Microsoft's Problem With Human Resources

Microsoft's Problem With Human Resources Suggested Solutions The current paper is the sequel of Part One, paper in which I elaborated on Microsoft's human resource problem: its characteristics, causes and implications for the company. This paper will focus on solving the crisis by proposing four alternatives, analyzing them and choosing the one that best meets the company's demands. Solutions suggested for solving the problem In a nutshell, the problem Microsoft is facing regards the great number of employees that leave the firm.

Basing their decision of finding a new work place on the too long and stressful work hours or the low wages, fact remains that the international corporation is losing on weekly basis good employees. In an attempt to stop these resignations, or at least minimize their number, the managers asked the Human Resource Department to analyze the problem and come up with solutions.

In order to find solutions, the Human Resource Department had to look at the problem from the employees' point-of-view and then find ways to compensate for whatever it was the employees were lacking in. First, the workers were unsatisfied with their salaries. It is known that the salaries at Microsoft are fair, but tend towards the low end of the average salaries in the software industry. To compensate for this, the marketing department thought of granting employees the right to buy shares and become shareholders.

Second, most employees complain about the long hours they have to put in and how this affects their social lives. To solve these complaints, the HR department suggested sponsorship of several extra curricular activities, such as free tickets to theater or cinema, gym or swimming pool subscriptions. Third, another inconvenient was brought about by the long hours spend in the company and the fact that these meant more hours away from home, the spouse and the children.

Aware of the fact that they could never replace this, the HR department suggested that both employees as well as their families receive full compensation for medical consultations and treatments. Forth, another dissatisfaction brought about by the low salaries employees were receiving was referring to their rather limited possibility of purchasing a home or a property for their own use. In an attempt to solve this inconvenience, the marketing department suggested the implementation of financial plans within the company. 3.

Analyzing the alternatives a) First alternative - granting employees the possibility of buying shares (ESPP) Given Bill Gates policy of paying "reasonably low base salaries for all employees" (Cusumano and Selby, Microsoft Secretes, p. 116) and the workers' dissatisfaction with this measure, the HR department suggested that the employees be offered other incentives, such as bonuses or stock options. This measure proved highly successful in the past, as in March 1997, "workers realized an estimated 730 million dollars in profits from their Microsoft options.

This computed to 32.000 $ per employee." (Justin Fox, Stock-Option Magic at Microsoft, Fortune 136, no. 1, July 7th 1997, p.

54) b) Second alternative - sponsorship of several social activities (SSA) This method of improving the relationship between the company and its employees, meant to increase the satisfaction one would get from working at Microsoft would imply the following: "health club membership, 5.000$ for adoption assistance, paid maternity and paternity leave, charitable gifts program, tuition assistance, consultations for health, discounts for all Microsoft products and specialized assistance in personal crisis situations."(Microsoft Corporation, http://www.microsoft.com/jobs/benefits.htm, January 31st 1998) Above all these, the corporation could also prepare special programs during which employees would get to know each other better and bond.

They could divide the workers in several groups in accordance with their interests: "group of the single parents, working parents, African-American, Attention Deficit Disorder, Korean etc." (Microsoft Corporation: (http://www.microsoft.com/corpinfo/fastfact.htm) c) Third alternative - health care (HC) To motivate their employee, Microsoft could bare the full costs of medical consultations and treatments for both employee and their family (partner, spouse and children).

The sponsored fields covered by the employer would be "medical, dental and vision coverage," with the possibility of signing a contract for "life insurance, short- and long-term disability insurance and a group legal plan." (Roger J. Bartin, Minique Emmanuel, Vicki Lockamy, Sue Lewkowitz and Eva Somaan, Microsoft Case Study, 1997) d) Forth alternative - financial plans (FP) Aside from the employee stock purchase program (ESPP), Microsoft could offer their employees the possibility of savings.

Say for example that a worker could be allowed to "defer up to 15% of salary, with Microsoft matching 50 cents of every dollar" (Microsoft Benefits, Microsoft Corporation, Recruiting Brochure, 0695 Part No. 098-60768). This measure would imply that an employee could "leave" part of their monthly wages within the company. Microsoft could use these finances for further investments and in exchange for them offer employees an interest rate. Employees could get their money back anytime with no consequences. 4.

Choosing the most convenient alternative Paired Comparison Analysis The Paired Comparison Analysis method helps select from several options the one that is more important, the solution that will offer the most advantages. In applying this method, the Human Resource Department had to elaborate a table having for row and column headings the options available, assigned with letters from A to D.

They blocked out the cells where an option is compared to itself and the duplicate cells and then started comparing the alternatives in order of importance, assigning them an importance ratio from 0 to 3. ESPP (A) SAA (B) HC FD (D) ESPP (A) A2 A1 SSA (B) C1 D1 HC D1 FP (D) Example: A2 - giving employees the possibility of becoming shareholders (A) is more important than the sponsorship of social activities (B) by two points.

Next, the HR department performed the calculi for each option as follows: A=2+1+1=4 B=0 C=1 D=1+1=2 and then identified the percentage of importance for each possibility: A=57% B=0% C=14% D=29%. Therefore, the alternative that would offer employees grater satisfactions is A, the employee stock purchase program (ESPP). The selection criterion at the basis of the chosen alternative was the importance it had for the employees, moreover the option that offered them more satisfaction and motivation to continue working at Microsoft.

The fact that the chosen alternative, out of the four proposed ones, was the employee stock purchase program reveals to us the most important element that motivates one in a work place - financial rewarding. Bibliography Roger J. Bartin, Minique Emmanuel, Vicki Lockamy, Sue Lewkowitz and Eva Somaan, Microsoft Case Study M.A. Cusumano and R.W. Selby. Microsoft secrets. Free Press, 1995 Microsoft Corporation, http://www.microsoft.com, posted January 31st, 1998, last Accessed July 9th 2006 Justin Fox, Stock-Option Magic at Microsoft, Fortune 136, no. 1, July 7th 1997, p.

54 Paired Comparison Analysis, Working Out the Relative Importance of Different Options, http://www.mindtools.com/pages/article/newTED_02.htm, last accessed on July 9th 2006 Microsoft Benefits, Microsoft Corporation, Recruiting Brochure, 0695 Part No. 098-60768 Microsoft's Problem with Human Resources Part Three - Implementation and Evaluation Plan 1.

Executive Summary After in the first two parts of the paper I identified the problem, proposed several solutions from which I chose the one that best met the demands of the company and of the employees, part three is meant to analyze the solution itself: the manner of implementing it, the changes it would bring upon the company, the measurements made to conclude if and when the problem is solved, a contingency plan in case the initial solution fails to prove successful, the budget for implementing the solution and the goals the company hopes to achieve.

2. Implementation process To implement the employee stock purchase program, Microsoft first had to identify the number of employees interested in investing in the company, in other words the number of employees that would want to buy Microsoft shares and become shareholders. For the first quarter of 2007, the company identified an approximate number of 8500 employees that would be interested in purchasing Microsoft stock options. Secondly, the company had to calculate the amount of money an employee would have to pay for a stock option.

This price should be much under the market price of Microsoft stocks (somewhere between 30 and 40$ per share) so the employees are really advantaged. They established a price per share of 7 U.S. dollars and ruled that no employee could invest more than 15% of their pre-tax salary in stock options. Third, the company would have to print out the actual shares and make it possible for the employees to buy them. 3. Changes in the organization's structure Once Microsoft had sold its employees the shares promised, the number of shareholders would grow.

The money charged for the options would be transferred into the company's bank account leading to the increase of Microsoft's long-term capital. Moreover, for even allowing its employees to buy shares, the IRS would absolve Microsoft from paying a certain amount of taxes, proportional to the number of shares sold and the amount of money charged for them (http://www.fool.com/portfolios/rulemaker/2000/rulemaker000217.htm).

On the other hand, as the number of shareholders increases, so does the amount of money the company would have to pay its investors in the form of allowances or dividends, therefore a decrease of its own profits would occur. 4. Measurements made to determine when the problem is solved To identify whether the human resource problem is solved within the company, the managers could request several studies. These studies could refer to the employee fluctuation adherent to the months since the ESPP was made available.

Once the fluctuation ratio would be identified, it would be compared to the fluctuation ratio adherent to the same period of the previous year. The HR department would calculate a variation interval in which the fluctuation would be considered normal and then compare the current employee statistics with the previous ones and draw the conclusions.

Another method Microsoft could use to identify the results of the implemented solution would be to engage in conversations with the employees or send out questionnaires for them to fill in and then analyze the responses given. They could ask the workers if they purchased shares and if they did, in what amount, how has their income changed since they became shareholder and how did they see their future at Microsoft. 5.

Contingency plan In the eventuality that the implantation of the ESPP does not have the desired results, the human resource department needs to elaborate a second plan to solve the employee crisis in the company. Based on the results of the Paired Comparison Analysis (part two), the second best alternative to solve the human resource problem would be for Microsoft to elaborate financial plans for its workers.

In this order of ideas, the company could offer their employees the possibility of "leaving" part of their monthly salaries in the company for further investments. In exchange for this short-term "loans," Microsoft would pay employees interest rates according to the amount of money left in the firm and employees could get their money back anytime they wished. Nonetheless, these amounts could not exceed 15% of each employee's pre-tax salary (Microsoft Benefits, Microsoft Corporation, Recruiting Brochure, 0695 Part No.

098-60768) Another method to promote the financial plans for employees would be to offer them assistance with purchasing houses and other properties. Microsoft could help its employees contract bank loans by endorsing them or could even offer the employee the loan themselves, with interest rates lower then the banks'.

Having concluded, in the second part of the paper, that financial rewordings are the most motivating factor for an employee, I believe that, if the ESPP were to fail, the next best option Microsoft should implement, in order to solve their HR crisis, would be the elaboration of financial plans. 6. The criteria for measuring a successful outcome Considering the initial problem, mass resignation of the employees, the solution implemented would be considered successful once the number of employees that leave the firm will decrease.

Based on the statistics elaborated by the HR department, the outcome of the selected alternative will be considered to have achieved its goals when the employee fluctuation will be contained in the variation intervals adherent to the normal fluctuation. 7.

Schedule and budget for the ESPP The implementation of the ESPP would begin in the autumn of 2006, more precisely in September 1st 2006, with the necessary preparation: analyzing the data adherent to employees' interest in becoming shareholders, the approximate number of shares needed, their costs and the actual printing of the stock options. From January 1st 2007, Microsoft employees would be able to buy shares at he price of 7$ per share, but will not be allowed to.