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Microsoft Corporation (NASDAQ: MSFT, NYSE: MSFT) is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions. Established on April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home computer operating system market with MS-DOS in the mid-1980s, followed by the Microsoft Windows line of operating systems. Microsoft would also come to dominate the office suite market with Microsoft Office. The company has diversified in recent years into the video game industry with the Xbox and its successor, the Xbox 360 as well as into the consumer electronics and digital services market with Zune, MSN and the Windows Phone OS. The ensuing rise of stock in the company's 1986 initial public offering (IPO) made an estimated four billionaires and 12,000 millionaires from Microsoft employees.
Primarily in the 1990s, critics contend Microsoft used monopolistic business practices and anti-competitive strategies including refusal to deal and tying, put unreasonable restrictions in the use of its software, and used misrepresentative marketing tactics; both the U.S. Department of Justice and European Commission found the company in violation of antitrust laws. Known for its interviewing process with obscure questions, various studies and ratings were generally favorable to Microsoft's diversity within the company as well as its overall environmental impact with the exception of the electronics portion of the business.

Skills development opportunities can be valued by employees as much as salary increases, according to one organisation.

The Chartered Management Institute (CMI) says businesses wanting to retain their best employees have no choice but to offer regular opportunities for them to up-skill.

Mike Petrook, spokesperson for the CMI, said "a fairly overwhelming majority" of employees want to develop transferable skills on the job.

He said that while a failure to increase salaries may encourage some employees to leave, money is by no means all that matters to workers.

"Money is important, because frankly we've all got bills to pay," Mr Petrook admitted.

"But the most important thing that people are looking for is how they can make sure that they are continually employable."

He said that if businesses are not prepared to invest in employee skills training, talented staff will simply find another job elsewhere.

PricewaterhouseCoopers recently reported that UK businesses' failure to retain talent as well as in other countries costs a combined £42 billion per annum.

The professional services giant said that companies need to consider carefully how they reward and motivate staff, and attempt to secure their loyalty.

The employee retention program could be expensive, perhaps costing billions of dollars, based on what Microsoft did when it acquired another technology company last year.

A look at that deal suggests the extent to which people are the vital assets at companies that mainly generate ideas that become software and Web services. The hidden cost of “flight insurance” against employee defections may also be a reason Microsoft has resisted raising its bid, which is now worth $42 billion.

Last May, Microsoft bought Tellme Networks, a maker of voice-recognition software used in directory assistance and for searching the Internet through voice commands. Microsoft paid $800 million for Tellme, a private company based in Mountain View, Calif., but it put in another $100 million for employee retention programs, according to two people close to Microsoft. That figure has not been previously disclosed.

Cash payments, stock options and grants to encourage employees to stay after a takeover are fairly standard in Silicon Valley, venture capitalists and industry analysts say. These incentive plans, they add, can extend deep into the engineering ranks, unlike the situation in most other industries where retention packages, or “golden handcuffs,” are typically offered to a handful of top executives.

For Tellme, which has 330 employees, the money set aside amounts to more than $300,000 for each worker.

Yahoo is a much larger company, with more than 14,000 employees worldwide. And if Microsoft acquires Yahoo, any employee retention effort would probably be more tailored and less broad than for Tellme, analysts say. But even a program proportionately much smaller could add another sizable expense, perhaps a couple of billion dollars, to the overall cost of bringing Yahoo into the Microsoft fold, analysts estimate.

“It would be a significant additional expense that would come due over several years,” said David B. Yoffie, a professor at Harvard Business School. “And Microsoft knew that when they made the bid for Yahoo.”

When buying companies in Silicon Valley, Microsoft in particular may have to offer attractive incentives to keep employees. Its reputation is still tainted by memories of its strong-arm tactics against companies like Netscape and Sun Microsystems in the 1990s, which prompted a long-running federal antitrust case that it lost.

That reputation is probably dated, noted Mark R. Anderson, chief executive of the Strategic News Service, a technology newsletter. “But if you’re in the Valley, that first impression of Microsoft still has to be overcome,” Mr. Anderson said. “So I think the company pays more in employee retention packages — a Microsoft premium.”

At Tellme, there was some history to overcome. Michael McCue, a founder and the chief executive, was a vice president for technology at Netscape. He met regularly with Justice Department investigators when they were assembling their antitrust case against Microsoft.

When the chief executive of Microsoft, Steven A. Ballmer, offered to buy Tellme, Mr. McCue asked if his company would be forced to switch the operating system used in its data center, Sun’s Solaris, to Microsoft’s Windows.

“No, no, we’ve learned our lesson,” Mr. Ballmer replied, according to Mr. McCue.

Mr. McCue declined to discuss Microsoft’s employee retention program, other than to say it had been ample and effective. A few people have left, including Robert P. Komin, Tellme’s chief financial officer, who joined a solar energy start-up, Solexel. But 95 percent of the workers who were with Tellme when it became a subsidiary of Microsoft stayed.

The case examines the employee motivation and retention strategies of the US based Microsoft Corporation (Microsoft). Since its inception, Microsoft was appreciated for its employee-friendly HR practices. However, during the late 1990s, as the company was growing rapidly in size, it lost the popular elements of its work culture. Moreover, several racial discrimination lawsuits and antitrust proceedings affected the company's corporate image and financial performance adversely. In the early 2000s, in order to improve its profit margins, Microsoft started cutting several employee benefits, which demotivated its employees. To boost the employee morale, in 2006, Steve Ballmer, the then CEO of Microsoft, appointed Lisa Brummel as the Senior Vice-president of HR.



After taking charge, Brummel announced a plan to significantly revamp some of the existing HR management practices at the company. She announced a plan named 'myMicrosoft,' which included developing appropriate systems to enhance communication between the employees and the HR department, making changes in the company's performance review system, introducing several new employee benefits, and designing new workplaces in an effort to attract and retain employees. The case analyzes in detail the HR initiatives taken by Brummel. It ends with a discussion on the benefits realized from the initiatives implemented by her.

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