Microsoft is one of the wealthiest and most successful companies in the world.

Even more important,

from a human resource perspective, is the fact that Microsoft is an employee-driven organization. While
other organizations base their success on better manufacturing techniques, or better technology,
Microsoft's success is based on the effectiveness of their employees. Essentially, Microsoft value their
staff and realize the importance of their staff. This focus on employees may, in the future, expand to all
organizations. Microsoft then, is worth studying as an example of best practice in human resource
management.
This study will focus on Microsoft's employee management methods including how they recruit and how
they retain their staff. By looking at how Microsoft operate, there is opportunity for other organizations
to consider how they manage their employees and to consider whether their staff are also valued.
Firstly, the study will present information on the human resource practices at Microsoft. Secondly, the
study will analyze these practices with a view to showing why they are effective.

HUMAN RESOURCE MANAGEMENT AT MICROSOFT

Recruitment and Selection - In the Beginning
Bill Gates is the driving force for Microsoft and from the beginning of the company he believed in
recruiting extremely intelligent staff, favoring intelligence over experience, "his preference for hiring
extremely intelligent, not necessarily experienced, new college graduates dated from Microsoft's startup days, when he and cofounder Paul Allen recruited the brightest people they knew from school - their
smart friends'" (Bartlett 1).
From the beginning Gates realized that his employees were his greatest assets, shown by his quotes
including "it's the effectiveness of our developers that determines our success" and "take our 20 best
people away, and I will tell you that Microsoft will become an unimportant company" (Bartlett 2).
Microsoft's recruitment strategies reflect their philosophy. They sought the smartest and the most
driven people and did so aggressively, as Steve Ballmer says "whenever you meet a kick-ass guy, get
him" (Bartlett 2).
The recruitment strategies in the beginning 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" (Bartlett 2). Experience was not required
and it was in fact, preferred that new employees had no experience.
Once selected, these students had to undergo a thorough selection process. The first stage was an
interview "by at least 3, and sometimes up to 10, Microsoft employees" (Bartlett 2).
These interviews were designed not to test knowledge, but to test "thought processes, problem-solving
abilities, and work habits" (Bartlett 2). Technical interviews are described as being focused mainly on
problem-solving, with interviewers posing problem scenarios. To test the composure of the candidate
and also their creative problem-solving skills, unexpected questions were also included. Two examples

of these questions given are "how many times does the person use the word the' in a day" and
"describe the perfect TV remote control" (Bartlett 2).
After the interview, interviewers would e-mail their decision on the interviewee with the words Hire' or
No Hire' and comments on the problem area, the future interviewers would then use these comments
to further investigate whatever issues there were with the interviewee (Bartlett 3). This interviewing
process was essentially a make or break' one, where interviewees were pushed to their limits, if they
thrived and survived this meant they would also thrive and survive in the Microsoft working
environment.
After this series of interviews, if the majority of interviewers were favorable the interviewee would
finally meet with their manager and this manager would make a final hire/no hire decision. The very last
step is an interview by someone outside the hiring group, this person is independent and so unbiased in
their opinion. This person is meant as a final check that the person is a good Microsoft person and also
to prevent managers from hiring the wrong people because they have a need to fill a certain position
(Bartlett 3).
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.

Recruitment and Selection - Later Stages

Microsoft retained the same basic principles as they 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 continued to be active rather than passive, with Microsoft head hunting' the
best staff. These staff were found, monitored and recruited from other companies by over 300
recruiting experts, "once someone had been identified as hard core' - Microsoft's euphemism for the
kind of highly talented and driven people they sought - the pursuit was relentless, if subtle. Regular
telephone calls at discreet intervals, conversations at industry conventions, invitations to formal dinners
- recruiting team members employed every means possible to keep the lines of communication open"
(Bartlett 9).
Microsoft also took advantage of breaking opportunities such as company layoffs, one example is with
the AOL down size, "when we heard AOL was downsizing Netscape's operations in the valley, we
assembled a team to identify the best talent and go knocking on doors" (Bartlett 10).

Employee Satisfaction and Loyalty

Microsoft attempted to cater to the needs of its employees from the beginning. Recognizing that the
majority of employees were just out of college, the Microsoft company operated like a campus. The
former director of human resources describes this saying, "how do you make young kids who had never
been away from home - or only as far as college - comfortable? We wanted to keep the atmosphere at
work one they were somewhat familiar with, and also make sure it gave them a sense of social

belonging" (Bartlett 4). This environment also included every employee having their own office they
were free to decorate as they please and the provision of subsidized food and drink (Bartlett 4).
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" (Bartlett 6).
It is noted that few employees leave the organization by dismissal, with the majority leaving voluntarily
(Bartlett 10). Concern over high attrition rates in the 1990s led to surveys to find the cause of the
problem and for changes to be implemented. One of the major changes was the requirement for top
management to coach lower levels, assisting in their development by doing so. This became known as
turning over the keys' (Bartlett 11). This is important because it allows people an opportunity to
develop further. Also critical to the changes was a new focus on empowering people and of defining
clear goals. These changes were all designed to increase employee satisfaction and commitment to the
organization, while maintaining the same spirit the small company began with.

Employee Rewards
In the early days Gates was a firm believer that employee ownership was critical in raising motivation
and employee retention, in lieu of high salaries he offered employees equity (Bartlett 7). Once listed on
the stock exchange, this continued, with the company offering stock options to employees based on
performance.
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 (Bartlett 7). Performance goals
employees were measured against were specific measurable ones, these performance objectives
shortened to SMART: Specific, Measurable, Attainable, Results-based, and Time-bound (Bartlett 2). This
formal review system also included more common evaluations by managers to ensure no unexpected
deviations. The system also included the process of employees evaluating themselves, these selfevaluations then being sent to the manager who does their own evaluation. The employee and manager
then meet to discuss the review (Bartlett 8).
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.

ANALYSIS OF HUMAN RESOURCE MANAGEMENT AT MICROSOFT

Recruitment and Selection
It is reported that companies must be aware of where they are going in the future and how the current
configuration of human resources relates to this (Noe et al., Ch.5).
As we have seen, Microsoft employ different recruitment practices than many organizations based on
their need for the very best people. Microsoft actively recruit suitable employs 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 important source of competitive
advantage. Microsoft use human resources for competitive advantage, basing their 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. Based on the importance placed on having the best people in the industry,
their aggressive head hunting' techniques are justified.
What is most crucial here is that Microsoft's recruitment practices meet their human resource needs. It
is an important sign of the focused approach of Microsoft, with their actions always leading towards
their 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
(Noe et al., Ch.5). 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.
This is an effective method, as it can be ascertained, that if the employee is successful in the selection
process, they will be successful within the organization.

Employee Motivation
McNamara says that "the key to supporting the motivation of your employee is understanding what
motivates each of them." The important thing about Microsoft is that they employ people who
specifically will be motivated by the environment they provide. They do not employ skilled people and
expect them to be motivated, they employ intelligent and driven individuals and give them the
environment and the opportunity to develop beyond their current level. The fit between employee and
organization is important to motivation and this is what Microsoft ensures.
A recent 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 (Schermerhorn 395). 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 persons need to be self-fulfilled. It is
described that the way to achieve this is to "provide people with opportunities to grow, be creative, and
acquire training for challenging assignments and advancement" (Daft 530). 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.

One employee of Microsoft describes this saying "the only way to achieve here is to push the envelope
of what you can do. Every day try to do better. Work smarter. Work harder. Innovate more. People are
focused 100% on performing their job as successfully as possible (Bartlett 5). 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.

Employee Loyalty and Satisfaction

We have seen that empowering employees is one of the new approaches being utilized by Microsoft. It
is noted that empowering employees requires a culture that reflects this (Billsberry 292). In the
Microsoft case we see that a change of culture is actually the reasoning behind the introduction of
empowerment, suggesting that the change is considered and will be successful.
Employee loyalty and satisfaction is also assisted by Microsoft's consideration of its employees. We saw
that in the early days, the company largely consisted of young graduates and the company built a
culture around the needs of this group of young graduates. This process has continued, with Microsoft
always attempting to cater for the needs of its employees.
The latest attempt is by providing greater opportunity for younger employees, by having older
employees coach them.
Three aspects of tasks that affect job satisfaction are job complexity, degree of physical strain and
perceived value of the task (Noe et al., Ch.10). 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.
This issue can also be looked at in terms of an employee's role. There are three factors associated with
roles: role ambiguity, role conflict and role overload (Noe et al., Ch.10). Role ambiguity is kept low by
Microsoft because of the consistency in the culture and in what is required, role conflict is also kept low.
Role overload is kept high, with employees pushed to their limits. In most organizations this would be a
concern, but Microsoft's awareness of this means that they specifically seek employees who will react
well with role overload.

Employee Rewards
In Ideas That Will Shape the Future of Management Practice' (Bohl, Luthans, Hodgetts & Slocum)
human resources is 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.
As we have seen, Gates recognized the importance of his people from the beginning and this is reflected
in the reward systems, that not only rewards for current achievement but rewards stocks to those that
are seen as valuable future assets of the company. This can be seen as a prime example of the focus on

a partnership, those that are seen as being valuable to the company, are rewarded with shares that will
increase in value even as that person assists in moving the company forward.
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
(Daft 15). 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 path,
allowing those with technical skills to advance as technical experts, just as those with conceptual skills
advance as managers.
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.