How Microsoft Organises Itself

While the IE blog describes the lower level workings of PUMs etc, an article in Business Week describes how Microsoft's management have organised themselves:

Ballmer realized that Microsoft needed new methods to manage an ever-more-complex company. He first tried to organize around different kinds of customers. The idea was to get product-development groups more connected to users. But the reorganization didn't work. Decisions about such widely used products as Windows, for example, spread across too many of the new divisions. Not even a year into his new job, Ballmer was stressed out and looked it.

Now, Ballmer feels like he's on the right track. He has lost 52 pounds in the past year. He is tanned and clearly comfortable in his CEO role. A series of epiphanies brought him to this place--the result of reorganizational experiments, face-to-face meetings with execs at other companies, and thirsty reading of management books. Good to Great by management guru James C. Collins and Welch's Jack: Straight From the Gut got him to think about solving a wide variety of problems systematically, rather than trying to fix them on an ad hoc basis.

From this patchwork, Ballmer stitched together a quilt of management processes that, he says, especially suits Microsoft. Ballmer elevated the importance of something he calls the "organizational health index," a key factor in measuring executive performance. Taken from Procter & Gamble, the OHI is a survey of employees who are asked to rate their bosses on their leadership skills. By studying GE, Ballmer crafted a new system to identify and promote promising managers.

Perhaps Ballmer's biggest innovation is something called the Executive P&L, launched in April. It's a balance sheet that divides the company into seven distinct businesses and gives each unit's leader the financial tools to measure its performance. Ballmer hopes the device will empower execs who have long worked in an environment where everything was run by the CEO. In the past, managers would know the costs of developing a product but not the cost of selling it. Now, they can see their costs end-to-end, giving them the information necessary to make decisions about allocating resources without having to run it by Ballmer.

To some managers, it's liberating. On June 3, Senior Vice-President Doug Burgum walked Ballmer through his financial plan for his corporate-applications group for the coming fiscal year. Ballmer seized on an unusually large bump in R&D spending. In the end, he made it clear it was up to Burgum to decide how much to spend. "In some ways, the review felt like a really good board meeting," says Burgum, who ran Great Plains Software.

To make sure the new management system ticks along with Swiss precision, Ballmer has adopted a calendar with regularly scheduled meetings. The cycle, which Ballmer calls the "rhythm of the business," kicked off on May 29 with seven days of business-plan reviews. In October, the company's 21 senior vice-presidents will meet for two weeks with their staffs, analyzing their organizational structure and their development needs. A month later, leaders of the company's seven businesses gather for seven days of high-level brainstorming sessions designed to identify new opportunities. And in January, after the results of Microsoft's annual customer-satisfaction survey come in, the same execs meet for four days to analyze them.

Gates had his "think weeks," where he secluded himself at his family's retreat in Hood Canal in northwest Washington to ruminate on the Next Big Thing in technology. Ballmer has created "management sync weeks," weeklong events every quarter with day-after-day of meetings involving the executive staff and board members. The idea is to coordinate themes and strategies among the company's important decision-making groups. The first sync week begins June 17.