Once upon a time, Microsoft employees made millions from the stock they were given, because of the company's constantly escalating stock price. Those days are long behind us. Microsoft has just recognized that getting company stock is no longer a motivation, and has instead shifted employee compensation towards cold, hard cash. It's a smart move.
Mary Jo Foley reports that Microsoft has overhauled its entire employee review system. It's a top-to-bottom change, including the way in which employees are rated annually.
But likely the most important part of the change is found in this paragraph of the memo Steve Ballmer sent out to company employees. Here's the excerpt taken from the full memo as reported on Foley's blog:
For all employees, we will shift a portion of stock award targets into base salary, providing more cash up front and obvious incremental employee value. Senior leaders will continue to have a large portion of their overall compensation in stock to ensure their compensation is heavily tied to the financial performance of the company.
Given that there's very little likelihood that Microsoft stock will soar anytime in the foreseeable future, it's a good move on Microsoft's part, and likely lead to less grumbling about pay.
Microsoft will also apparently give larger raises to those people who work on products where the competition is fierce, such as Bing, and less large raises to those where Microsoft has the market sewn up, such as Windows, according to Seattlepi. Here's what the newspaper says:
Employees who work on highly competitive products --- for instance, Windows Phone and Bing --- will get bigger raises than employees in less competitive areas, such as Windows, said a person familiar with the changes. And Microsoft will invest more in its early and mid-level R&D researchers.
This may seem unfair, but it's also the right move. It will mean that there will be more internal competition to work on products that Microsoft deems the most strategically important and that require the best engineers.
Will all this on its own solve any of Microsoft's myriad problems? Certainly not. But a motivated workforce is vital to tech success, and this may help.
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