Microsoft To Show Employees the Money (Not the Stock)

We introduce this topic here today not to dig up a tired reference from a mediocre movie that's nearly 15 years old but instead to discuss a topic of interest to everybody in the Microsoft "ecosystem": how much Microsoft employees get paid.

Why, you might ask, should that matter to you, the partner? Well, as we've written in this space before, and as readers have told us many times over the years, Microsoft is not the destination company it used to be. The phrase that's floating around now is that Microsoft is a place to have worked rather than a place to be. The company's recent and ongoing execudus seems to support that line of thinking.

Part of the reason why Microsoft is old news is that it's just plain old. In a market in which even Google is starting to look long in the tooth, Microsoft is rapidly drifting past cougar phase and becoming a spinster. There's more to Microsoft's recruiting and retention struggles than just avant-garde technology and hipster street cred, though. There's another issue in play: money.

For years, Microsoft offered the promise of stock options constantly poised to explode in value. Base compensation was OK, but Microsoft stock was the real draw for many recruits. Well, the problem there is that Microsoft's stock price has basically been stagnant for the last two years (and really for about the last five, at least). So, those stock options aren't very attractive anymore, and base pay isn't that great, either. Better for young minds to run to Facebook, for instance, and get in on the ground (or maybe second or third) floor or something that's both cool and still poised to pop financially in years to come.

There's an argument that Microsoft has missed some big changes in technology because it hasn't had the talent to develop, say, a great tablet or a competitive mobile operating system, or find a way to really harness social networking. Redmond churns and churns and ends up spinning out mediocrity -- or, in the case of tablets for consumers, nothing -- because it just doesn't have the people to keep up with its rivals, or so the story goes. Granted, Microsoft has never been much of a leader -- more of a follower-then-conqueror -- in the industry, but Redmond's silence or disappointing efforts on several key technology fronts continues to be unusual and disappointing.

Finally, Steve Ballmer and his leadership team (no one can charge them with not being deliberate) are looking to reverse that trend. They might not be able to make Microsoft cool again, but they can make working there more lucrative. They announced this week that they're planning on raising pay at the company, specifically for employees working in fast-moving areas of technology (sorry, Dynamics team). Microsoft is also going to increase performance-based incentives.

But here's the real kicker: Microsoft is going to start paying employees more in cash and less in stock options. The company is taking a positive step to remove one of the least appealing aspects of working there. That's good news for partners and any other creatures in Microsoft's "ecosystem" who desperately want the company to catch up to some of its more technologically progressive rivals.

Of course, dumping stock for cash won't solve Microsoft's coolness problem or make it a more attractive employment destination than some sexy start-up. But doling out money -- real money -- is never a bad way to attract talent. Plus, this seems like some sort of tacit admission on Microsoft's part that it really does have a problem with trying to increase its stock price and its value to shareholders.

This kind of self-awareness is rare in Redmond these days; Microsoft has become in many ways a delusional company full of people who still think that just because Microsoft introduces something, whatever that thing is will come to dominate the market eventually. Clearly, that's not the case anymore. The '90s are over. There's a whole generation that barely remembers where the phrase "show me the money" came from. Maybe an infusion of young talent armed with bigger paychecks will provide some fresh perspective and create some better products in Redmond. And then maybe those stock options will end up being really valuable again.

How attractive do you think Microsoft is as a place to work compared to other companies in the industry? Send your thoughts to [email protected].

Posted by Lee Pender on April 21, 2011