Winning the war for talent

Can you name five products launched by Microsoft in 2006? Windows 2006? Office 2006? Xbox 2006? None of these rings a bell for me.

But Microsoft spent $6.58 billion on research and development in that year – more than any other company on the planet.

This is not a Microsoft-bashing article. The technology colossus remains one of the greatest drivers of productivity, economic activity, education and understanding in the world.

Its contribution to the globalisation of information has broken down barriers and increased inter-community understanding in a way that no end of G8 summits can ever hope to achieve.

History records that Microsoft got lucky when it snatched a deal to provide operating system software to the earliest personal computers. From this point, it forged a partnership with Intel that saw them reinforcing each others’ businesses for over 20 years.Microsoft developed software that required ever-increasing power and speed from processors, memory and storage; Intel and other chipset makers would provide the hardware.

This created a core of power in the IT industry that invited admiration, envy, anger, and ultimately lawsuits for anti-competitive practices.

These lawsuits focused on technology issues: did Microsoft give its application developers preferential access to its operating system? Did it lock out web browser competitors such as Netscape? Did it abuse its monopoly power?

I was reporting on these arguments as editor of Arabian Computer News at the time, and always believed that the lawsuits smacked of sour grapes from competitors.

The IT market was in a period of massive innovation, and Microsoft seemed to me to be an enabler rather than a barrier to this innovation.

What the lawsuits failed to address (quite rightly) was Microsoft’s tireless pursuit for the most talented minds in the world.

This, in my opinion, was the true genius of Bill Gates, and the reason why the company remains as powerful today as it was a decade ago.

Stories of stock options creating hundreds of billionaires at Microsoft are now legend. Less widely reported at the time was the dogged and determined spadework that went into recruitment.

I remember speaking to the general manager of Microsoft Middle East in the mid 1990s. He described how graduate recruits from Bangalore to Boston were subjected to gruelling testing programmes to establish their IQs and aptitudes.

They would work for weeks on coding projects to demonstrate their flair. They would be interviewed several times by up to a dozen inquisitors.

Thousands of applicants would be whittled down – worn down – to a quivering handful that might be invited to the campus at Redmond.

Microsoft recognised the value of this talent better than any other company in the software industry. It hired the best, it kept the best and it poached the best from its competitors. If it couldn’t poach people, it bought the company they worked for.

I wrote about dozens of acquisitions per year of small start-ups where a couple of geeks in a garage became millionaires with a bit of virtually worthless software code. Did Microsoft really need to buy this code? No, but it really wanted the geeks who wrote it.

Bill Gates understood that you don’t win wars on the battlefield. You win wars by not needing to fight at all because your potential enemies are kept constantly weak, or don’t want to be enemies at all.

Talented individuals within Microsoft were so well paid (and tied in with stock options) that they had no incentive to leave and set up in competition to their master.

Small software companies were not motivated to compete with Microsoft, they simply wanted to be noticed by The Empire, and acquired by it.

I wonder how much of the $6.58 billion Microsoft spent on R&D in 2006 was invested in creating new stuff, or how much was spent on hiring the brightest people in the world, and rewarding its existing staff for not leaving the company.

I know the company registered its 5000th patent in 2006 – a world record – but my hunch still stands that Microsoft knows people matter more than patents. And the most pressing personnel issue is ensuring the world’s greatest people work for you, never against you.

Hiring, developing and retaining great talent is a skill set that many businesses in the Middle East currently lack. Recruitment is too often left to overseas agents who line up candidates for a quick phone interview.

Key people are hired without ever meeting anybody from the company, or visiting their offices.
Staff development typically means learning on the job; hoping that skills improve through osmosis rather than formal training. Employees are left feeling that they are faceless and replaceable cogs in a corporate engine.

Salaries and benefits are set arbitrarily rather than strategically. There is nothing wrong with a company keeping an iron grip on its spending, but too few recognise that great employees are a company’s most valuable asset.

It is vital to retain them so that they don’t leave and start competing with you. (On the flip side, if they are hopeless, let them go and poison somebody else’s well).

Businesses in the Middle East are currently growing as fast as Microsoft in the 1990s, but many will not all survive to see a second decade. Great companies will grow over several business cycles, and those that have the greatest bedrock of talent will have the best chance of prospering for generations.

Great people are a company’s most potent competitive weapons. Work with them, look after them, and never, ever, ever, let them leave.