Microsoft Corporation's Organizational Structure - Case Study Example

Organizational Behaviour - Report on Microsoft Introduction Organizational behavior can be defined as “the study and application of knowledge about how people as, individuals, and groups act in organizations” (Colquitt, 2010). However according to the modern changes and development of the business organizations organizational behavior has been revolutionized and expanded in broad areas such as organizational culture, leadership, change management and organizational ethics. Thus organization behavior is based on basically on management philosophy, values, vision and goals which would drive the organizational culture. Basically organizational culture is determined by the leadership style, communication and group dynamics of the particular organization. In fact employees would perceive this as the quality of work life which impacts on final outcomes as employee performance, motivation, individual satisfaction and personal growth and development in the organizational environment. Business organizations are those legal entities that engage themselves in the production of a good or service with the intention of selling it for a profit and are much more focused on the long run survival in achieving organizational goals such as profitability, shareholder satisfaction, market share and share price growth, corporate governance, sustainability, market leadership and so on. However the modern conceptualization of the business organization as a paradigm that sets trends to be followed by societies, in which they operate thus influencing the very behavioral dynamics of the members of those societies, is far more revolutionary and thought provoking. Thus this paper would focus on the strategic activities of the senior executives and provide an overview of the operational and tactical decisions implemented by the Microsoft Company. Further it would provide an understanding of the main components of competitive advantage and how these components have sustained the company against the backdrop of the behavioral challenges faced by the company in modern business environment. Analysis I. Company Background of Microsoft Microsoft Corporation can be identified as a multinational computer software technology company which basically provides different computer software products for computing devices, consumer electronics and video game consoles to its worldwide customers. Its current staff strength is in the region of 93,000 employees working in over 90 odd countries. This figure alone speaks volumes about its business strategies and initiatives. Thus Microsoft’s mission statement is “To help people and businesses throughout the world realize their full potential”. In addition the company has developed a system of values - “integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect” (www.microsoft.com). Microsoft’s emphasis on technology isn’t without its own detractors. For instance its technology is more or less becoming obsolete day by day due to the fact that its rivals are doing better in developing hybrid technologies. However unlike other competitors in the market Microsoft could have been innovated in very critical areas such as maximizing the speed of search engines by using hybrid technologies. However Microsoft’s financial statements are not the surest indicator of the company’s success or failure. In the first place the company’s success is based on a few products such as Microsoft Office System, Xbox 360 platform sales, Windows Server & SQL Server and licensing of Windows Vista. Its critical success factors cannot be determined in the absence of a much broader comparative analysis involving internet related services including content generating activity and advertising. In comparison to a profit figure of $ 14,065 million in 2007, the company made profits amounting to $ 17,681 million in 2008. This is substantial enough against the backdrop of the current economic recession. This success is further dwarfed by the increase in operating costs to $ 37,928 million as against $32,598 million in 2007. Stakeholder’s equity was $ 36,286 million in 2008 compared to $ 31,097 million in 2007. Thus the organizational success is determined by the internal strengths of the organization in which controlling, rationalizing and utilizing the available resources to achieve the maximum productivity and the associated organizational goals through competitive advantage are the predominant activities. Thus Microsoft has the highly calibrated capital, trained employees and networks in the form of strategic intelligence about markets, finances, operations, techniques and HR management (Greenberg, & Baron, 2003). Microsoft’s capacity building and enhancement strategies have known to be sound and its core competencies have been built around this formulaic strength-weakness determination paradigm. Despite this position of Microsoft as a pioneer of costly-to-copy resource development processes still there is competition coming from rivals who have been able to imitate the same product by reducing its cost and using advanced technology, e.g. wide range of software products. Still Microsoft’s internal value chain is particularly stronger in comparison to most of its rivals because it has created a flexible strategic management structure, culture and appropriate leadership style. Microsoft’s strategic expansion policy is shaped by M&A tactics though its acquisition bid for Yahoo failed due to resistance of the Yahoo management. It regards Yahoo as a company with a modern face. Though Yahoo has some specific advantages in market share growth and internet search engine related advertising and content creation, it basically lacks a resource base as that of Google’s. Microsoft has been seeking to place itself in between Google’s high profile marketing success and Yahoo’s divisive policy approach. However it must be noted that Microsoft’s current operational strategy is focused on challenging Google while Yahoo is considered to be lacking in many performance related competencies. Critical success factors or competencies like the firm’s ability to respond to market volatilities arising from the current economic downturn are determined by the internal factors. A business strategy of Microsoft has acquired a new dimension with a set of priorities. It has being worked out to realign its strategic imperatives in corporate governance and VRIO framework with specific emphasis on achieving competition related long term objectives against the backdrop of stiffer regulations and competition. The strategic competition has compelled Microsoft to adopt far reaching policy changes in both its operational strategy and the mission related corporate governance principles in order to achieve horizontal and vertical synergies which are associated with its organizational goals. Thus strategic orientation of Microsoft is centered on competitors, the competitive environment and customer satisfaction or/and market penetration. II. Organizational Culture of Microsoft Microsoft’s organizational culture is essentially connected with leadership style. Leadership at Microsoft is determined by its cultural diversity. The multinational workforce at Microsoft requires such a democratic leadership style with a transformational approach (Maanen, & Barley, 1984). Transformational leadership style places emphasis on collective responsibility and corporate goals such as corporate social responsibility, growth, stakeholder satisfaction and innovation. Internationally accepted HRM practices that are associated with culturally diverse staff have been fully implemented at Microsoft and it has adopted such practices as Training & Development, skills reorientation, job enrichment, acculturation (or cultural assimilation), performance management and good compensation practices to retain the staff. According to 2009 statistics there were approximately 93,000 employees working on full time basis, 56,000 in the US and 37,000 internationally at Microsoft. In fact, of the total 36,000 of them were involved in product Research & Development (R&D), 26,000 were employed in Sales & Marketing, 17,000 were engaged in product support & consulting services, 5,000 in manufacturing and distribution and 9,000 employees were involved in general and administration (Microsoft Annual Report, 2009, www.Microsoft.com). In fact Microsoft initiated some cultural diversity programs for the staff in its efforts to create an environment of inclusion and diversity for the employees of the company. Organizational culture demands a degree of corporate responsibility towards meeting demands of the community. In other words organizational culture or and behavior is connected with the company’s competition policy of paying higher prices to sustain its supply lines disregarding the consequences of supplier behavior (Kossek, & Karen, 2003). Its organizational culture is customer-centric and employee motivating but nevertheless quality targets of some of its products are achieved at the expense of employee welfare. III. Organizational structure of Microsoft Microsoft’s organizational structure can be regarded as the best management structure comparing to other companies that democratically constituted. It has a flatter organizational structure with a shorter hierarchy which encourage for the interaction and communication between all levels of the employees. There is still a sound system of internal communication with quality circles being formed and well informed about decisions in advance. Figure 1: Manager’s/Leader’s Competency-based Framework Source: Writer’s own diagram Warren Bennis (1961) holds the view that less hierarchical more democratic institutions with the ability to adapt to the unfolding environment are the best. A competency-based contingency framework or model like this requires a series of sub-level functions or competencies to be outlined as of consequence though such heterogeneous elements which lie outside the functional domain of the manager’s/leader’s tasks could be avoided with convenience. For example Microsoft’s manager’s/leader’s common competencies are always inclusively treated in the theoretical framework for the purpose of reference. This is illustrated by the above diagram. Planning, leading, organizing and controlling are four function based approach to managing the work environment in a business organization. Those are considering as main functions that a manager has to perform in this business organization. The manager’s primary function is to determine the organizational goals that set out in the mission statement and the annual reports to its stakeholders. Microsoft’s organizational goals have to be achieved by utilizing and organizing the available resources and combining them with employees by maximizing its output and minimizing its costs. Therefore the manager seeks to combine supplies and provisions and then integrate suppliers and creditors into the whole process of management. Next, management need to adopt methods in order to build integrated networks or process for easy control and execution of strategy. IV. Leadership style of Microsoft Leadership/management style is defined as the set of skills that individual leaders possess in the organizational context to lead his/her subordinates to achieve organizational goals within a pre-defined time-frame. Leadership style of Microsoft is basically democratic and right now much attention is being paid to cultural diversity programs of an international nature. Thus relationship or transformational leadership theories focus on the positive links between the leader and his followers (Menken, 2009). Transformational leaders are able to inspire and motivate their subordinates in a manner that the latter would have all the freedom to achieve organizational goals performing on a team spirit. Since transformational leaders act in conformance with high ethical standards subordinates would have the potential to contribute towards organizational goals. Its strategic management culture has led to the recruitment, training and development of new executive leaders. Skills of those efficient executive leaders are determined by Microsoft’s commitment to provide a good service to the community with specific emphasis on customer care. Microsoft has been successful in adopting just the right type of technique in enabling worldwide people to interact in a highly volatile e-environment. Microsoft has been able to strategically push its product portfolio in the software products and computer devices market at a very competitive level. Competitive strength of the organization is determined by its corporate strategy including the marketing strategy. For example Microsoft as a service provider would have to initiate its corporate strategy of satisfying the consumer with a range of services so that competitors would be compelled to match its own strength or adopt a different policy approach such as lower prices to attract customers. How best Microsoft would be able to match its competitors in this environment of stiffer competition depends on the inner organizational strengths such as leadership style and motivation of staff. V. HRM & CSR Strategy at Microsoft Cultural diversity of workforce in modern business organizations against the backdrop of globalization has attracted the attention of many researchers and analysts. Multicultural workforces in the context of the modern business organization have been studied with specific reference to international Human Resource Management (HRM) practices. HRM according to Armstrong “is the strategic and coherent approach to the management of an organizations most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business” (Armstrong, 2006). HRM involves such tasks as recruitment, training & development (T&D) of skills, employee relations, retention and motivation strategies, workplace culture and delegation of power, authority and responsibility. Thus a far more strategic significance is assumed by its country-specific and organization-specific contexts than any other dimension. Thus Microsoft has been reputed for very advanced HRM practices both at the national and the international levels. In fact Microsoft has been especially known for its international HRM practices in all over the world. Thus globalization has had its impact on Microsoft in a much more pronounced way than it had on other domestic companies. Because of employees have been regarded as the most valuable asset, Microsoft provides diverse resources, tools and flexible programs to their employees, to create a balance between work and personal lives (Brynjolfsson, & Urban, 2001). Especially Microsoft has been initiated different work life balance programs including, flexible working arrangements, employee development courses, financial planning, grocery service, child-care assistance, legal assistance, fitness benefits and other variety of programs. Despite the above programs Microsoft management is committed and dedicated to create a healthy, productive and flexible work environment because that would enhance the organizational productivity as well as personal life balance. At Microsoft, it has defined diversity broadly as it is beyond the race, origin, gender, age and expression. Thus Microsoft has been identified diversity values – thinking and action globally; innovating; and showing leadership. In fact multicultural employees at Microsoft are acting as innovative decision makers for their worldwide customers and business partners. Thus innovation would directly affect on reducing the cost of technology at Microsoft and also Microsoft shows their leadership capabilities especially by supporting the communities. However Microsoft has adapted a series of CSR initiatives and policies in conformance with the Microsoft’s global business strategy. For instance Microsoft has joined with worldwide partners to take action against the illegal spammers and phishing scammers which would support to the customers and public policies and legislations. The theoretical underpinnings of CSR have been evolving against a more complex and diverse organizational context in the ever increasingly globalized world. Theoretically CSR involves those social, employee and public welfare and environmental policies and initiatives. Microsoft has initiated some measures to retain its staff members in the long run with a strategic focus on cooperate goals. Productivity goals of these Microsoft have been amply affected by these new measures and labor turnover figures have shown sharp decrease with these policy adopted. Microsoft has been promoting safe online experience, online trust and confidence so that people can rely on internet and do their business without any issues. VI. Organizational change and development Organizational change and development refers to a process in which individuals, processes, practices and whole organizations are transformed from their current position to a new desired position. According to Microsoft its organizational change and development is a complex strategic process in which attitudes, values, beliefs and the organizational structure are subject to change through adaptation to new challenges and techniques in equally new market segments. In other words it’s a dynamic process intended to bring about systemic improvement and change. Thus organizational culture plays a very significant role here (Burke, 1991). The process of transformation from what an organization now is to a new dimensional growth trajectory is determined by how best change is accepted by the staff of the Microsoft. However its objective is a higher quality work life, productivity, adaptability and effectiveness of the staff and overall organizational activities. It has three stages or phases, viz. design, planning and implementation. As much as organizations differ in their internal leadership and cultural set up, the theoretical approaches to change also differ. For instance, in Microsoft there is a democratic organization or/and leadership styles. They need equally diverse and effective theoretical approaches for change. Nowadays nature and the needs of the Microsoft are changing rapidly and organizational development is changing to meet the changing need of the organization (Patterson, & West, 2005). Thus typical organizational development activities include some forms such as team building, work life balance, organizational assessment, carrier development, training, coaching, leadership development and change management. It is aim to improve health and effectiveness of the individual and organizational level. Conclusion Organizational behavior has been defined as people-organization relationship. Thus it has been described in a variety of terms by analysts and the related learning outcomes such as organizational structure, culture, leadership style, HRM and CSR practices and policies, innovation, development and change management are part of this overall strategic orientation. However organizational behavior can be considered as a multifaceted task which is invariably connected with the corporate strategies and goals of the organization. Thus motivation, group dynamics and leadership style have one particular aim, viz. meeting the challenges of the strategic competitive and operational environments of the organization. Particularly the functional parameters associated with attitudes, behaviors, values, strategies, leadership and teamwork skills have undergone a rapid transition. Such parameters have increasingly been redefined by modern theorists to improve a variety of work environment based practices. However Microsoft existing strategic management initiatives and policies have been subjected to technological advances, competitive actions and fast pace of change within the environment. In other words Microsoft must adopt a very long term strategy based on targeting not only employees but also re-orienting them to meet overall management challenges both in policy design and implementation. REFERENCES 1. Armstrong, M 2006, A Handbook of Human Resource Management Practice, 10th edn, Kogan Page, London. 2. Bennis, WG 1961, ‘Revisionist theory of leadership’, Harvard Business Review, vol. 39. 3. Burke, WW 1991, ‘Creating successful organization change,’ Organizational Dynamics, vol.19, no.4, pp.5-17 04. Brynjolfsson, E & Urban, G (Eds) 2001, Strategies for E-Business Success, Jossey-Bass, California. 05. Colquitt, J 2010, Organizational Behavior: Improving Performance and Commitment in the Workplace, McGraw-Hill, New York. 06. Greenberg, J & Baron, RA 2003, Behavior in organizations: Understanding and managing the human side of work, 8th edn, Pearson Education, New Jersey. 07. Kossek, E & Karen, M 2003, ‘Increasing diversity as an HRM change strategy’. Journal of Organizational Change Management, vol.16, no.3, pp.328-352. 08. Maanen, V & Barley, JV 1984, ‘Occupational communities: culture and control in organizations’, Research in Organizational Behavior, vol.6, pp.287-365. 09. ‘Microsoft Corporation Annual Report’, 2009, Retrieved from www.microsoft.com on February 18, 2009. 10. Menken, I 2009, Organizational Behavior and Leadership Management Essentials Emereo Publisher, Brisbane. 11. Patterson, M & West, MA 2005, ‘Validating the organizational climate measure: Links to managerial practices, productivity and innovation’, Journal of Organizational Behavior, pp.379-408. Read More