It’s September. No surprise that my FB stream is full of Sr. Microsoft people announcing they are leaving the company.
— Charlie Kindel (@ckindel) September 28, 2012
I tweeted about a bunch of senior MS people announcing their departures from Microsoft on Facebook and got a bunch of questions from my followers about why this happens. Figured it was worth sharing my opinion on why.
There are four reasons:
- The general stock plan is set up so that stock is granted September 1. Stock grants vest over 4 years (the vesting schedule has changed over the years) and this means that large amounts of stock vest September 1.
- Annual bonuses are paid on September 15.
- The annual reviews are done and you are told “your numbers” sometime between late-August and September 15 (because you’ll see the results in your September 15 paystub). See my post “Got a 4? You Were Just Fired from Microsoft” for my thoughts on this.
- For consumer-facing products, fall is when products ship. This is due to a desire to get products into market for the holiday shopping season. When a product ships (e.g. Windows 8) everyone on the team who’s been head’s down over the summer lifts their heads and looks around for “What’s next?”.
The combination of these factors means that you will see a lot of people leave Microsoft in the fall (as I did).
Is it a good thing or a bad thing that these people are leaving?
From Microsoft’s perspective it can be both. Microsoft uses two terms to describe departures from the company: Good Attrition and Bad Attrition.
Good attrition means Microsoft felt the person leaving was no longer providing the desired value or there was an expectation they would not provide value in the future. Usually, but not always, this person would have gotten a 4 or 5 on their most recent annual reviews. Microsoft (like most companies) is not very good at forcing people out (it’s actually very hard to get fired from Microsoft).
Bad attrition means Microsoft valued the employee and is bummed they are leaving.
Senior managers are expected to drive 5-10% attrition (which is why the stack rank system sets the quota for 5s at 7%), but there’s actually no positive feedback loop to incent them to do it. I think a stack-rank system is appropriate for a large company; but this point was one my biggest gripes when I was a manager at Microsoft. The Microsoft system actually incents managers of high-performing teams to try to keep poor-performers around. Worse it provides an anti-incentive for firing them (if you have a high-performing team, you are not given credit for people you ‘managed out’ earlier in the year).
Of course, whether it’s good attrition or bad attrition is in the eye of the beholder. Frankly, when I see people like Bob Muglia leaving (he left last September) I see it as very, very bad attrition. Like the worst ever. Some of the recent announcements I’ve seen on my Facebook timeline made me think “Wow, that sucks for MS; that will leave a big hole.”
But there are some where I say “Its about time….I hope I don’t run into that person in some startup I’m involved in!”. Clearly good attrition.
I suspect most large companies have similar cycles. Microsoft’s is centered around it’s fiscal-year which starts July 1.
I think as much as it’s a sad thing for Sr. people it’s an interesting and motivating thing for us, juniors. We see that okay every year there are some empty senior positions that I can try fill. Other than the fresh blood that it comes to the company ranks, it makes Microsoft an interesting place for new graduates. But in the end what do know? I have not had my first annual review yet.
For the cost of developing an extraordinary ‘senior’, I’d agree that attrition at that level is just ‘bad’.
Playing devil’s advocate: You are talking about a sunk cost. Sunk costs are sunk and a business should never use them to justify a forward decision. http://en.wikipedia.org/wiki/Sunk_costs
I think the economic penalty comes into play if the senior talent that was invested in is now aligned in competition with your business. Look at all the talented and experienced folks now at Amazon, Google, Facebook, etc. that are now working on products that compete directly with Microsoft’s.
Anytime you let someone go you have to factor in the possibility – indeed probability in places like Seattle – that they could end up working for a competitor. Part of “good attrition” should be a conclusion that MS is better off and competitors not unduly helped. But you’re ignoring the other side of the coin. Keeping underperforming senior people in place has an even more direct impact on competition: it demotivates your high performers and up and comers. MS’s problems aren’t that it has “good attrition”. There are obvious cases where that’s necessary. The issue for MS is that too often what’s called “good attrition” has in fact been “bad attrition”, with more talented people leaving than the ones who remain.
Ah, it’s such a fun time of year. Yes, the whole review system at MSFT is loopy mcgoos. I don’t understand the forced curve on high performing teams. That a team which came in 60% under their targets got the same number of 1s and 2s to hand out as a team that was 60% over an already aggressive target is just bad for morale. Like you point out, you end up with managers who keep the Cs and Ds around so that they can absorb the punishment. It’s terrible career management for those folks, but the reduced self esteem inflicted as part of the process puts them in a spot where they are held captive by a bad review. There are groups at MSFT who will not interview a recipient of a 4. So much for the ability to rehab your review…
“it’s actually very hard to get fired from Microsoft”
For performance related cause, yes.
For running afoul of politics, no. It’s exceedingly easy. And performance in role is often ignored entirely.