, compensation based evaluation
Providing better salary option than market value
Attract newly graduate talent through talent management by offering them high salary
and motivate them through giving autonomy to develop something unique that never
happen before.
ATTRACTING AND RETAINING CRITICAL TALENT THROUGH
REWARD SEGMENTATION
TALENT SEGMENTATION
Technology is a hugely competitive industry when it comes to talent, and it is also a very
wealthy industry. Many companies have enormous resources at their disposal to lure top talent
and invest heavily in their development. Companies must be willing and able to pay a premium
salary for attracting and retaining this talent, or risk losing them to a competitor. But although
organizations may be able to justify high-level investment in critical talent, they first need to
define what critical talent is and what it means to them specifically.
Critical talent refers to the high performers in an organization who consistently outperform
expectations and whose skills are integral to the companys strategic direction and future
projects. Microsoft sought to implement a compensation scheme that allowed the company to
maximize its rewards spend by targeting individuals in the organization who have maximum
impact on the business. To achieve this, Microsoft needed to identify its critical talent
understanding where they are located in the business and how their work aligns with overall
strategy.
Microsoft uses a sophisticated approach to collect and assess relevant market data for its roles
in most of the countries in which it operates. The company examined market data trends over
time to identify roles and areas where the market price is increasing at a faster rate than in the
rest of the market, providing visibility on where pressure exists in the market and in certain
countries. For example, salaries for software engineers are increasing significantly faster than in
the market in general and even just within IT indicating that there is a market demand for
software engineers and companies will likely pay a premium to acquire this talent.
Microsoft organized these data into pyramids that allowed them to view the structure of each
group and the composition of workers and then compare this to its competitors via aggregated
research. This provided a clear view of where Microsofts most vulnerable employees were
(those attractive to competitors) and where the company needed to invest in order to attract,
motivate, engage and retain talent.
Engineering & Research employees represent roughly one third of the companys workforce and
to attract and retain them company must need to acquire their loyalty so rewards are necessary
for this. Microsoft evaluated the concentration of critical talent at all career levels in this group
but realized the distribution of employees at each level was not optimal considering the structure
and composition of its key competitors workforces and Microsofts strategic objectives.
Microsoft also removed some of the obstacles preventing the company from finding quality
talent beyond a select pool of candidates, giving greater latitude to the hiring manager to make
decisions outside set hiring guidelines to secure the right candidates.
Microsoft also sought to improve its appeal to new college graduates and promote itself as an
ideal place to start a career. It put in place a process through which it could deliver a monetary
check to a candidate upon acceptance of a job offer, creating excitement and enhancing its
reputation and appeal via word of mouth. As a result of these and other measures, acceptance
rates for graduate positions have never been higher.
Turning its attention to existing E&R employees, Microsoft sought to recognize the unique and
critical contribution this group makes to the business by compensating them accordingly. The
company introduced an E&R specific salary structure that is higher than for other groups. This
rate is driven by market data and, where roles are identified as overpaid compared to market, the
salary structure is revised to ensure it is competitive without going overboard. Microsoft also
doubled the E&R promotion budget to better focus on early-career workers and provide
additional promotional opportunities for all of the E&R employees.
Key talent awards:
Microsoft sought to reward employees across the board in a way that motivated them to
deliver their best results and outcomes, and to promote retention in critical talent areas and better
drive successful outcomes. Giving an opportunity to hire employees to do something unique and
motivate them in a sense that they can do it. Just give your best to that. This help in generating a
new talent for the next 10 years for Microsoft Corporation.

PRACTICAL IMPLICATIONS AND OUTCOMES

Microsoft recognized four practical implications that can be leveraged by other organizations
across a range of industries that are looking to optimize their rewards spend.
First a company must identify its critical talent and ensure that this identification aligns with
strategic goals. This helps identify where investment needs to be made so budgets can be
allocated accordingly.
Secondly Regular evaluation of reward options and investments is crucial to ensure that
compensation is having the desired effect.
Third Companies must also track employee demographics to identify where employees are in
their career and note any potential attrition issues or concerns.
Finally, fourth it is important to measure actual outcomes against initial insights.
Adhering to these principles facilitates growth and development, as you are likely to have the
right staff on hand when you need them most, and the required skills and motivation in-house to
adapt to emerging market trends and opportunities.
Microsoft strategies to deal with External Environment
Microsoft, with over $ 70 billion in global sales and net income in excess of $ 22 billion a year,
is one of the leading technology companies in the world and has maintained its position as a
pioneer and industry leader in enterprise.
Microsoft employs about 100,000 people across 191 offices worldwide and manages a diverse
portfolio. Historically, many of these products work almost entirely as separate businesses. This
has created a complex environment in which the company needed to attract, retain, reward and
motivate a specific group, while maintaining equity compensation in all divisions. Under the new
strategy "One Microsoft" of the company some of this complexity is being addressed,
recognizing that any organization as diverse as Microsoft worldwide still face challenges in
implementing performance solutions and rewarding. This complexity has led the team to define
four key Microsoft to simplify and guide their programmers reward principles: distinctiveness,
differentiation, market competitiveness, and accountability for results.
Accountability for results is an extension of a strong culture of performance pay Microsoft
(which seeks to recognize and reward employees for doing their best work and business results)
and simultaneously attract and retain key talent by delivering the highest compensation to high
performance employees. To ensure that this compensation promotes the competitiveness of the
market, Microsoft is based primarily on data from the relevant market rewards and understand
how they compare with those of key competitors.
In 2011, Microsoft launched a new model that sought to further simplify its system of rewards
and differentiate the company in the market. His one vote, one reward" principle introduced a
clear link between performance rating and an employee rewards, helping to make this clear
relationship to employees. The rendering of accounts manager was the crux of the system. All
these changes were made with the intention to increase the attraction and retention of critical
talent, and recognize and reward outstanding performance across the enterprise
The health and life insurance
Flexible Spending Accounts (for health care and dependent day care)
Disability coverage
Short and long term
Insurance long term care
Employee Purchase Plan
Financial education seminars
Tuition Assistance
Paid vacation and holidays
Discounts on products
Personal and family counseling
Wellness programs
Onsite Gyms.
Threats and how they are coping with them
Illegality (Piracy):

Competing with pirated versions of its own software is hard for Microsoft, Steve Ballmer
(CEO) said at a Strategic Update meeting. "Windows license number one market share. Number
two market share goes to Windows pirated, or unlicensed. That's a competitor that's tough to
beat, they've got a good price and a heck of a product, but we're working on it."
Microsoft pursues pirates with some vigor, spending time, money and energy trying to reduce
their market share. But it's a fight it knows it can never win, and one that doesn't have a huge
impact on its business anyway. Sure, some of the pirated software represents lost sales, but many
unlicensed users especially in developing countries would most likely switch to open source
software if the only alternative was having to pay for Microsoft's wares. As Ballmer clearly
understands, demand is bound to be artificially high when the price of pirated software is zero.
Competitors (Linux):
Microsoft sees Linux as a much more significant competitor, even though its share of the
desktop OS market is small. Here's why: "I think the dynamic with Linux is changing
somewhat," Ballmer said at the meeting. "I assume we're going to see Android-based, Linux-
based laptops, in addition to phones. We'll see Google more as a competitor in the desktop
operating system business than we ever have before."
This statement is quite revealing in that it shows Microsoft's general fear that Google is out to get
it is becoming more concrete: that Google is going to try to use Linux to do much more
significant damage to Microsoft's businesses than it has managed to do so far. As yet its Chrome
browser (a platform for future web services?) and its cloud-based applications such as Gmail,
Google Calendar and Google Docs, which compete (in a mild way) with Outlook and Office
have had almost no impact on Microsoft. But Google taking a lead with Android Linux could
make a far bigger impact on the desktop than any of the more traditional Linux players have
been able to so far.
Microsoft is also worried about Linux because of its success in the data center, where its share of
the server market, at a little below 20 percent, is significant. It's these worries that prompted
Microsoft to warn anyone who cared to listen that Linux infringed its intellectual property and to
mutter darkly about legal repercussions. Last week these mutterings turned into a lawsuit
launched against Tom alleging patent violation relating to the company implementation of the
Linux kernel.
These same worries were behind Microsoft cozying up to Novell, giving it hundreds of millions
of dollars in exchange for support certificates it can give or sell to customers who use Novell's
SUSE Linux to help it fight Red Hat. It's a kind of divide and conquer' strategy on the server side
of the business, though it doesn't seem to be working very well: Despite the help from Microsoft,
Novell's Linux business was down 42 percent in the first fiscal quarter of this year (ending
January 31st.) By contrast, at the end of December Red Hat reported revenue up 22 percent in its
third quarter.
Macintosh:
Microsoft's only other competitor on the desktop is Apple. "I think depending on how
you look at it, Apple has probably increased its market share over the last year or so by a point or
more, said Ballmer. And a point of market share on a number that's about 300 million is
interesting. It's an interesting amount of market share, while not necessarily being as dramatic as
people would think ..."
Which is a polite way of saying that in Microsoft's opinion Apple is not really a competitor
worth worrying about. Its desktop market share is beginning to fall back after a strong couple of
years, and with no presence in the server room it doesn't pose a threat in the way that Linux does.
Basically, Microsoft is saying it intends to ignore Apple like a wasp at a picnic, and with any
luck it will eventually buzz off.
It's a message that appears to come from the very top of the company, but one that does have
unfortunate consequences: Apple's consumer goodies are forbidden fruit for the Gates clan, Bill's
wife Melinda told Vogue magazine recently. "There are very few things that are on the banned
list in our household. But iPods and iPhones are two things we don't get for our kids ... Every
now and then I look at my friends and say, 'Ooh, I wouldn't mind having that iPhone,'" she
laments.
Suggestion for Compensation and Rewards
As Microsoft holding large amount of share in the software business that why it is said to be as a
big fish in business.
Microsoft attract candidates by offering them large amount of salaries, they can also
attract them by evaluating them in a sense that if a newly hired employee or already
working employees have any new idea company must listen to him and after checking
complete feasibility of that project or idea company must support him to promote his
work to success.
Setting compensation and rewards on new innovation bring a lot of new proposals in
company that can help organization survive in competing environment.
Providing a proper working environment that support all the workers in their working
field with open communication style. Sharing knowledge with one another
Microsoft as performing business in highly technological environment, they must design
compensation and rewards management for especially for all the departments. Even they
already made compensation plans for E&R.
If a new innovation is created by any employee they if that idea is feasible then company
must gave overall hold of that project to the idea creator but monitored by higher
management and in case of success a proper compensation in form of WIN WIN
situation given.
Employee Reward Strategies Range from Basic to Complex
Take a walk in my shoes video for the staff showing what one employee did during a
typical day.
Roast, Toast and Boast lunches in which managers would roast a long-time employee,
toast new hires and boast about a company accomplishment.
Do it yourself titles. Employees were allowed to create their own titles
Say thank you frequently
Create a learning attitude (learn from mistakes)
Motivate XBOX team in Microsoft as the former XBOX ONE boss left the company
4 ways to reward and motivate employees:
Four points very much important to be considered by HR department in Microsoft in
evaluating employees performance and setting rewards standards
1. Establish an action plan:
You must always reward top performance and must be as clear as possible to your staff
on just what you consider top performance. You must have a plan and culture that motivates
less-than-top performers to strive to do better. Communication is the key ingredient for the entire
program.
2. Be creative in determining rewards:
Prepare rewards as god as required. If previous rewards system help then continues that
but must search for alternative rewards option. Rewards must be given and planned according to
the behavior and results of employee efforts
3. Give employee rewards your personal touch:
Part of the recognition factor in rewarding employees is your involvement. If you want to
send your employees out for lunch, then make the arrangements yourself.
4. Group rewards may be appropriate, but don't undermine individual
initiative:
One final issue is deciding the scope of your compensation plan. In a bid to be fair and to
keep the program simple, it may seem logical to offer group rewards and to leave individual
rewards for things such as base pay. However, that can emphasize group achievement at the
expense of individual initiative. With that in mind, Birol says that a plan should ideally operate
on two levels, covering both individuals as well as the group as a whole. "You make one-third
based on the individual's tangible performance, and the remaining two-thirds based on the group
accomplishing and achieving whatever it was charged with doing," Birol says. "From there, you
have everyone rank their peers.











References
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competitors-for-2013-7000001816/ [Accessed 12 Jun. 2014].
Datamation.com, (2014). Top 3 Threats to Microsoft: Apple, Linux, Pirating - Datamation.
[online] Available at: http://www.datamation.com/columns/article.php/3809496/Top-
3-Threats-to-Microsoft-Apple-Linux-Pirating.htm [Accessed 12 Jun. 2014].
Microsoft.com, (2014). Microsoft Case Study: Microsoft Project Server 2010 - I ntel
Corporation. [online] Available at: http://www.microsoft.com/casestudies/Microsoft-
Project-Server-2010/Intel-Corporation/Intel-Will-Save-Annually-While-Making-
Project-Management-More-Flexible/4000010276 [Accessed 12 Jun. 2014].
12 Ways to Optimize Your Employee Benefits Program
[Online]http://www.businessmanagementdaily.com/glp/32166/Employee-Benefits-
Program.html
Nick Rettenmyer is the director of Global Compensation Programmes at Microsoft.
[Adobe file]ATTRACTING AND RETAINING CRITICAL TALENT THROUGH
REWARDS SEGMENTATION AT MICROSOFT
Microsoft Business HUB
http://www.microsoftbusinesshub.com/News_and_Updates/4_ways_to_reward_and
_motivate_employees