Employee Motivation and Retentions Strategies at Microsoft Corporation


The development of technology has led to the increased use of computers throughout the world. The majority of tasks that modern organizations and individuals perform are based on computers, and this indicates the will of people to invest heavily in these technologies in order to improve effectiveness and productivity of their operations. Although there are numerous players in the computer software industry, there is no doubt that Microsoft is a leading progressive and reliable software producing company. Since its establishment in 1975, Microsoft Corporation has transformed into a global empire in the computer-related industry (Chakraborty, 2010). Taking advantage of its colossal resources and highly qualified employees, the corporation has managed to produce a wide array of products that correspond to the existing and emerging computing needs of its clients worldwide. Over the past couple of decades, the presence of the company became stronger and it aims at distinguishing itself from its competitors, however it needs to face an array of challenges. This case analysis is focused on the case study titled “Employee Motivation and Retentions Strategies at Microsoft Corporation” and the goal is to understand the issues highlighted in the case study, and provide an analysis report that will indicate the problems identified, measures taken, results, and recommendations.


Microsoft Corporation, a swiftly growing company, faced a lot of challenges in the 1990s and 2000s. Its growth was exponential, and, as a result, there was a need to ensure that it did not lose focus on the human resources as it focused on product development and profit generation. During this period, the company was one of the best employers, and it managed to attract and retain the best talents (Chakraborty, 2010). However, it started facing operational challenges relating to antitrust lawsuits within the USA and in the EU, which had a negative impact on its business. In addition, as the company expanded, its work culture started changing leading to challenging work environment, risk taking, and innovativeness. Additionally, the functionality of the company became more bureaucratic with all the key decisions requiring the approval of Gates or Ballmer. It led to the employees` frustration, and ultimately, it greatly affected the performance of the company.

One of the problems faced by the company`s human resource department was a law suit in 2001 filed by 7 African American employees accusing the company of racial discrimination in terms of performance evaluations, compensation, promotions, and wrongful termination. One of the worst issues that any company can face entails law suit filed by its employees in regard to how they are treated. It is not only an internal problem, but it also causes numerous issues for the company in the employment market as it becomes an unattractive employer. In the modern world where globalization is rampant, every organization is expected to have employees from all walks of life, and racial discrimination could be a major problem in relation to attracting and retain top talent. Therefore, this was a major problem that Microsoft was facing, and it needed to work on a solution sooner than later. In addition to the HR-related problems, negative publicity received by the company led to the decline of the company’s stock value. Although the management was vocal about the company’s policy on inclusivity and diversity, there was some level of damage already done and this could not be reversed.

The other problem faced by the company in relation to the employees was the struggle to retain and motivate them, especially in the early 2000s. At the time, one of the most attractive programs for the employees was stocks options, which gave the employees the right to buy a number of shares at a discount rate and using a look-back option. However, in 1999 the value of the stocks began declining steadily. Within less than five months, the stock value declined by 44.1 percent (Chakraborty, 2010). As a result, the value of the stocks owned by the employees was declining, and as such, it ceased being attractive to the employees. In addition, deterioration of the company`s stock value and performance led to a decline in its appeal to employees, as well as, their motivation. It is also a period when some of the employees, including those holding senior management positions, decided to quit or make changes and accept offers from rival corporations. As the company continued to develop, the frustration among the employees continued to grow. Some of human resources problems faced by the organization included:


As highlighted above, some of the company`s African American employees complained of unfair treatment in the workplace, and filed a court case. In the case, they highlighted various issues including lower salaries as compared to their Caucasian counterparts with similar qualifications. They also received no bonuses or other incentives received by their white counterparts to boost employees` performance (Chakraborty, 2010). Additionally, they received low ratings during their performance assessments, which denied them an opportunity to be accepted when applying for higher positions. Additionally, the same performance assessments were used by the management to expel the employees who underperformed. In order to replace the fired employees, the company opted to get contractual workers; however, they also complained about unfair treatment and were unable to perform in accordance to the set standards. As a result, even such employees opted to quit before the end of their contracts.

Hiring Problems

The company suffered from a high number of employees leaving unexpectedly, and it had to intensify its efforts as to replace them. The same problems making the employees leave were not solved and made it difficult for the company to retain new employees. The employment market was already aware of the problems that existed within the organization, which made Microsoft unappealing as an employer. Even with the excellent opportunities provided by the company some of potential employees backed out as they feared to be unable to bear hostile workplace. Moreover, new graduates started to hesitate when presented with an opportunity to join the company, and opted to start their career at rival companies.

Strict Leadership

Although Microsoft was seen as a company that provided some of the best benefits to its employees, it was also known to be notoriously tough. The management wanted its employees to provide excellent results at all times since they were working for one of the best corporations. The company`s culture relied on perfectionism, and employees faced extensive penalties and sanctions when making mistakes (Chakraborty, 2010). The employees were obliged to fully concentrate on their work regardless of any personal problems. The underperformers were either expelled or threatened with expulsion. On the other hand, the best performers were not rewarded but asked to constantly improve their performance. The work environment became frustrating and pressure-filled, and employees` morale reduced significantly.

Increase in Attrition Rates

As Microsoft Corporation gained a great share of the market and became more successful, the management became obsessed with maintaining higher profits, and they reduced the focus on the improvement of the employees` skills (Chakraborty, 2010). As a result, the employees did not experience positive developments in their careers for a long time, including lack of promotions and salary increments. As a result, the company lost a great number of trusted employees, including top leaders, leading to a significant surge in attrition rates. The latter doubled, and the organization finally took the appropriate actions to solve the problem.

Politics and Bureaucracy

As the company continued with global expansion it needed to recruit more people to deal with expansion operations. However, as the workforce increased, it also became an obstacle to many employees who wanted to attain their career goals. The longer it took for the employees to get promoted, the more frustrated they became and some of them even decided to seek alternative employment elsewhere. Some of the employees who were left behind as their colleagues got promoted felt frustrated. However, most of the decisions were still made by the top management, thus, there was need to have their approval prior to making new decisions.


Communication Improvement

When Steve Ballmer was appointed as CEO, he decided that it was important to improve the communication lines between the company’s HR department and the employees so as to make sure that their demands, needs and sentiments were addressed in an effective manner (Chakraborty, 2010). Unlike in the earlier years when the employees had no one to rely on, Ballmer ensured the improvement of the employees` wellbeing. In order to succeed, Ballmer decided to hire Lisa Brummel as a new HR Chief. It was an excellent decision as it restored the employees` trust in the management. The human resource department is an essential part of an organization as it ensures there is a constant flow of information between employees and top management. Through the enhancement of HR department’s effectiveness, company can manage to resolve the existing conflicts and issues, as well as the ones that can emerge in future. HR department can always work as a mediator when there is tension between the management and the workforce. The idea should be implemented as the empowerment of the HR department can assist in ensuring that the employees of Microsoft have friends they can depend on, which can be effective in alleviating frustrations whenever their needs and demands are not met. Improving the communication can also lead to strengthening of relations between the management and the employees with the HR department serving as a mediator.

Improved System of Appraisal and Compensation

The organization also changed its performance appraisal system from forced ranking to commitment rating. The forced ranking has a problem as it had biasness in its determination of the employees who would get the incentives for the exceptional performance. Through the commitment rating, the employees received equal opportunities to get incentives depending on their performance. It was another important decision made by the company as it helped to solve the issues that had raised controversies in regard to unfair performance evaluation. It can be easily understood why African American employees felt that the forced ranking was biased, as only some employees eligible to receive incentives. Through the use of the commitment rating, the employees had higher chances of receiving more stock options as they demonstrated their eagerness to perform better.

Increased Employee Benefits

In regard to benefits received by employees, the HR department implemented numerous changes, including transportation, health benefits, child care benefits, food availability etc. As a result, the company became more appealing to the current and potential employees. Through the integration of employee benefits and addition of the competitive salaries, the company`s management believed that the employees` commitment and motivation to their work would be rekindled. It is a decision, which can be considered a practical and logical solution to the problem of high attrition rates that had been witnessed within the organization, and had damaged the public image of the company. It is the only feasible solution that would assist in changing the minds of the employees who could be thinking about leaving the company. Once they receive the information about new benefits provided by the company, it becomes easier for them to make a decision to keep their jobs. Although the benefits may be deemed small, when combined with other changes within the organization, they are appealing to the employees. The benefits have the potential to reinvigorate and motivate them.

New Workplace Setups

New workplace designs, selected by the employees, indicated their need to feel comfortable at work. The decision was implemented in order to ensure that the employees felt that they were valued. The aim was to let employees have their ideal work stations. The organization came up with designs based on the employees` characters, thus enabling the employees to work in the most ideal environment, leading to the improvement of job performance. The idea was brought by the need to instill teamwork and camaraderie among the workers, which were essential for the organization to succeed. It is a decision that may be deemed as irrelevant, but it is actually a brilliant decision as it shows that the organization is interested in employee satisfaction. This would improve the unity and cooperation among the employees, as well as make them feel valuable to the company. It is also a move that shows that the leadership of Microsoft identified the fact that they could not attain the company`s goals and expect the achievements without the workers` contributions. The workplace designs are expected to assist the employees regain their trust in the organization and their fellow colleagues. The decision will make the employees appreciate the efforts of the management and it will strengthen their relationship with colleagues.


The case indicates that Microsoft recognized the problems related to the policies that were unfavorable to its employees. The company`s main focus was on more profits instead of the employees` wellbeing. The main reason why most of the employees left the company is due to the feeling that they were no longer needed, and the company did not appreciate their efforts. They had the feeling that they would not get any career growth if they continued working at Microsoft. It is essential for the company to learn from its mistakes, as well as, those of other industry players, for example IBM, in order to retain its employees and attract new ones.

One of the areas that the company should focus on regards training of its employees in order to improve their skills. As the employees grow and develop within the organization, they need to be prepared to deal with the issues and challenges that their new tasks may bring. In order to ensure that they succeed, Microsoft should ensure that the employees receive adequate training; this will also make the employees understand that their efforts contribute to the goals of the organization. It also shows that the organization intends to retain them as it is preparing them for the future, and they also feel valuable to the company.

The company should also focus on reducing its perfectionist culture in order to reduce the pressure put on the employees. Although the employees enjoy working in a profitable organization, sometimes they feel the pressure intensify and they may be demotivated if they do not attain perfectionism. It is one of the reasons why the employees may opt to move to a smaller company where there is less pressure and they can try new ways of doing things without the fear of failing. Working in a perfectionist work environment may lead to the employees being unable to perform using their full potential due to fear they may fail and the future consequences. The company should adopt an organizational culture, which will encourage the workers to perform to their full potential, enjoy their success, and learn from their mistakes. It is a move that would assist in pressure reduction, thus leading to increased motivation and retention of the workforce.

Although Microsoft is one of the ideal workplaces for any employee, the case study indicates the problems that it has faced in relation to employee motivation and retention. The implementation of the steps implemented by the company did improve the situation, but it can be further improved through the implementation of the recommendations stated above.