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A Microsoft Turnaround in the Making: Ballmer Gets Religion

This article is more than 10 years old.

Microsoft is coming back, and it all comes down to talent management.

Microsoft's Steve Ballmer proves the point.

BusinessWeek just published a fascinating interview with Steve Ballmer, CEO of Microsoft. In this interview Mr. Ballmer discusses his growth as a leader, and explains that when he first got the job 3 1/2 years ago he believed that he could "muscle" most major decisions through the company. But Microsoft's tremendous failures with Vista demonstrated that the company was not working well together and there were not enough empowered leaders in engineering. Today Ballmer has totally changed his management philosophy and is now focused heavily on recruiting the right leaders and making them work together.

I spent a few days at Microsoft recently and after many years I felt a whole new energy. Product groups are clearly working more closely together, the company is now heavily focused on design and usability (Microsoft's new phone software is getting rave reviews), and I expect Windows 8 and Skype integration to be a huge home run for the company. If you read between the lines of Ballmer's interview (and visit Redmond), you can see that this turnaround is all about talent management and leadership. And today Microsoft's stock is at it's highest level in three years.

What This Means to You. Talent Management makes money.

Well, other than going out and buying MSFT stock, there is another message here. Sound talent management makes money.

Here is some astounding data:

Of the 700+ organizations we studied in 2010 and 2011, only 7% told us that they have a "strategic talent management" program. (Defined as a top-down led program for leadership development, succession, development of strategic competencies, and continuous and structured reviews of talent.)

These "Talent Driven" Companies Vastly Outperform their Peers

Companies at this level of maturity are generating more than twice the revenue per employee, 40% lower turnover rates, and 38% higher levels of employee engagement than their peers. And by the way, they also spend almost twice as much per employee on HR in general.

So while talent management takes time and costs money, it really pays for itself.

Talent Management is Good Business, not just Good HR.

Look at enduring organizations like IBM, GE, UPS, American Express ... companies that seem to survive and continuously reinvent themselves year after year. How do they do it? They focus heavily on the management of people, not just the business. They assess and re-assess leaders, they move people from role to role, they invest in corporate training, and they put in place rigorous and highly scientific solutions to hiring.

Human Resource executives hear this. In a recent CHRO (Chief Human Resource Officer) study performed by Cornell's School of Industrial and Labor Relations, HR leaders overwhelmingly agreed that their biggest challenge this year is "building better talent."

But ultimately this is not HR's problem. HR's role is to design and promote the process, but it is up to line leaders to operate as "talent managers." This means taking time to assess leaders, figure out "what people qualities drive success," and give people feedback on a continuous basis. These are the skills which winning leaders build over their entire career.  And as organizations, only 7% of companies believe they have reached this level of management maturity.

And this is not really a surprise. Organizations must continuously invest in management and leadership training, because people are always getting "promoted" into leadership without the necessary skills (67% of respondents rate their first line leaders far-behind or well-behind in the skills they need to do their jobs). And the "Right" leaders for your company are unique to your own culture, business, and strategy.

By the way, talent management is not something you copy out of a book. Your talent management strategy is unique to you. If you are a fast-growing company, you may need to focus on strategic sourcing and building your employment brand. If you are globalizing, your focus should be the integration of your recruiting and internal talent mobility program. If you suffer from low engagement and employee performance, it may be time to focus on the revamp of your performance management and development planning process.  And on and on.

The bottom line is this: companies that work on these "soft" programs dramatically outperform those that don't. The numbers prove it.... (and watch Microsoft this year, I'm betting on a big comeback).