After three decades, Microsoft finally has woken up.
The world's largest software maker has announced an end to its widely criticized business practice of treating its teams like separate, competing companies. CEO Steve Ballmer is unifying his many scattered divisions into four main departments, declaring in a memo to his 90,000 employees yesterday: "We are rallying behind a single strategy as one company — not a collection of divisional strategies."
The pernicious organizing strategy at Microsoft is the reason that the company hasn't realized its full potential. I never understood how a company whose mission statement is "to help people realize their full potential" could have such a narrow-minded approach to its own workings. In pitting its employees and divisions against one another, Microsoft churned out lines of disparate products and conflicting visions for years.
At its worst, this strange way of operating meant ceding the tablet market to Apple. Microsoft had built an e-reader prototype in 1998. But Bill Gates – the software genius and terrible manager who originated these woes — quashed the e-reader because it didn't look like the Windows operating system. The two divisions didn't collaborate. The project ended.
Microsoft divisions are insular islands. They have their own brands and strategies: there's Bing, the search engine, Windows phones, the dearly departed Zune (the ill-fated Mp3 player), and of course Xbox. Microsoft's gaming console didn't fully integrate with Windows until recently.
The lack of cohesion doesn't just dilute the brand, it harms corporate culture. The Microsoft Office team is notorious for failing to communicate. It's no surprise that the latest version of the company's signature productivity suite doesn't match the look and feel of Windows 8, the company's latest platform.
Microsoft's performance review process is another outgrowth of internal strife. It involves a crippling practice called "stack ranking," which forces each division manager to designate a certain number of team members as top performers, average and poor, even if all did a stellar job.
This is a company that attracts the brightest minds in its field, but its management style has workers focused on saving their hides, not innovating. Balmer's rallying cry for newfound cohesion must mean an end to these damaging practices if the company wants to beat its nimble competitors at Apple and Google.
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