Rewards - A Motivatingfactor at Microsoft Corporation

Rewards A motivating factor at Microsoft corporation
A motivating
factor at Microsoft
corporation
Page | 1
1.Introduction:
Motivation is the word derived from the word motive which means needs, desires, wants or drives
within the individuals. It is the process of stimulating people to actions to accomplish the goals. In the
work goal context the psychological factors stimulating the peoples behaviour can be - desire for
money,rewards,success,jobsatisfaction,team work etc.
Managing reward is largely about managing expectations what employees expect from their
employers in return for their contribution and what employers expect from their employees in return
for their pay and the opportunity to work and develop their skills. Expectorations are built into the
employment relationship, the starting point of which, from the rewards point of view, is an
undertaking by an employee to provide effort and skill to the employer, in return for which the
employer provides the employee with a salary or a wage.
The purpose of managing the system of rewards within the organisation is to attract and retain
the human resources the organisation needs to achieve its objectives. To retain the services of
employees and maintain a high level of performance, it is necessary to increase their motivation and
commitment. In effect the organisation is aiming to bring about an alignment of organizational and
individual objectives when the spotlight is on reward management.
Page | 2
2.Meaning and definition of Motivation:
Motivation is the word derived from the word motive which means needs, desires, wants or drives
within the individuals. It is the process of stimulating people to actions to accomplish the goals. In the
work goal context the psychological factors stimulating the peoples behaviour can be
desire for money
rewards
success
recognition
job-satisfaction
team work, etc
One of the most important functions of management is to create willingness amongst the employees to
perform in the best of their abilities. Therefore the role of a leader is to arouse interest in performance
of employees in their jobs. The process of motivation consists of three stages:
A felt need or drive
A stimulus in which needs have to be aroused
When needs are satisfied, the satisfaction or accomplishment of goals.
Therefore, we can say that motivation is a psychological phenomenon which means needs and wants
of the individuals have to be tackled by framing an incentive plan.
Page | 3
3.Characteristics Or Features of Motivation
Some important features of motivation may be brought out as follows:
1. Personal and Internal Feeling
Motivation is a psychological phenomenon, which is generated within an individual in the form of an

energetic force that drives him to behave or not to behave in certain ways. These are some
environmental and other forces that trigger these drives.
2. Art of Stimulating Someone Or Oneself
A manager can use motivation to inspire not only his subordinates, but to motivate himself also. For
self-motivation, he has to take following steps
He should set a goal for himself and should not close sight of it.
He should supplement his long term objectives with short-term goals.
He should learn a challenging task every year.
Page | 4
He should make his job a different one with a view to improving objectives for his position
and increasing his productivity.
He should develop an area of expertise by building on his strengths and developing his
weaknesses into strengths.
He should give himself the feedback and reward himself by celebrating his accomplishment.
3. Produces Goal Directed Behaviour
Motivation is closely intertwined with behaviour. As a Behavioural concept, it directs human

behaviour toward certain goals.
4. Motivation can be either Positive or Negative
Positive motivation is also known as Carrot Approach and includes use of additional pays, incentives,
praise possibility of becoming a permanent employee etc. Negative motivation is also called Stick
Approach and implies punishment, such as reprimands, threat of demotion, threat of termination, etc.
5. The Central Problem of Motivation is HOW
Motivation is necessary for successful achievement of goals. However, it is a complex process

because different employees have different needs, their motives are varied and needs and motivates
change from time to time. Moreover, motivation is partly logical and partly emotional. Further, people
satisfy their needs in many different ways. Hence, the central problem of motivation is how to inspire
such a typical group of individuals towards attainment of goals in a concerned manner.
6. Motivation is System Oriented
Motivation is the result of interplay among three sets of different factors:
Influences operating within an individual, for example, his needs, tensions, motives, values,
goals etc.
Influences operating within the organisation for example, its structure, technology, physical
facilities, various processes, the nature of job, advancement avenues etc.
Page | 5
Forces operating in the external environment, for example, society is culture, norms, values,
customs, government policy regarding the business of the enterprise etc.
7. Motivation is a Sort of Bargaining

Inducements from the side of the enterprise and contributions from the side of the employees.
8. Motivation is a complex phenomenon:

Motivation being an internal feeling cannot be observed directly. Since motives themselves are
dynamic, it further adds to complexity.
9. Motivation is different from Satisfaction
Motivation refers to the drive and effort to satisfy a want or goal. Satisfaction refers to the
contentment experienced when a want is fulfilled. In other words, motivation implies a drive toward
an outcome and satisfaction is the outcome already experienced.
Page | 6
4. Importance of Motivation in Modern Organisations
1. Productive use of resources:

Modem organisation work through physical, financial and human resources. The utilisation of
physical and financial resources depends on the willingness of people to work.
Motivation enables people to convert physical and financial resources into useful products. It helps
management to get the best out of human as well as non-human resources.
2. Increased efficiency and output:

Motivation enables people to work enthusiastically. Performance is a product of not merely ability to
do a task but the willingness to do the same with zeal and enthusiasm. Motivation bridges the gap
between the overall efficiency and output. This, ultimately, helps in reducing the cost of operation.
3. Achievement of goals:
Motivation causes goal directed behaviour. It helps people to move in a desired direction and earn
rewards. In organisations where managers try to understand the needs of employees and institute
appropriate incentive systems, accomplishment of goals in fairly easy. If people are not properly
motivated, no useful purpose can be served be planning, organising and staffing functions.
4. Development of friendly relationships:

Motivation brings employees closer to organisation. The needs of employees are met through
attractive rewards, promotional opportunities, etc. employees begin to take more interest in
organsiational work.
Their morals are high. They begin to think that the enterprise belongs to them and the interests of the
enterprise are their interests and there is no difference between them. This helps in developing cordial
relations between management and workers.
5. Stability in workforce:
Page | 7

Attractive motivational schemes satisfy the needs of employees. As a result, their commitment to
organisational work increases. Employees do their tasks loyally and enthusiastically, they are not
tempted to leave the organisation. This means reduced employee turnover. Further, satisfaction on the
job means reduced absenteeism.
Page | 8
5. Theories of Motivation:
1. Locke's Goal Setting Theory
Goal setting is a powerful way of motivating people, and of motivating yourself. The value of goal
setting is so well recognized that entire management systems, like Management by Objectives, have
goal setting basics incorporated within them. In fact, goal setting theory is generally accepted as
among the most valid and useful motivation theories in industrial and organizational psychology,
human resource management, and organizational behaviour.Dr Edwin Locke's pioneering research on
goal setting and motivation in the late 1960s. In his 1968 article "Toward a Theory of Task Motivation
and Incentives," he stated that employees were motivated by clear goals and appropriate feedback.
Locke went on to say that working toward a goal provided a major source of motivation to actually
reach the goal which, in turn, improved performance. This information does not seem revolutionary
to us some 40 years later. This shows the impact his theory has had on professional and personal
performance. In this article, we look at what Locke had to say about goal setting, and how we can
apply his theory to our own performance goals.Locke's research showed that there was a relationship
between how difficult and specific a goal was and people's performance of a task. He found that
specific and difficult goals led to better task performance than vague or easy goals. Telling someone
to "Try hard" or "Do your best" is less effective than "Try to get more than 80% correct" or
"Concentrate on beating your best time." Likewise, having a goal that's too easy is not a motivating
force. Hard goals are more motivating than easy goals, because it's much more of an accomplishment
to achieve something that you have to work for. A few years after Locke published his article, another
researcher, Dr Gary Latham, studied the effect of goal setting in the workplace. His results supported
exactly what Locke had found, and the inseparable link between goal setting and workplace
performance was formed. In 1990, Locke and Latham published their seminal work, "A Theory of
Page | 9

Goal Setting and Task Performance." In this book, they reinforced the need to set specific and difficult
goals, and they outlined three other characteristics of successful goal setting.
Locke and Latham's Five Principles

According to Locke and Latham, there are five goal setting principles that can improve our chances of
success:
Clarity.
Challenge.
Commitment.
Feedback.
Task complexity.
2.Vrooms Expectancy Theory:

Expectancy theory proposes that an individual will decide to behave or act in a certain way because
they are motivated to select a specific behavior over other behaviors due to what they expect the result
of that selected behavior will be In essence, the motivation of the behavior selection is determined by
the desirability of the outcome. However, at the core of the theory is the cognitive process of how an
individual processes the different motivational elements. This is done before making the ultimate
choice. The outcome is not the sole determining factor in making the decision of how to behave
Expectancy theory is about the mental processes regarding choice, or choosing. It explains the
processes that an individual undergoes to make choices. In the study of organizational behavior,
expectancy theory is a motivation theory first proposed by Victor Vroom of the Yale School of
Management.
"This theory emphasizes the needs for organizations to relate rewards directly to performance and to
ensure that the rewards provided are those rewards deserved and wanted by the recipients. Victor H.
Vroom (1964) defines motivation as a process governing choices among alternative forms of
voluntary activities, a process controlled by the individual. The individual makes choices based on
estimates of how well the expected results of a given behavior are going to match up with or
eventually lead to the desired results. Motivation is a product of the individuals expectancy that a
certain effort will lead to the intended performance, the instrumentality of this performance to
achieving a certain result, and the desirability of this result for the individual, known as valence In
1964, Vroom developed the Expectancy theory through his study of the motivations behind decision
Page | 10

making. His theory is relevant to the study of management. Currently, Vroom is a John G. Searle
Professor of Organization and Management at the Yale University School of Management.
The Expectancy Theory of Motivation explains the behavioral process of why individuals choose one
behavioral option over another. The theory explains that individuals can be motivated towards goals if
they believe that: there is a positive correlation between efforts and performance, the outcome of a
favorable performance will result in a desirable reward, a reward from a performance will satisfy an
important need, and/or the outcome satisfies their need enough to make the effort worthwhile. Vroom
introduces three variables within the expectancy theory which are valence (V), expectancy (E) and
instrumentality (I). The three elements are important behind choosing one element over another
because they are clearly defined: effort-performance expectancy (E>P expectancy), performanceoutcome expectancy (P>O expectancy)
Three components of Expectancy theory: Expectancy, Instrumentality, and Valence
a) Expectancy: Effort Performance (EP)
b) Instrumentality: Performance Outcome (PO)
c) Valence: V(R)
a) Expectancy: Effort Performance (EP)

Expectancy is the belief that one's effort (E) will result in attainment of desired performance (P) goals.
Self efficacy- the persons belief about their ability to successfully perform a particular
behavior. The individual will assess whether they have the required skills or knowledge
desired to achieve their goals.
Goal difficulty- when goals are set too high or performance expectations that are made too
difficult. This will most likely lead to low expectancy. This occurs when the individual
believes that their desired results are unattainable.
Perceived control - Individuals must believe that they have some degree of control over the
expected outcome. When individuals perceive that the outcome is beyond their ability to
influence, expectancy, and thus motivation, is low.
b)Instrumentality: Performance Outcome (PO)

Page | 11

Instrumentality is the belief that a person will receive a reward if the performance expectation is met.
This reward may present itself in the form of a pay increase, promotion, recognition or sense of
accomplishment. Instrumentality is low when the reward is the same for all performances given.
Another way that instrumental outcomes work is commissions. With commissions performance is
directly correlated with outcome (how much money is made). If performance is high and many goods
are sold the more money the person will make.
Factors associated with the individual's instrumentality for outcomes are trust, control and policies:
Trusting the people who will decide who gets what outcome, based on the performance, Control of
how the decision is made, of who gets what outcome, Policies understanding of the correlation
between performance and outcomes.
c) Valence V(R)
Valence: the value an individual places on the rewards of an outcome, which is based on their needs,
goals, values and Sources of Motivation. Influential factors include one's values, needs, goals,
preferences and sources that strengthen their motivation for a particular outcome.
Valence is characterized by the extent to which a person values a given outcome or reward. This is not
an actual level of satisfaction rather the expected satisfaction of a particular outcome.
The valence refers to the value the individual personally places on the rewards. -1 0 +1
-1= avoiding the outcome 0 = indifferent to the outcome +1 = welcomes the outcome
In order for the valence to be positive, the person must prefer attaining the outcome to not attaining it.
Valence is one behavioral alternative, where the decision is measured on the value of the reward.
The model below shows the direction of motivation, when behavior is energized:
Motivational Force (MF) = Expectancy x Instrumentality x Valence
When deciding among behavioral options, individuals select the option with the greatest amount of
motivational force (MF). Expectancy and instrumentality are attitudes (cognitions), whereas valence
is rooted in an individuals value system.
Examples of valued outcomes in the workplace include, pay increases and bonuses, promotions, time
off, new assignments, recognition, etc. If management can effectively determine what their employee
values, this will allow the manager to motivate employees in order to get the highest result and
effectiveness out of the workplace.
Page | 12
3. Porter Lawlers Model:

Porter and Lawler used Victor Vrooms expectancy theory as a foundation to develop their
expectancy model. Similar to Vrooms theory Porter and Lawler concluded that an
individuals motivation to complete a task is affected by the reward they expect to receive for
completing the task. However Porter and Lawler introduced additional aspects to the
expectancy theory.
Intrinsic and Extrinsic Rewards
Porter and Lawler categorised the reward as intrinsic and extrinsic
Intrinsic rewards are the positive feelings that the individual experiences from
completing the task e.g. satisfaction, sense of achievement.
Extrinsic rewards are rewards emanating from outside the individual such as bonus,
commission and pay increases.
Porter and Lawlers model suggested that an individuals view regarding the attractiveness
and fairness of the rewards will affect motivation.
Porter and Lawler said that motivation is also affected by
the individuals ability to perform the task and
their perception of the task
Page | 13
Actual performance in a job is primarily determined by the effort spent. But it is also affected by the
persons ability to do the job and also by individuals perception of what the required task is. So
performance is the responsible factor that leads to intrinsic as well as extrinsic rewards. These
rewards, along with the equity of individual leads to satisfaction. Hence, satisfaction of the individual
depends upon the fairness of the reward.
4.Adams Equity Theory
Balancing Employee Inputs and Outputs
Adams' Equity Theory calls for a fair balance to be struck between an employee's inputs (hard work,
skill level, tolerance, enthusiasm, and so on) and an employee's outputs (salary, benefits,
intangibles such as recognition,and so on).
Page | 14

According to the theory, finding this fair balance serves to ensure a strong and productive relationship
is achieved with the employee, with the overall result being contented, motivated employees.
Understanding the Theory
Adams' Equity Theory is named for John Stacey Adams, a workplace and behavioral psychologist,
who developed his job motivation theory in 1963. Much like many of the more prevalent theories of
motivation (such as Maslow's Hierarchy of Needs and Herzberg's Two-Factor Theory ), Adams'
Equity Theory acknowledges that subtle and variable factors affect an employee's assessment and
perception of their relationship with their work and their employer.
The theory is built-on the belief that employees become de-motivated, both in relation to their job and
their employer, if they feel as though their inputs are greater than the outputs. Employees can be
expected to respond to this is different ways, including de-motivation (generally to the extent the
employee perceives the disparity between the inputs and the outputs exist), reduced effort, becoming
disgruntled, or, in more extreme cases, perhaps even disruptive.
How to Apply the Adams' Equity Theory
It is important to also consider the Adams' Equity Theory factors when striving to improve an
employee's job satisfaction, motivation level, etc., and what can be done to promote higher levels of
each.
To do this, consider the balance or imbalance that currently exists between your employee's inputs and
outputs, as follows:
Inputs typically include:
Effort.
Loyalty.
Hard work.
Commitment.
Skill.
Ability.
Adaptability.
Flexibility.
Tolerance.
Determination.
Enthusiasm.
Page | 15
Trust in superiors.
Support of colleagues.
Personal sacrifice.
Outputs typically include:
Financial rewards (such as salary, benefits, perks).
Intangibles that typically include:
Recognition.
Reputation.
Responsibility.
Sense of achievement.
Praise.
Stimulus.
Sense of advancement/growth.
Job security.
While obviously many of these points can't be quantified and perfectly compared, the theory argues
that managers should seek to find a fair balance between the inputs that an employee gives, and the
outputs received.
And according to the theory, employees should be content where they perceive these to be in balance.
Page | 16
5.McClellands Theory of Needs:
Need theory, also known as Three Needs Theory, proposed by psychologist David McClelland, is a
motivational model that attempts to explain how the needsfor achievement, power, and affiliation
affect the actions of people from a managerial context. This model was developed in the 1960s soon
after Maslow's hierarchy of needs in the 1940s. McClelland stated that we all have these three types of
motivation regardless of age, sex, race, or culture. The type of motivation that each individual is
driven by life experiences and the opinions of their culture. This need theory is often taught in classes
concerning management or organizational behaviour.
Need for achievement
People who are achievement-motivated typically prefer to master a task or situation. They prefer
working on tasks of moderate difficulty, prefer work in which the results are based on their effort
rather than on anything else, and prefer to receive feedback on their work. Achievement based
individuals tend to avoid both high risk and low risk situations. Low risk situations are seen as too
easy to be valid and the high risk situations are seen as based more upon the luck of the situation
rather than the achievements that individual made.This personality type is motivated by
accomplishment in the workplace and an employment hierarchy with promotional positions
Need for affiliation

Page | 17

People who have a need for affiliation prefer to spend time creating and maintaining social
relationships, enjoy being a part of groups, and have a desire to feel loved and accepted. People in this
group tend to adhere to the norms of the culture in that workplace and typically do not change the
norms of the workplace for fear of rejection. This person favors collaboration over competition and
does not like situations with high risk or high uncertainty. People who have a need foraffiliation work
well in areas based on social interactions like customer service or client interaction positions.
Need for power
This motivational need stems from a person's desire to influence, teach, or encourage others. People in
this category enjoy work and place a high value ondiscipline. The downside to this motivational type
is that group goals can become zero-sum in nature, that is, for one person to win, another must lose.
However, this can be positively applied to help accomplish group goals and to help others in the group
feel competent about their work. A person motivated by this need enjoys status recognition, winning
arguments, competition, and influencing others . With this motivational type comes a need for personal
prestige, and a constant need for a better personal status.
Effect on management
McClelland's research showed that 86% of the population are dominant in one, two, or all three of
these three types of motivation. His subsequent research, published in the 1977 Harvard Business
Review article "Power is the Great Motivator", found that those in top management positions had a
high need for power and a low need for affiliation. His research also found that people with a high
need for achievement will do best when given projects where they can succeed through their own
efforts. Although individuals with a strong need for achievement can be successful lower-level
managers, they are usually weeded out before reaching top management positions. He also found that
people with a high need for affiliation may not be good top managers but are generally happier, and
can be highly successful in non-leadership roles such as the foreign service.
Page | 18
6. Managing Rewards: A motivating factor:

Managing reward is largely about managing expectations what employees expect from their
employers in return for their contribution and what employers expect from their employees in return
for their pay and the opportunity to work and develop their skills. Expectorations are built into the
employment relationship, the starting point of which, from the rewards point of view, is an
undertaking by an employee to provide effort and skill to the employer, in return for which the
employer provides the employee with a salary or a wage.
The purpose of managing the system of rewards within the organisation is to attract and retain
the human resources the organisation needs to achieve its objectives. To retain the services of
employees and maintain a high level of performance, it is necessary to increase their motivation and
commitment. In effect the organisation is aiming to bring about an alignment of organizational and
individual objectives when the spotlight is on reward management.
defined; rewards are the payments made to the employees as compensation for the services
rendered by them to the organisation. Compensation or remuneration is what employees receive in
exchange for their work in the enterprise, and Criffeth, Hom (2001) defined that compensation is the
benefits made to employees by employer for attracting and retaining personnel in the organisation.
Thus the concept of incentives / rewards implies increased willingness or motivation to work.
Reward strategy is the deliberate utilization of the pay system as an essential integrating
mechanism through which the efforts of various sub units and individuals are directed towards the
achievement of an organisation strategic objective, subject to internal or external constraints.
Contemporary compensation administration frequently embraces a strategic approach where the mix
and level of direct pay and benefits are chosen to reinforce the organisations overall strategic
objectives (Gomez-mejia, 1992). Integration among four basis policy decisions is required in the
design of a consistent compensation system (Milkovich and Newman, 1993). These decisions involve:
(i) the comparison of jobs within an organisation (Internal equity/internal consistency).
(ii) setting pay levels relative to competitors (External equity/External competitiveness).
(iii) adjusting pay for individual employees (pay for performance, rewards systems, skill based
pay design), and
(iv)
the administration of the compensation function (benefits administration, and benefits

communication).
Page | 19
Rewards and motivation:

Motivation is the economical stimulus that causes us to act. The stimulus may be a
need or a drive that energizes certain behaviours. At work, motivation is a combination of all factors
in our working environment that lead to positive or negative efforts. If we understand what motivates
us, we are more likely to achieve our personal and professional goals. Likewise, if organizations know
how to motivate employees, they can increase productivity. This ability to boost production is
increasingly important as organizations compete in the global market. While all companies make
some efforts to motivate employees, a growing number of organizations are introducing new
strategies including different compensation packages, as a means of motivating todays workers
(Dalton, Hoyle and Watts, 2003). Thus rewards and motivation are interrelated.
Page | 20
7. Types of rewards:
It is generally recognized that people may receive two major categories of
rewards from work. One is intrinsic rewards, which are rewards that are internal to workers and which
they give themselves. Intrinsic rewards include self-esteem, a sense of accomplishment, and a feeling
of growth or development of special skills and talents. Many of these rewards are desired from the
work itself. Intrinsic rewards are related to the workers perception of the job and, hence, are affected
by job design, intrinsic rewards may be called as non-financial/non-monetary rewards.
A second category is extrinsic rewards, which are external to workers and are given by the
organisation or some one else. Extrinsic rewards include direct and indirect compensation. Direct
incentives are those rewards which are directly involved with the money as wages and salaries, bonus,
commission, individual and group incentives, profit sharing and stock options. Indirect incentives are
those rewards which are related to employees benefits or perquisites. It consists of protection
programmes, paid time off, health insurance plans, child care benefits and employee discounts
(Henderson, 1994). Extrinsic rewards may be called as monetary or financial rewards.Being an
extrinsic reward, compensation is more easily controlled by managers than are intrinsic rewards.
Intrinsic rewards satisfy hierarchical needs of higher level such as social, esteem and self actualization
needs, and are real motivators or satisfiers where as extrinsic rewards satisfy lower level needs
(Maslow 1951)
Page | 21
8.Objectives of Reward System:

The study of different patterns of rewards/wage payment is important both from the academic as well
as practical points of view, Wages are among the major factors in the economic and social life of any
community. In an economic sense, wages represent payment of compensation in return for work done.
In a sociological sense, wages characterize stratification of occupational categories. In a psychological
sense, wages satisfy needs directly and indirectly in response to changing employee aspirations. It
constitutes one of
several elements of job satisfaction and is instrumental for the satisfaction of some needs more
than others. In a legal sense, the term wages/salaries has acquired various connotations, depending on
the context and has become a subject of special law in many countries. It is most important to an
industrial worker because his standard of living and that of his family depends upon his earnings.
Rewards support new developments which help in the introduction and effective use of
sophisticated management techniques. For example JIT (Just-in-time), FMS (flexible manufacturing
system), cellular manufacturing, CIM (computer integrated manufacturing) and other applications of
information technology such as integrated in business system and point-of-event, date capture
systems. Further, it helps to achieve continuous improvement in levels of quality and customer service
by supporting such processes as TQM (total quality management).
In order to achieve the business goals and the desired work culture, organisations provide
employees a range fixed and variable compensation, which include fixed cash, short term incentives
and long term incentives, recognition programmes and the work environments. Guaranteed pay to the
employees is essentially a fixed cost to the business, while pay that is variable and depends on the
individual and group performance is essentially related to the business results. This movement in the
mix of pay signifies a shift from viewing employee as a cog in the cost weel to viewing the employees
as a group of people who have come together to achieve some common goals.
Page | 22
9.About Microsoft Company
Microsoft
Corporation is
an
American multinational
corporation headquartered
in Redmond, Washington, that develops, manufactures, licenses, supports and sells computer
software, consumer electronics and personal computers and services. Its best known software
products are the Microsoft Windows line of operating systems, Microsoft Office office suite,
and Internet Explorer web browser. Its flagship hardware products are Xbox game console and
the Microsoft Surface series of tablets. It is the world's largest software maker measured by
revenues. It is also one of the world's most valuable companies.
Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975 to develop and
sell BASIC interpreters for Altair 8800. It rose to dominate the personal computer operating
system market with MS-DOS in the mid-1980s, followed by the Microsoft Windows. The company's
1986 initial public offering, and subsequent rise in its share price, created an estimated three
billionaires and 12,000 millionaires from Microsoft employees. Since the 1990s, it has increasingly
diversified from the operating system market and has made a number of corporate acquisitions. In
May 2011, Microsoft acquired Skype Technologies for $8.5 billion in its largest acquisition to date.
As of 2013, Microsoft is market dominant in both the IBM PC-compatible operating system
and office software suite markets (the latter with Microsoft Office). The company also produces a
wide range of other software for desktops and servers, and is active in areas including internet
Page | 23

search (with Bing), the video game industry (with the Xbox, Xbox 360 and Xbox One consoles), the
digital services market (through MSN), and mobile phones (via the Windows Phone OS). In June
2012, Microsoft entered the personal computer production market for the first time, with the launch of
the Microsoft Surface, a line of tablet computers.
History
197283: Founding and company beginnings
Paul Allen and Bill Gates (r.) on October 19, 1981, in a sea of PCs after signing a pivotal contract.
IBM called Microsoft in July 1980 inquiring about programming languages for its upcoming PC
line; after failed negotiations with another company, IBM gave Microsoft a contract to develop the OS
for the new line of PCs.
Paul Allen and Bill Gates, childhood friends with a passion in computer programming, were seeking
to make a successful business utilizing their shared skills. In 1972 they founded their first company
named Traf-O-Data, which offered a rudimentary computer that tracked and analyzed automobile
traffic data. Allen went on to pursue a degree in computer science at the University of Washington,
later dropping out of school to work at Honeywell. Gates began studies at Harvard. The January 1975
issue of Popular Electronics featured Micro Instrumentation and Telemetry Systems's (MITS) Altair
8800 microcomputer. Allen noticed that they could program a BASIC interpreter for the device; after
a call from Gates claiming to have a working interpreter, MITS requested a demonstration. Since they
didn't actually have one, Allen worked on a simulator for the Altair while Gates developed the
interpreter. Although they developed the interpreter on a simulator and not the actual device, the
interpreter worked flawlessly when they demonstrated the interpreter to MITS in Albuquerque, New
Mexico in March 1975; MITS agreed to distribute it, marketing it as Altair BASIC. They officially
established Microsoft on April 4, 1975, with Gates as the CEO. Allen came up with the original name
of "Micro-Soft," the combination of the words microcomputer and software, as recounted in a 1995
Page | 24

Fortune magazine article. In August 1977 the company formed an agreement with ASCII Magazine in
Japan, resulting in its first international office, "ASCII Microsoft". The company moved to a new
home in Bellevue, Washington in January 1979.
Microsoft entered the OS business in 1980 with its own version of Unix, called Xenix. However, it
was MS-DOS that
solidified
the
company's
dominance.
After
negotiations
with Digital
Research failed, IBM awarded a contract to Microsoft in November 1980 to provide a version of
the CP/M OS, which was set to be used in the upcoming IBM Personal Computer (IBM PC). For this
deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products, branding it
as MS-DOS, which IBM rebranded to PC DOS. Following the release of the IBM PC in August 1981,
Microsoft retained ownership of MS-DOS. Since IBM copyrighted the IBM PC BIOS, other
companies had to reverse engineer it in order for non-IBM hardware to run as IBM PC compatibles,
but no such restriction applied to the operating systems. Due to various factors, such as MS-DOS's
available software selection, Microsoft eventually became the leading PC operating systems vendor.
The company expanded into new markets with the release of the Microsoft Mouse in 1983, as well as
a publishing division named Microsoft Press. Paul Allen resigned from Microsoft in February after
developing Hodgkin's disease.
198494: Windows and Office

While jointly developing a new OS with IBM in 1984, OS/2, Microsoft released Microsoft Windows,
a graphical extension for MS-DOS, on November 20, 1985. Microsoft moved its headquarters to
Redmond on February 26, 1986, and on March 13 the company went public; the ensuing rise in the
stock would make an estimated four billionaires and 12,000 millionaires from Microsoft employees.
Due to the partnership with IBM, in 1990 the Federal Trade Commission set its eye on Microsoft for
possible collusion; it marked the beginning of over a decade of legal clashes with the U.S.
Government. Microsoft announced the release of its version of OS/2 to original equipment
manufacturers (OEMs) on April 2, 1987; meanwhile, the company was at work on a 32bit OS, Microsoft Windows NT, using ideas from OS/2; it shipped on July 21, 1993, with a
new modular kernel and
the Win32 application
programming
interface (API),
making porting from 16-bit (MS-DOS-based) Windows easier. Once Microsoft informed IBM of NT,
the OS/2 partnership deteriorated.
In 1990, Microsoft introduced its office suite, Microsoft Office. The software bundled separate office
productivity applications, such as Microsoft Word and Microsoft Excel. On May 22 Microsoft
launched Windows
3.0 with
streamlined user
interface graphics
and
improved protected
mode capability for the Intel 386 processor. Both Office and Windows became dominant in their
Page | 25

respective areas. Novell, a Word competitor from 19841986, filed a lawsuit years later claiming that
Microsoft left part of its APIs undocumented in order to gain a competitive advantage.
On July 27, 1994, the U.S. Department of Justice, Antitrust Division filed a Competitive Impact
Statement that said, in part: "Beginning in 1988, and continuing until July 15, 1994, Microsoft
induced many OEMs to execute anti-competitive "per processor" licenses. Under a per processor
license, an OEM pays Microsoft a royalty for each computer it sells containing a particular
microprocessor, whether the OEM sells the computer with a Microsoft operating system or a nonMicrosoft operating system. In effect, the royalty payment to Microsoft when no Microsoft product is
being used acts as a penalty, or tax, on the OEM's use of a competing PC operating system. Since
1988, Microsoft's use of per processor licenses has increased."
19952005: Internet and the 32-bit era

Bill Gates giving his deposition in 1998 for the United States v. Microsoft trial. Once the U.S.
Department of Justice 1993 took over from the Federal Trade Commission, a protracted legal
wrangling between Microsoft and the department ensued, resulting in various settlements and possible
blocked mergers. Microsoft would point to companies such as AOL-Time Warner in its defense.
Following Bill Gates's internal "Internet Tidal Wave memo" on May 26, 1995, Microsoft began to
redefine its offerings and expand its product line into computer networking and the World Wide
Web. The company released Windows 95 on August 24, 1995, featuring pre-emptive multitasking, a
completely new user interface with a novel start button, and 32-bit compatibility; similar to NT, it
provided the Win32 API. Windows 95 came bundled with the online service MSN, and for
OEMs Internet Explorer, a web browser. Internet Explorer was not bundled with the retail Windows
95 boxes because the boxes were printed before the team finished the web browser, and instead was
included in the Windows 95 Plus! pack. Branching out into new markets in 1996, Microsoft and NBC
Universal created a new 24/7 cable news station, MSNBC. Microsoft created Windows CE 1.0, a new
OS designed for devices with low memory and other constraints, such as personal digital assistants. In
October 1997, the Justice Department filed a motion in the Federal District Court, stating that
Microsoft violated an agreement signed in 1994 and asked the court to stop the bundling of Internet
Explorer with Windows.
Bill Gates handed over the CEO position on January 13, 2000, to Steve Ballmer, an old college friend
of Gates and employee of the company since 1980, creating a new position for himself as
Chief Software Architect. Various companies including Microsoft formed the Trusted Computing
Platform Alliance in October 1999 to, among other things, increase security and protect intellectual
property through identifying changes in hardware and software. Critics decry the alliance as a way to
enforce indiscriminate restrictions over how consumers use software, and over how computers
Page | 26

behave, a form of digital rights management; for example the scenario where a computer is not only
secured for its owner, but also secured against its owner as well. On April 3, 2000, a judgment was
handed down in the case of United States v. Microsoft, calling the company an "abusive monopoly";
[33]
it settled with the U.S. Department of Justice in 2004. On October 25, 2001, Microsoft
released Windows XP, unifying the mainstream and NT lines under the NT codebase. [34] The company
released the Xbox later that year, entering the game console market dominated by Sony and Nintendo.
[35]
In March 2004 the European Union brought antitrust legal action against the company, citing it
abused its dominance with the Windows OS, resulting in a judgment of 497 million ($613 million)
and to produce new versions of Windows XP without Windows Media Player, Windows XP Home
Edition N and Windows XP Professional N.
200610: Windows Vista, mobile, and Windows 7
CEO Steve Ballmer at the MIX event in 2008. In an interview about his management style in 2005, he
mentioned that his first priority was to get the people he delegatesto in order. Ballmer also emphasized
the need to continue pursuing new technologies even if initial attempts fail, citing the original
attempts with Windows as an example.
Released in January 2007, the next version of Windows, Windows Vista, focused on features, security,
and a redesigned user interface dubbed Aero. Microsoft Office 2007, released at the same time,
featured a "Ribbon" user interface which was a significant departure from its predecessors. Relatively
strong sales of both titles helped to produce a record profit in 2007. The European Union imposed
another fine of 899 million ($1.4 billion) for Microsoft's lack of compliance with the March 2004
judgment on February 27, 2008, saying that the company charged rivals unreasonable prices for key
information about
its workgroup and back office servers. Microsoft stated that it was in compliance and that "these fines
are about the past issues that have been resolved". 2007 also saw the creation of a multi-core unit at
Microsoft, as they followed in the steps of server companies such as Sun and IBM.
Bill Gates retired from his role as Chief Software Architect on June 27, 2008, while retaining other
positions related to the company in addition to being an advisor for the company on key
projects. Azure Services Platform, the company's entry into the cloud computing market for Windows,
launched on October 27, 2008. On February 12, 2009, Microsoft announced its intent to open a chain
of Microsoft-branded retail stores, and on October 22, 2009, the first retail Microsoft Store opened
in Scottsdale, Arizona; the same day the first store opened, Windows 7was officially released to the
public. Windows 7's focus was on refining Vista with ease of use features and performance
enhancements, rather than a large reworking of Windows.
As the smart phone industry boomed beginning in 2007, Microsoft struggled to keep up with its
rivals Apple and Google in providing a modern smart phone operating system. As a result, in 2010,
Page | 27

Microsoft revamped their aging flagship mobile operating system, Windows Mobile, replacing it with
the new Windows Phone OS; along with a new strategy in the smart phone industry that has Microsoft
working more closely with smart phone manufacturers, such as Nokia, and to provide a consistent
user experience across all smart phones using Microsoft's Windows Phone OS. It used a new user
interface design language, codenamed "Metro", which prominently used simple shapes, typography
and iconography, and the concept of minimalism.
Microsoft is a founding member of the Open Networking Foundation started on March 23, 2011.
Other founding companies include Google, HP Networking, Yahoo, Verizon, Deutsche Telekom and
17 other companies. The nonprofit organization is focused on providing support for a new cloud
computing initiative called Software-Defined Networking. The initiative is meant to speed innovation
through simple software changes in telecommunications networks, wireless networks, data centers
and other networking areas.
Following the release of Windows Phone, Microsoft underwent a gradual rebranding of its product
range throughout 2011 and 2012the corporation's logos, products, services, and websites adopted
the principles and concepts of the Metro design language. Microsoft previewed Windows 8, an
operating system designed to power both personal computers and tablet computers, in Taipei in June
2011. A developer preview was released on September 13, and was replaced by a consumer preview
on February 29, 2012. On May 31, 2012, the preview version was released.
On June 18, 2012, Microsoft announced the Microsoft Surface, the first computer in the company's
history to have its hardware made by Microsoft. On June 25, Microsoft announced that it was paying
US$1.2 billion to buy the social network Yammer. On July 31, 2012, Microsoft launched
the Outlook.com webmail service to compete with Gmail. On September 4, 2012, Microsoft
released Windows Server 2012. On October 1, Microsoft announced its intention to launch a news
operation, part of a new-look MSN, at the time of the Windows 8 launch that was later in the month.
On October 26, 2012, Microsoft launched Windows 8 and the Microsoft Surface. Three days
later, Windows Phone 8 was launched. To cope with the potential for an increase in demand for
products and services, Microsoft opened a number of "holiday stores" across the U.S. to complement
the increasing number of "bricks-and-mortar" Microsoft Stores that opened in 2012.
On March 29, 2013, Microsoft launched a Patent Tracker. The Kinect sensor device was upgraded for
the 2013 release of the eighth-generation Xbox One and its capabilities were revealed in May 2013.
The new Kinect uses an ultra-wide 1080p camera, it can function in the dark due to an infrared sensor,
it employs higher-end processing power and new software, it can distinguish between fine movements
(such as a thumb movements), and the device can determine a user's heart rate by looking at his/her
face. Microsoft filed a patent application in 2011 that suggests that the corporation may use the Kinect
camera system to monitor the behavior of television viewers as part of a plan to make the viewing
Page | 28

experience more active. On July 19, 2013, Microsoft stocks suffered its biggest one-day percentage
sell-off since the year 2000 after its fourth-quarter report raised concerns among the investors on the
poor showings of both Windows 8 and the Surface tablet; with more than 11 percentage points
declining Microsoft suffered a loss of more than USD 32billion. For the 2010 fiscal year, Microsoft
had five product divisions: Windows Division, Server and Tools, Online Services Division, Microsoft
Business Division, and Entertainment and Devices Division.
Businesses
Windows Division, Server and Tools, Online Services Division
The company's Client division produces the flagship Windows OS line such as Windows 8; it also
produces the Windows Live family of products and services. Server and Tools produces the server
versions of Windows, such as Windows Server 2008 R2 as well as a set of development tools
called Microsoft Visual Studio, Microsoft Silver light, a web application framework, and System
Center Configuration Manager, a collection of tools providing remote-control abilities, patch
management, software distribution and a hardware/software inventory. Other server products
include: Microsoft SQL Server, a relational database management system, Microsoft Exchange
Server, for certain business-oriented e-mail and scheduling features, Small Business Server, for
messaging and other small business-oriented features; and Microsoft BizTalk Server, for business
process management.
Microsoft provides IT consulting ("Microsoft Consulting Services") and produces a set of certification
programs handled by the Server and Tools division designed to recognize individuals who have a
minimal set of proficiencies in a specific role; this includes developers ("Microsoft Certified Solution
Developer"), system/network analysts ("Microsoft Certified Systems Engineer"), trainers ("Microsoft
Certified Trainers") and administrators ("Microsoft Certified Systems Administrator" and "Microsoft
Certified Database Administrator"). Microsoft Press, which publishes books, is also managed by the
division. The Online Services Business division handles the online service MSN and the search
engineBing. As of December 2009, the company also possesses an 18% ownership of the cable
news channel MSNBC without any editorial control; however, the division develops the channel's
website, msnbc.com, in a joint venture with the channel's co-owner, NBC Universal.
The Commons, located on the campus of the company's headquarters in Redmond
The Microsoft Business Division produces Microsoft Office including Microsoft Office 2010, the
company's
line
of
office
software.
The
software
product
includes Word (a
word
frequently
used
processor), Access(a relational

database program), Excel (a spreadsheet program), Outlook (Groupware,
Page | 29

with Exchange Server), PowerPoint (presentation software), Publisher (desktop publishing software)
and Sharepoint. A number of other products were added later with the release of Office 2003
including Visio, Project, MapPoint, InfoPath and OneNote. The division also develops enterprise
resource planning (ERP) software for companies under the Microsoft Dynamics brand. These
include: Microsoft Dynamics AX, Microsoft Dynamics NAV, Microsoft Dynamics GP, and Microsoft
Dynamics SL. They are targeted at varying company types and countries, and limited to organizations
with under 7,500 employees. Also included under the Dynamics brand is the customer relationship
management software Microsoft Dynamics CRM, part of the Azure Services Platform.
Entertainment and Devices Division
The
Entertainment
and
Devices
Division
produces
the Windows
CE OS
for embedded
systems and Windows Phone for smart phones. Microsoft initially entered the mobile market through
Windows CE for handheld devices, eventually developing into the Windows Mobile OS and now,
Windows Phone. Windows CE is designed for devices where the OS may not directly be visible to the
end user, in particular, appliances and cars. The division also produces computer games, via its inhouse game publisher Microsoft Studios, that run on Windows PCs and other systems including titles
such as Age of Empires, Halo and the Microsoft Flight Simulator series, and houses the Macintosh
Business Unit which produces Mac OS software including Microsoft Office 2011 for Mac.
Microsoft's Entertainment and Devices Division designs, markets, and manufactures consumer
electronics including the Xbox 360 game console, the handheld Zune media player, and the televisionbased Internet
appliance MSN
TV.
Microsoft
also
markets personal
computer
hardware including mice, keyboards, and various game controllers such

as joysticks and gamepads.
Culture
Technical reference for developers and articles for various Microsoft magazines such as Microsoft
Systems Journal (MSJ) are available through the Microsoft Developer Network (MSDN). MSDN also
offers subscriptions for companies and individuals, and the more expensive subscriptions usually offer
access to pre-release beta versions of Microsoft software. In April 2004 Microsoft launched a
community site for developers and users, titled Channel9, that provides a wiki and an Internet
forum. Another community site that provides daily video casts and other services, On10.net, launched
on March 3, 2006. Free technical support is traditionally provided through online Usenet newsgroups,
and CompuServe in the past, monitored by Microsoft employees; there can be several newsgroups for
a single product. Helpful people can be elected by peers or Microsoft employees for Microsoft Most
Valuable Professional (MVP) status, which entitles them to a sort of special social status and
possibilities for awards and other benefits.
Page | 30

Noted for its internal lexicon, the expression "eating our own dog food" is used to describe the policy
of using pre-release and beta versions of products inside Microsoft in an effort to test them in "realworld" situations. This is usually shortened to just "dog food" and is used as noun, verb, and
adjective. Another bit of jargon, FYIFV or FYIV ("Fuck You, I'm [Fully] Vested"), is used by an
employee to indicate they are financially independent and can avoid work anytime they wish. The
company is also known for its hiring process, mimicked in other organizations and dubbed the
"Microsoft interview", which is notorious for off-the-wall questions such as "Why is a manhole
cover round?".
Microsoft is an outspoken opponent of the cap on H1B visas, which allow companies in the U.S. to
employ certain foreign workers. Bill Gates claims the cap on H1B visas makes it difficult to hire
employees for the company, stating "I'd certainly get rid of the H1B cap" in 2005. Critics of H1B
visas argue that relaxing the limits would result in increased unemployment for U.S. citizens due to
H1B workers working for lower salaries. The Human Rights Campaign Corporate Equality Index, a
report of how progressive the organization deems company policies towards LGBT (lesbian, gay,
bisexual and transsexual) employees, rated Microsoft as 87% from 2002 to 2004 and as 100% from
2005 to 2010 after they allowed gender expression.
Criticism
Main article: Criticism of Microsoft
Bad Vista and Defective by Design groups protest against Windows Vista
Criticism of Microsoft has followed the company's existence because of various aspects of its
products and business practices. Ease of use, stability, and security of the company's software are
Page | 31

common targets for critics. More recently, Trojan horses and other exploits have plagued numerous
users due to faults in the security of Microsoft Windows and other programs. Microsoft is also
accused of locking vendors into their products, and not following and complying with existing
standards in its software. Total cost of ownership comparisons of Linux as well as OS X to Windows
are a continuous point of debate.
The company has been in numerous lawsuits by several governments and other companies for
unlawful monopolistic practices. In 2004, the European Union found Microsoft guilty in a highly
publicized anti-trust case. Additionally, Microsoft's EULA for some of its programs is often criticized
as being too restrictive as well as being against open source software.
Microsoft has been criticized (along with Yahoo, AOL, Google and others) for its involvement
in censorship in the People's Republic of China. Microsoft has also come under criticism for
outsourcing jobs to China and There were reports of poor working conditions at a factory in
southern China that makes some of Microsoft's products.
Corporate affairs
The company is run by a board of directors made up of mostly company outsiders, as is customary for
publicly traded companies. Members of the board of directors as of February 2014 are: John W.
Thompson, Steve
Ballmer, Dina
Dublon, Bill
Gates, Maria
Klawe, Stephen
Luczo, David
Marquardt, Mason Morfit, Satya Nadella, Charles Noski, and Helmut Panke. Board members are
elected every year at the annual shareholders' meeting using a majority vote system. There are five
committees within the board which oversee more specific matters. These committees include the
Audit Committee, which handles accounting issues with the company including auditing and
reporting; the Compensation Committee, which approves compensation for the CEO and other
employees of the company; the Finance Committee, which handles financial matters such as
proposing mergers and acquisitions; the Governance and Nominating Committee, which handles
various corporate matters including nomination of the board; and the Antitrust Compliance
Committee, which attempts to prevent company practices from violating antitrust laws.
Page | 32
Five year history graph of NASDAQ: MSFT stock on July 17, 2013
When Microsoft went public and launched its initial public offering (IPO) in 1986, the
opening stock price was $21; after the trading day, the price closed at $27.75. As of July 2010, with
the company's nine stock splits, any IPO shares would be multiplied by 288; if one was to buy the IPO
today given the splits and other factors, it would cost about 9 cents. The stock price peaked in 1999 at
around $119 ($60.928 adjusting for splits). The company began to offer a dividend on January 16,
2003, starting at eight cents per share for the fiscal year followed by a dividend of sixteen cents per
share the subsequent year, switching from yearly to quarterly dividends in 2005 with eight cents a
share per quarter and a special one-time payout of three dollars per share for the second quarter of the
fiscal year.[98][99] Though the company had subsequent increases in dividend payouts, the price of
Microsoft's stock remained steady for years.
One of Microsoft's business tactics, described by an executive as "embrace, extend and extinguish,"
initially embraces a competing standard or product, then extends it to produce their own version
which is then incompatible with the standard, which in time extinguishes competition that does not or
cannot use Microsoft's new version.[101]Various companies and governments sue Microsoft over this
set of tactics, resulting in billions of dollars in rulings against the company. Microsoft claims that the
original strategy is not anti-competitive, but rather an exercise of its discretion to implement features
it believes customers want.
Financial
Standard and Poor's and Moody's have both given a AAA rating to Microsoft, whose assets were
valued at $41 billion as compared to only $8.5 billion in unsecured debt. Consequently, in February
2011 Microsoft released a corporate bond amounting to $2.25 billion with relatively low borrowing
rates compared to government bonds.
For the first time in 20 years Apple Inc. surpassed Microsoft in Q1 2011 quarterly profits and
revenues due to a slowdown in PC sales and continuing huge losses in Microsoft's Online Services
Page | 33

Division (which contains its search engineBing). Microsoft profits were $5.2 billion, while Apple Inc.
profits were $6 billion, on revenues of $14.5 billion and $24.7 billion respectively.
Microsoft's Online Services Division has been continuously loss-making since 2006 and in Q1 2011 it
lost $726 million. This follows a loss of $2.5 billion for the year 2010.
On July 20, 2012, Microsoft posted its first quarterly loss ever, despite earning record revenues for the
quarter and fiscal year, with a net loss of $492 million due to a write down related to the advertising
company a Quantive, which had been acquired for $6.2 billion back in 2007.
As of January 2014, Microsoft's market capitalization stands at $314B, making it the 8th largest
company in the world by market capitalization.
Environment
In 2011, Greenpeace released a report rating the top ten big brands in cloud computing on their
sources of electricity for their data centers. At the time, data centers consumed up to 2% of all global
electricity and this amount was projected to increase. Phil Radford of Greenpeace said "we are
concerned that this new explosion in electricity use could lock us into old, polluting energy sources
instead of the clean energy available today," and called on "Amazon, Microsoft and other leaders of
the information-technology industry must embrace clean energy to power their cloud-based data
centers." In 2013, Microsoft agreed to buy power generated by a Texas wind project to power one of
its data centers.
Microsoft is ranked on the 17th place in Green peace's Guide to Greener Electronics (16th Edition)
that ranks 18 electronics manufacturers according to their policies on toxic chemicals, recycling and
climate change. Microsoft's timeline for phasing out BFRs and phthalates in all products is 2012 but
its commitment to phasing out PVC is not clear. As yet (January 2011) it has no products that are
completely free from PVC and BFRs.
Microsoft's main U.S. campus received a silver certification from the Leadership in Energy and
Environmental Design (LEED) program in 2008, and it installed over 2,000 solar panels on top of its
buildings in its Silicon Valley campus, generating approximately 15 percent of the total energy needed
by the facilities in April 2005.
Microsoft makes use of alternative forms of transit. It created one of the worlds largest private bus
systems, the "Connector", to transport people from outside the company; for on-campus
transportation, the "Shuttle Connect" uses a large fleet of hybrid cars to save fuel. The company also
subsidises regional public transport as an incentive.[115][116] In February 2010 however, Microsoft took
a stance against adding additional public transport and high-occupancy vehicle (HOV) lanes to a
bridge connecting Redmond to Seattle; the company did not want to delay the construction any
further.
Page | 34

Microsoft was ranked number 1 in the list of the World's Best Multinational Workplaces by the Great
Place to Work Institute in 2011.
Marketing
In 2004, Microsoft commissioned research firms to do independent studies comparing the total cost of
ownership (TCO) of Windows Server 2003 to Linux; the firms concluded that companies found
Windows easier to administrate than Linux, thus those using Windows would administrate faster
resulting in lower costs for their company (i.e. lower TCO). [119] This spurred a wave of related studies;
a study by the Yankee Group concluded that upgrading from one version of Windows Server to
another costs a fraction of the switching costs from Windows Server to Linux, although companies
surveyed noted the increased security and reliability of Linux servers and concern about being locked
into using Microsoft products. Another study, released by the Open Source Development Labs,
claimed that the Microsoft studies were "simply outdated and one-sided" and their survey concluded
that the TCO of Linux was lower due to Linux administrators managing more servers on average and
other reasons.
As part of the "Get the Facts" campaign, Microsoft highlighted the .NET trading platform that it had
developed in partnership with Accenture for the London Stock Exchange, claiming that it provided
"five nines" reliability. After suffering extended downtime and unreliability the LSE announced in
2009 that it was planning to drop its Microsoft solution and switch to a Linux based one in 2010.
In 2012, Microsoft hired a political pollster named Mark Penn, whom the New York Times called
"famous for bulldozing" his political opponents as Executive Vice-President, Advertising and
Strategy. Penn created a series of negative ads targeting one of Microsoft's chief competitors, Google.
The ads, called "Scroogled", attempt to make the case that Google is "screwing" consumers with
search results rigged to favor Google's paid advertisers, that Gmail violates the privacy of its users to
place ad results related to the content of their emails and shopping results which favor Google
products. Tech publications like Tech Crunch have been highly critical of the ad campaign, while
Google employees have embraced it.
Cooperation with the United States Government
Microsoft provides information about reported bugs in their software to intelligence agencies of the
United States government, prior to the public release of the fix. A Microsoft spokesperson has stated
that the corporation runs several programs that facilitate the sharing of such information with the U.S.
government.
Following media reports about PRISM, NSA's massive electronic surveillance program, in May 2013,
several technology companies were identified as participants, including Microsoft. Microsoft joined
the PRISM program in February 2011. However, in June 2013, an official statement from Microsoft
read:
Page | 35

We provide customer data only when we receive a legally binding order or subpoena to do so, and
never on a voluntary basis. In addition we only ever comply with orders for requests about specific
accounts or identifiers. If the government has a broader voluntary national security program to gather
customer data, we don't participate in it.
During the first six months in 2013, Microsoft had received requests that affected between 15,000 and
15,999 accounts.
MICROSOFT IN INDIA
Microsoft India Private Limited headquartered in Hyderabad, India is a subsidiary of US software
giant Microsoft Corporation. The company first entered the Indian market in 1990 and has since
worked closely with the Indian government, the IT industry, academia and the local developer
community to usher in some of the early successes in the IT market. Microsoft currently has offices in
the 13 cities.
Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, Hyderabad, Indore, Jaipur, Kochi, Kolkat
a, Mumbai, New Delhi, and Pune. Increasingly, the company has become a key IT partner of the
Indian government and industry, supporting and fueling the growth of the local IT industry through its
partner enablement programs. Since its entry into India, Microsoft has focused on three key
objectives:
To become a key IT partner of the Indian government and the local IT industry
To support and fuel growth of the local IT industry through its partner enablement programs
Page | 36
To use the Microsoft Unlimited Potential program to enhance education, jobs and
opportunities and foster innovation through relevant, affordable access to computing.
Microsoft in India employs about 5,000 people and has six business units representing the complete
Microsoft product portfolio.
Overview of Microsoft India:

Microsoft is organized and established. The major business areas are serving customers starting from
consumers to corporations. Individual but connected, every single business solely determines its own
profits and gains
Microsoft Corporation India Private Limited (MCIPL) is the marketing arm for Microsofts products
in India, set up in 1990. MCIPL has grown to over 685 employees, across offices in the nine cities of
Ahmedabad, Bangalore, Chennai, Hyderabad, Kochi, Kolkata, Mumbai, New Delhi and Pune. We
look at the sales and marketing for enterprise, small and mid-market group and consumer segments,
via a strong channel network of over 18,000 members, including over 550 ISVs.
Page | 37
10.Microsoft: A Highly Motivated Environment

In its local area, Microsoft is known as "The Velvet Sweatshop," which suggests that, if anything,
Microsoft might be doing too good a job of motivating its employees.
How does Microsoft achieve such a high level of motivation? It's simple. Microsoft explicitly focuses
on morale. Each group at Microsoft has a morale budget that can be used for anything the group wants
to use it for. Some groups buy movie-theater style popcorn poppers. Some groups go skiing or go
bowling or have a cookout. Some groups make T-shirts. Some groups rent a whole movie theater for a
private screening of their favorite movie.
While Microsoft was still involved with OS/2, the OS/2 development group requested that the
company install a washer and dryer in their building so that they wouldn't have to go home to do their
laundry. Although the group never got its washer and dryer, the message was clear: this team wanted
to work. It didn't ask for promotions, more money, bigger offices, or fancy carpet; it asked for
management to remove every conceivable roadblock so that it could concentrate on shipping a
product.
Microsoft s every floor in every building has a supply room stocked with common and not-socommon office supplies. You just take what you need, and you don't even need to sign anything. Most
other supplies are only an email message away. If you need office equipment--bookcases,
whiteboards, and so on--you just send email, put a note on the wall where you want the office
furniture, and within 24 hours someone will have installed the furniture in your office. If you have a
computer problem, you call the company's help desk and within an hour or two a knowledgeable
computer technician will have fixed your problem. They lend you a computer if necessary, and they
will even swap your hard disk into the loaner to minimize downtime.
Microsoft also makes extensive use of non-monetary rewards. Microsoft working on Windows 3.1.
During that time, three team T-shirts, a team rugby shirt, a team beach towel and a team mouse pad
took part in a nice team dinner on the local "Dinner Train" and another dinner at a upscale restaurant.
Microsoft doesn't ignore developers' personal lives, either. During , the developer who had the office
next to mine had his 10-year-old daughter come by every day after school. She did her homework
quietly in his office while he worked. No one at the company even raised an eyebrow.
Motivating yourself and other employees is part of the Microsoft corporate culture. Microsoft doesn't
have an explicit practice of asking team members to commit or "sign up" for a project, but it isn't
uncommon for an employee who expresses doubt about meeting a deadline to be asked whether he or
Page | 38

she is signed up. Microsoft avoids the problem of phony-sounding management motivational
speeches because, as often as not, the question doesn't come from a manager; it comes from the
person who will have to do the work if the person in question doesn't do it.
In addition to providing explicit support for morale, Microsoft gladly trades other factors to keep
morale high, sometimes trading them in ways that would make other companies shudder (Pascal
Zachary, Showstopper!, Free Press, 1994). Microsoft team managers and team leaders trade
methodological purity, programming discipline, control over the product specification, control over
the schedule, management visibility -- almost anything -- to benefit morale.
Whatever you might think of the effects this approach has on other project factors, the effect on
motivation and morale -- and consequently on Microsoft's success -- speaks for itself.
Microsoft invests a lot of resources into retaining and motivating their employees. The most
pronounced program that Microsoft offers is an employee advancement program. (Microsoft
Corp. 2008) A psychologist named McClelland is known for his theory in a persons need for
achievement. McClellands theory discusses that some people have a need for overcoming
difficult tasks, achieving goals and bettering ones self. (Kreitner & Kinicki, 2008) Microsoft
has human resource personnel that are tasked with creating leaders. These individuals goals are
to help grow skills that make future leaders and current leaders more skilled in their area of
expertise. Microsoft encourages employees to further their learning by offering management
clinics, seminars, and professional classes. If Microsoft doesnt offer what the employee is
looking for, they support them by offering funding for professional classes and allowing time
off for them. (Microsoft Corp. 2008) By assisting employee advancement within the company,
Microsoft sees high levels of motivation amongst those that have a need for self advancement
and achievement.
McClelland also theorizes that people have a need for affiliation. This need is found in people
that flourish in social groups. These individuals enjoy group activities, especially if these
activities can help the common good of people. (Kreitner & Kinicki, 2008) Microsoft has
realized that in order to help with employee satisfaction, they need to help employees feel
proud of themselves. By establishing organizations that help with charities and provide
volunteers for community programs, employees are given opportunities for group projects. Not
only do these group help meet the need for affiliation, they help satisfy intrinsic motivators
such
as
community
service.
Another form of fulfilling the needs of the employees, Microsoft sets very clear goals and
mission. Having a clear line of sight minimizes confusion. Confusion can and usually does lead
Page | 39

to dissatisfaction, which then can lead to a loss of motivation. (Kreitner & Kinicki, 2008)
Microsoft states that their missions are; Honesty and Integrity, respect for others, willingness to
take a challenge, passion for customers, accountability, and self-criticism. Microsoft states that
these mission help to get the employees personally attached to the company. This attachment
helps the employees feel good about their contributions to the company as a whole. (Microsoft
Corp. 2008) By getting the work force personally involved with well defined mission and
values, and offering a extremely lucrative benefits package; Microsoft has accomplished the
difficult task of both appealing to individuals intrinsic and extrinsic needs. With both sets of
need being fulfilled, Microsoft has achieved a high level of personal motivation within their
corporation.
For anyone that has the need and desires to grow the resume, MICROSOFT is probably a
perfect match. MICROSOFT is another company that invests a lot of resources into retaining
its employees by offering programs for professional development. Unlike Microsoft which has
a diverse motivational system, MICROSOFT has virtually placed all its eggs in one basket. Is
that a negative? Not in this case; MICROSOFT markets this idea to potential employees. Most
people that go to work for MICROSOFT do so under the assumption that there is room and
support for them to climb the corporate ladder. MICROSOFT voices that it is a company
designed to help employees reach their career objectives and goals.
MICROSOFT has a multifaceted approach to helping its employees better themselves. There
professional development programs include; MATREX, emerging sales professionals program,
and an intensive leadership development programs (LDP). MATRIX is a program that helps
entry level employees transition into a managerial role. The emerging sales program is an entry
level program that takes individuals with no experience and trains them to be sales
professional. The LDP is a program established to recruit individuals recently graduating from
college or obtaining MBAs. This program is two years long, when finish the individual will
have a career in higher management levels. aggressive approach towards those that have a need
for career growth may satisfy McClellands theories. However, what about those that just want
a static job and are not looking to climb the corporate ladder. It is this group of individuals that
makes me question if MICROSOFTis really trying to accommodate all their employees or just
the ones with a corporate drive. How long could an employee stay motivated if preference is
always given to those that are pursuing a development program? Victor Vroom theorizes that
some peoples motivation is a product from combinations of expected outcomes. (Kreitner &
Kinicki, 2008) This theory basically states that if an individual thinks their extra efforts will go
Page | 40

unnoticed, then why put forth the effort. For those individuals not intending on career
development may go unnoticed. This bias toward the career developing employees might start
to seem unfair. How long can anyone operate with high motivation if they feel their situations
are
unequal?
Psychologist J Stacy Adams states that his equity theory is a model of motivation that explains
how people strive for fairness and justice in social exchanges or in give-and-take relationships.
(Kreitner & Kinicki, 2008) Adams explains further that this theory has two main parts; inputs
and outputs. If an employee doesnt feel that his inputs are equal to the outputs, they may
develop a why bother attitude. This unequal treatment may be reinforced if those that are
scheduled for a program start to slack in their efforts yet still get treated better than those who
are not enrolled in such a program. MICROSOFT has invested a lot of time and resources into
providing for those that have a need for self accomplishment. However, for those that are not
looking for advancement, may become unmotivated and move on.
All the companies discuss seem to have some program in place to enhance motivation. It seems
that most companies lean towards helping those that are career hungry and have needs towards
furthering their advancement. They do well in techniques such as Job Enlargement. Job
Enlargement is helping the individual to advance within the corporation. (Kreitner & Kinicki,
2008) Two techniques that are not mentioned by all three companies are Job Rotation, and Job
Enrichment. Job rotation is the process of allowing employees to rotate functions within the
company to help combat boredom. Job Enrichment is when an employer allows the employee
to modify their job. This technique generally allows an individual to gain more responsibilities,
which in turn helps with advancement. Granted all three have programs the employees can
enter into, however this could be intimidating and a drastic step. What can the employee do if
they want to eases into advancement? What happens if once entered into a program the
employee
realizes
that
the
change
is
not
what
they
really
wanted?
In conclusion, corporations today are taking proactive steps to increase motivation. Companies
will need to understand that each employee has different needs and motivators, while educating
the managers on dynamic motivational techniques. I have learned that no matter how many
programs are established, a corporation is only as accommodating and motivating as its
managers.
Page | 41
11.Motivational Benefits for Employees at Microsoft

Working in Microsoft brings in a lot of unique experiences, along with a rewarding career prospect.
The company believes in the potential of each individual and their future potential to make anything
possible. So, apart from a high academic record, the company also looks for individuals who are
exceptionally talented and have a passion to achieve the impossible. With its 6 business units in India,
you can find a job best suitable to your knowledge and skills, which include product development,
researching, providing business support and marketing the products. This company is certainly a
unique one and with regular training and performance benefits helps a person to reach his or her
career goals. Microsoft India serves as the perfect platform for learning new technologies, research
the best solutions, and acquire knowledge about emerging market trends.Benefits play an important
role in our choice of employer. Microsoft believes that work should be challenging, yet rewarding. Its
vital to provide industry-leading benefits to all qualified employees. Starting with a competitive
salary, bonuses, and stock package benefits, Microsoft continues to reward eligible employees based
on their individual performance. Anyway these benefits do not stop at any level.
Microsoft aims to empower its employees with the resources, compensations, flexibility and job
security and ensuring its employees live a healthy and balanced life.
It is widely known that, Microsoft is recognised as a leading organisation for providing the strongest
and the most comprehensive incentives and benefits package in India. As mentioned earlier, Microsoft
employees start off with competitive wages, bonuses and stock awards based on individual
performance levels.
The main area of difference in Microsoft benefit packages in India is that it not offers flexibility in
working conditions but also the flexibility in benefit packages. So, It is like employees can choose the
mix of benefits that best suits them. This is in my view a great and very challenging approach because
each employee has unique benefit needs and to meet that Microsoft offers flexible benefits.
Health and Wellness:
It offers comprehensive and flexible healthcare for its employees and their qualified dependants. It
also provides dental and eye care coverage, onsite medical checks, health club membership
reimbursement etc.
Family and parenting
Page | 42

Employee families enjoy a wide range of benefits such as maternity leave, paid time off for new
moms and dads, and reimbursement of crche fees etc.
Investing:
provides an employee stock purchase program where they could purchase discounted shares of
Microsoft stock.
Giving together:
One more remarkable approach is that they match the amount that employees contribute to
community affairs like charities and educational institutions up to 50, 000 INR per employee/ year
and contribute to causes. It is another way where Microsoft makes a significant difference.
Learning and development:
It always believes in constant learning so the staff can possess very current KSA`s. It offers over 2000
internal training programs which may either online, virtually, or via class room training. It invests a
lot of amount on employee training and development.
According to Griffin and Moorhead (2009) common types of rewards to attract and retain qualified
employees include base pay, perquisites and awards, performance appraisal, indirect compensation,
bonuses etc. Microsoft offers the employees more than all the above types of rewards so this can be
considered as one of the basis for its success or survival.
Page | 43
12.Reward system at Microsoft India:
Performance and rewards
It believes in rewards according to the level of performance because it offers wide variety of benefits
to the top performers. These top performers is mainly measured based on their innovation at
Microsoft as the whole organisation runs on the concepts based on technology innovation methods. It
also focuses on the employee working tenure as it offers pay rises depending on the number of years
they worked for the company.
This could be understood clearly by the below table obtained from Indian resourcing consultancy
called naukri hub
Median salary based on years of experience:
Experience
Median Salary/ Annum
1 year or less
Rs 700,000
1 to 4 years
Rs 840,000
5 to 9 years
Rs 1,005,815
10 to 19 years
Rs 1,508,368
More than 20 years
Page | 44

Rs 4,800,000
(naukrihub.com, 2012)
Microsoft employee salaries vary depending on the region of the country or city they live in. This is
basically because of the fact that the cost of living varies in India depending upon which city or state
you live in. To understand, tables below can be observed:
Competency Based Pay :
It follows a pay and reward system that is partly dependent upon the educational competencies and
Qualification as it offers varied wage levels depending on the aboce criteria.
Salary Range by level of academic qualification:
Salary range of Microsoft employees according to the levels of

academic qualifications have been given below:
Academic Qualification
Salary Range
Bachelors Degree
Rs 370,000 to Rs 2,164,207
Bachelor of Engineering (B.E.)
Rs 1,002,500 to Rs 1,581,000
Bachelor of Technology (B.Tech)
Rs 166,107 to Rs 2,483,233
MBA (Master of Business Administration)
Rs 610,419 to Rs 1,965,270
(naukrihub.com, 2012)
Page | 45
Skill based Pay :
It relies on its employees skills and it gives different salary packages to individuals based on their
skills and area of competence. It is sometimes interrelated with competency based pay and therefore
cannot be much differentiated. Different level personnel are paid different pay packages like many
other organisations. For instance based on their designations this can be considered:
Group Rewards:
As it is an IT firm it consists of several departments and group projects. So the awards are frequently
given to the eligible teams, However there will be a group leader or a department head who indirectly
receives extra credit among the team.
For instance in the 2nd half of the year I was working on a project on one of the top hotel chains of
India and we as a team were given a deadline of 3 weeks. All the individuals in the team were
assigned a specific job and everyone worked hard and somehow managed to complete our respective
tasks in 2 weeks and presented the final presentation in less than the time allotted to us. At the end of
the year our group was awarded best group performer award. This rises the motivation levels of all the
members of the group but the team leader who contribution was less compared to the team members
was awarded the best performer award. This can sometimes have a negative effect on the rest of the
group members.
Transparent and fair Appraisal:
As the employees of the company every staff member has the right to know his/ her contribution to
the growth/ performance of the company. Microsoft has a fair and transparent approach in its
performance evaluation and there by ensure fair appraisal is established. It provides an online portal
showing detailed information about each individuals performance over certain period of time. In this
portal, it gives a clear picture of how many projects were undertaken by each employee, how many of
them completed on time and how many before deadlines, data about financial gain through various
projects, punctuality of employees, what areas needed to be improved by the personnel, feedbacks,
what type of rewards are available etc. So when employees know what is expected from them by the
company there is better chance for them to compete and work hard to gain the rewards and atleast
improve their performance to next levels.
Profit sharing:
Page | 46

This is more related to higher personnel and marketing staff. The marketing and resourcing groups of
the company are given incentives and profit sharing benefits based on the sales they attain and clients
they procure from the market. It is similar to some retail markets where managers have to reach
certain sales targets and they will be eligible to increase their bonuses based on the sales and profits
they bring to the company.
Annual lump sum financial rewards:
This is more of rewarded to most of the full time employees at my work place where they are
deposited with some lump sum payment depending on various aspects like their experience at the
company etc. More or less, this type of rewarding also plays a vital role in acquiring and retaining
people.
Contributions of rewards in the HR management at Microsoft:
Reward system play a vital role in Human resource department of any company and it is the same in
Microsoft as well. Analysts opined that Microsoft is largely successful due to its effective employee
retention strategies. After the global recession crisis there was an increased responsibility on the
shoulders of HR personnel. HR management has to be extremely strong and efficient to retain the top
employees by providing better compensation and benefit packages.
According to Joe Wilcox (2000) one of the companys representatives, Microsoft is constantly
exploring ways to ensure the compensation levels are competitive and make sure that the staff are not
only recognised for their work but are appropriately rewarded. According to Ian, General Manager at
windows presentation foundation, Microsoft, Its been new roles, new titles, new challenges every
year or so. I stopped putting my title on my business cards years ago as it was getting out-of-date so
frequently
Microsoft has been providing stock options at discount to employees since 1986, when it was listed
on the stock exchange. (Barnali Chakraborty, 2010)
Rewards like reimbursement of tuition fee for its employees to gain access to work related courses is
one of the unique approaches brought up by Microsoft and is equally benefits the strategic HR
management as it boosts the staffs interest to learn more and perform more which is ultimately
beneficial to the overall company performance.
Better the rewards management, better will be the employees motivation levels to perform more and
thus Strategic HR is ensured and thereby the organisations overall strategy.
Page | 47

Therefore Microsoft Corporation received several awards and recognitions and few among are:
2008 #1 Best Companies to Work for in India - Business Today
2008 #1 Most Preferred Employers in the Top 50 India Engineering Colleges - Economic Times/AC
Nielsen
2007 America's Most Admired Companies, Fortune
2009 #1 Great Places to Work for in Ireland ( Microsoft awards and recognition)
Page | 48
13.Microsoft SWOT analysis
Strengths
1. Brand loyalty
2. Highly paid rewards and
benefits
3. Easy to use software
4. Strong distribution
channels
5. Highly motivated
environment
6. Acquisition of Skype
Opportunities
1. Cloud based services
2. Mobile advertising
3. Mobile device industry
4. Growth through
acquisitions
Weaknesses
1. Poor acquisitions and
investments
2. Dependence on hardware
manufacturers
3. Criticism over security flaws
4. Mature PC markets
5. Slow to innovate
Threats
1. Intense competition in software
products
2. Changing consumer needs and
habits
3. Open source projects
4. Potential lawsuits
Page | 49
14.Conclusion
Organizations must match the reward systems with the motivational needs of employees and hence,
the package that they offer to potential and existing employees must be a mix of financial and nonfinancial rewards. As economists would point out, the role of incentives in motivating employees is
indeed high and hence the right kind of incentives must be rolled out. It is not simply enough if
companies keep raising the salaries or giving higher bonuses. It is also not enough if companies flatter
their employees and publicize their achievements. The key aspect is the match between the rewards
that are offered to the employee and his or her inner needs.
organizations must evolve reward systems that motivate each individual according to his or
her level of self-development and need for either monetary benefit or fulfillment imperative.
In this context, it is important to note that many multinational companies have a financial
component that motivates employees and a non-financial component like honoring the
employees, publicizing their achievements, and making senior management talk to these
employees for their contributions.
Microsoft has been providing stock options at discount to employees since 1986, when it was listed
on the stock exchange Better the rewards management, better will be the employees motivation levels
to perform more and thus Strategic HR is ensured and thereby the organisations overall strategy.
Therefore Microsoft Corporation received several awards and recognitions.
Page | 50
15.Weblography
Microsoft Corporation (2008), Microsoft careers, The Inside Track, Retrieved 04 April, 2008
from http://www.members.microsoft.com/carerrs/mslife/insidetrack.mspx
Maslow, A.H. (1951) Motivation and personality, New York; Harper and row publichers,
Inc.
www.microsoft.com
www.managementparadise.in
Page | 51

Rewards - A Motivatingfactor at Microsoft Corporation

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Rewards - A Motivatingfactor at Microsoft Corporation

Caricato da

Copyright:

Formati disponibili

Rewards A motivating factor at Microsoft corporation