Slowly dying - March 12th, 2006

http://www.washtech.org/news/industry/display.php?ID_Content=5041

Wash Tech a seattle labor union got hold over some Microsoft confidential documents and now trying to unionizing microsoft. Read the story from Washtech

Defections by high-level engineers have stung Microsoft in recent months, prompting questions about a rush of creative minds for the door. One explanation is the Redmond software giant has grown too big and cumbersome to keep its top engineers happy and productive.
But the star engineers who are jumping to younger technology companies, such as Google and Yahoo, aren’t the only employees who are disgruntled with day-to-day operations.
Internal Microsoft documents obtained by WashTech News show that Microsoft salaries have been stagnant or nudged only slightly higher over the past two years. Comments from current and former employees about the company’s compensation and performance review system suggest a growing level of frustration among rank-and-file workers.

Example:
The documents outline 20 salary grade levels with a low, medium and high range of pay for 2004 and 2006. A software design engineer in Test, for example, might start at level “58,” earning about $67,000. An employee at the Product Manager level could earn a $74,000 base at level “59;” and a Program Manager might start at level “62,” earning a mid-range annual salary of $99,000.
Some employees have access to pay levels, but others do not. And although most are aware of the different pay levels, some have only a vague understanding of how the system works as a whole. At Microsoft there is an unspoken code that co-workers not share compensation information with each other.
What is causing considerably more ire than pay levels, however, is a performance review ranking system that uses a bell-curve model to decide who gets high scores and who takes the low ones.
Microsoft Corp. has over 60,000 employees, and like almost all large corporations, it uses a performance review process to rate them. The idea behind any corporate performance review system is to provide an accurate and fair assessment of employee contributions, but some employees say Microsoft’s system promotes politics over fair reviews.
According to employees, who said they would be fired if they spoke on the record, the annual review amounts to little more than a closed-door popularity contest in which managers “fight” for higher scores for their team, or defer to higher-level decision makers who mandate how many workers drop to the bottom of the review scale.
One employee in the company’s Mobile and Embedded Devices group said when it comes to her review score, “my performance is about 10 percent of the whole equation.”
Another employee denounced a compensation system that is “capricious in its tolerance of managers who corrupt the system for their personal gain,” and blamed consecutive low-rankings on a “well-entrenched culture of favoritism.”
She said that even though she had received division awards for good work, two consecutive low review scores blocked her from moving to another, less-politically driven team, and the low reviews exclude her from getting any raises. Now her only option, she said, is to leave the company.
Microsoft spokesman Lou Gellos said the company conducts an annual poll of its employees, and that it was aware of the “different feelings” about the performance review system.
“The theme of this is something that is not new. We’re aware of what employees feel about this issue and others,” Gellos said in answer to a question about the level of frustration among employees.
Gellos said senior vice president Lisa Brummel, who was promoted to Human Resources Director in April last year, has been conducting an open door “listening tour” over the past month to solicit feedback from employees, and that compensation is high on her list. Gellos stressed that Brummel’s listening tour wasn’t an exercise, and that there would be action once sufficient information is collected.
Behind closed doors
In many groups, an employee’s review score may have less to do with their performance than their popularity, or their manager’s ability to negotiate to give out more high review scores. Another variable is when a marketing manager who does not have the technical background to fairly assess technical work is expected to review individual contributors in their team.
Review scores range from 2.5 to 5.0, but the process by which scores are arrived at occurs behind closed doors, employees said.
A writer who has worked at Microsoft for over six years, first as a contractor and now as a full-time employee, said her team numbers “have to be distributed in some way along a pseudo-bell curve: a certain percent get 4.5, a different percent get 4.0.” She said a 3.0 score officially meets expectations, but, “we all know that 3.0 is a red flag that you're on your way out the door - after all, Microsoft wants only people who exceed expectations.”
Unfair or not, she noted, “At least the company actually has enough money to give out raises, and bonuses, and stock.”
One former employee who worked at the company for over a decade said that if someone received a low review score and was overheard by a manager discussing it with a colleague, they risked a serious reprimand or being fired.
“No one would even talk about his level,” said the former employee, who said any open discussion about pay or review scores was taboo.
Microsoft’s bell-curve grading system has been in use, in one form or another, for years. A “stack ranking” system, which identified employees as “number one” and “dead last,” was changed in recent years to a “bucket system” in which employees are placed in a categories. The change occurred after lawsuits were brought against Microsoft alleging racial and gender bias in the closed-door meetings that determined the fate of an employee.
But the system hasn’t changed much, said the employee who worked at Microsoft over 10 years. “That’s why people are so irritated; there’s no way to predict your bonus, or ranking,” he said.
“Now the big problem is that those bucket meetings are behind closed doors. And where you get ranked depends almost entirely on who your lead is, how hard they fight, and what you’re working on,” he said. “Somehow that passes legal muster.”
Another employee who has been a test developer for several years said the reviews have always been a political process.
“The more peoples’ consciousness that you can get into, managers or peers, the better your rewards,” he said.
“In other words, your performance is meaningless unless everybody knows what you've been doing and see that it has a value or benefit to them or the team.”
A blog run by an anonymous Microsoft employee argues that the company is alienating employees with the review system and needs to overhaul it or risk further damaging morale. A post on the “Mini-Microsoft” blog sums up what appears to be a growing sentiment at the company once famously known for its overachieving workforce: “Microsofties have had enough.”
Comparing Microsoft’s review system with Boeing’s
If Microsoft is one side of the economic engine in the Northwest, Boeing is the other.
Each company employs highly educated, skilled workers. But Boeing’s engineers enjoy far more transparency about pay levels and their review system due to collective bargaining agreements between Boeing and the Society of Professional Engineering Employees in Aerospace union (SPEEA). SPEEA represents about 22,000 engineers, the majority of whom work in the Northwest.
Software sales are more predictable compared to sales of 737 jets, so Microsoft employees don’t face cycles of layoffs like at Boeing, but there are similarities in the review systems. Boeing engineers are assigned "Retention" numbers, from “R1” to “R3.” The 20 percent of the group who are categorized R3 know they are the first to go in a layoff, and explanations for R designations are available to all workers.
SPEEA makes salary grade level information available to all members. Retention ratings, layoff information, and salary adjustments are also readily available. At Microsoft, annual bonuses and review scores are determined behind closed doors. The difference between the two groups is the collective bargaining power of the Boeing engineers.
According to the Mini-Microsoft blog, Microsoft employees “own their own career.” For employees who work hard and manage to land on the high side of the review scale, the statement rings true. But for others, the bureaucracy in Redmond is wearing thin:
“I love working at Microsoft but cannot stay in an environment where I am treated shabbily and afforded no opportunity to defend myself against such treatment.”

Now they are complaining against offshoring their job. Read the story from SEATTLE POST-INTELLIGENCER

A Seattle-based labor union is seeking to use newly obtained internal Microsoft Corp. documents to fuel the debate over outsourcing and draw attention to its assertion that the company is shifting fundamental work offshore.

Microsoft rejects the claim and says a certain amount of overseas contracting is natural given the company's worldwide presence.

The Washington Alliance of Technology Workers says it obtained the previously confidential Microsoft contracts, spreadsheets and phone lists this month from a source inside the firm. The documents describe a series of agreements between Microsoft and outsourcing firms in such countries as India.

One conclusion the union draws from the papers: More than 1,100 people work for Microsoft in India under contracts with outsourcing firms, in addition to the 970 direct employees the company acknowledges. That brings Microsoft's total presence in India to more than 2,000 people -- significantly larger than previously known.

"They clearly have not been forthcoming about the extent of their offshore outsourcing," said Marcus Courtney, president of the union known as WashTech.

Microsoft said it doesn't disclose the size of its contract work force in India or anywhere else, because the figures can fluctuate significantly. But the company disputed the union's broader assertions about the role of its overseas contracts.

"These accusations don't reflect an understanding of the global nature of our business," said Microsoft spokeswoman Stacy Drake. "As a global company with operations in more than 80 countries, we absolutely work with partner companies around the world."

She noted that top Microsoft executives have said repeatedly that they plan to keep the majority of the company's core software development work in the United States.

During the fiscal year ended June 30, about 4 percent of Microsoft's research-and-development budget went to contract work by outside firms, Drake said. About 1 percent of the R&D budget went to work by contractors outside the United States.



Examples of work for which the company has recently contracted with Indian outsourcing firms include the development of a promotional computer program that advertises the company's software. In another case, Microsoft contracted with a company to replicate problems reported by customers and provide the information to Microsoft employees, who analyze and fix the problems.

Microsoft uses contract workers for "projects -- not products. There's a big difference there," said S. "Soma" Somasegar, the Microsoft corporate vice president who oversees the company's 6-year-old India Development Center in Hyderabad, India.

"Anything that is core to what we are doing, core to our mission, we are going to do it in Microsoft," Somasegar said in a recent interview.

WashTech's Courtney, however, pointed out that the documents leaked to the union include long lists of outsourcing contracts that refer in two instances to Longhorn, the code name for the next version of Windows. One contract with Infosys Technologies is described as "Longhorn Migration Guide," and one with Wipro Ltd. describes testing for Longhorn and other products.

Courtney called it "a red flag" suggesting that fundamental work on the next operating system is being outsourced overseas.

But one analyst said the descriptions don't seem to refer to fundamental development work. "Based on the names of these contracts, I don't see that you can reach that conclusion," said Michael Cherry, an analyst at Directions on Microsoft, a Kirkland-based research firm.

Microsoft's Drake said the company uses employees, not contract workers, for "all intellectual property work," including the design and creation of Windows and other products that the company sells. "All development work on Longhorn is done by Microsoft employees, the vast majority in Redmond," she said.

It's the second time in recent months that WashTech has obtained documents outlining Microsoft's outsourcing practices. Last month, the union publicized two Microsoft outsourcing contracts, including job descriptions, seeking to show that high-end jobs are prone to outsourcing.

As part of its broader campaign against outsourcing, WashTech also is running an ad in The New York Times today urging Congress to protect technology jobs. The ad doesn't mention Microsoft.

The latest documents received by WashTech also include a recent agreement between Microsoft and a Russian outsourcing company, Luxoft. Courtney said the deal shows that Microsoft is developing "a global supply chain of labor." Drake described the company's relationship with Luxoft as new and said the firm isn't yet doing any work for Microsoft.

Courtney said the union received the latest documents in early July, from the same source as before, but waited to provide them to reporters until this week to coincide with the recent release of Microsoft's hiring projections and the company's annual meeting with financial analysts, to take place today on its Redmond campus.

Microsoft last week said it plans to hire 6,000 to 7,000 employees worldwide during the next year, including 3,000 in the Puget Sound region, but a significant number of those people will fill jobs vacated by others, rather than new positions, making the net gain in employment smaller. During the past year, for example, Microsoft hired about 3,000 people in the region, but less than half of those filled new positions, and the company's local employment expanded by about 1,400 people.

That is much smaller than the company's growth during the economic boom of the late 1990s.

"Microsoft has significantly reduced its hiring," Courtney said.

I myself am not aware about the salary about my colleague or boss. But somebody outsider does. What do you think. Dont ask me if they are real.


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here(Seattle Intelligence)