Tech Stuff

What Microsoft CEO Ballmer gets wrong about employee compensation

Microsoft CEO Steve Ballmer is on the offensive, launching a new compensation plan designed to stem the flow of employees fleeing to other, jazzier companies like Google, according to GeekWire, which released an internal email that Ballmer sent to the company this morning.

Ballmer is slashing the amount of stock awards given to employees and increasing the amount of up-front cash employees get in their base salaries, calling the new payment strategy “the most significant investment in overall compensation we have ever made,” and noting that the changes are designed specifically to draw in “top talent.”

The plan, which takes effect in September, also involves retiring the company’s current two-pronged employee rating system and making “important increases in compensation… [in] certain geographies.”

It’s about time someone addressed the problem of Microsoft’s employee losses and recruitment woes, which have been significant issues at the company for much of Ballmer’s tenure. But the approach appears particularly ham-handed, given that it focuses its compensation increases on mid-level employees company-wide and not on less-expensive entry-level engineers or upper-level star talent.

For the less-stock-more-cash strategy to be a boon to employees, Microsoft shares would need to decline significantly over time. And, even if they did, all that would mean is that they’d dodged a huge bullet by having their pay corralled into their base salaries.

Making matters worse, Microsoft’s average starting salary still trails Google’s by an average of $10,000, putting it at a severe disadvantage when it comes to straight-from-college recruitment.

That being said, Google is a particularly rough competitor when it comes to employee pay — in an overwhelmingly popular move, the company announced a 10-percent raise for all employees last December.

TAGS: google | microsoft

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