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Wealth of Options: By David Bank
Now, Mr. Peters spends many afternoons at Sun Villa Bowl, an aging bowling alley tucked between a grocery store and a Mormon temple in this eastside Seattle suburb. On a recent weekday, Mr. Peters, 41 years old, is the only bowler present below what used to be called retirement age. He raises a red ball to his side, steps off, slides and releases. The ball skids down the lane, hooks hard to the left and explodes into the pocket. Strike! "You can tell when it leaves your hand," he says. "It's so satisfying." More satisfying, for now, than his old job at Microsoft. Mr. Peters says he realized as he neared his 40th birthday that he had lost his passion for the all-consuming, 16-year career that made him rich but led him to neglect almost everything else, including his health and family. Many other top Microsoft managers have come to similar conclusions. Tired of grueling deadlines, frustrated by the bureaucracy that has accompanied Microsoft's explosive growth or lured away by the boom in high-tech start-ups, dozens of the company's most capable leaders, all around 40, have opted out -- at least temporarily -- to hunt for fossils, take bike trips, launch new ventures, play with their children, do good or just goof off. The defections reflect Microsoft's own passage into midlife as it prepares for its 25th anniversary next year. Microsoft may have assembled the best team of software professionals the world has ever seen, as Chairman Bill Gates likes to boast, but its very success may now be contributing to the exodus. By most analysts' estimates, about a third of Microsoft's 30,000 permanent workers are millionaires. Top performers hired as recently as 1994 are likely to have options on shares valued at more than $3 million. Many old-timers, benefiting from annual bonuses in the form of stock options and the 764-fold rise in the company's market value since it went public in 1986, are worth more than $100 million -- or would be if they had held their stock. To be sure, turnover is endemic in the high-tech industry. But in most companies, the outflows follow financial disappointments. Microsoft, by contrast, has been on an earnings roll and is expected to report net income for the fourth quarter ending June 30 of $1.9 billion, or 35 cents a diluted share, up 36% from a year earlier, on revenue of $4.77 billion. Although Microsoft's shares have stalled recently, they have nearly doubled in the past year. The top-level flight is all the more striking because the Redmond, Wash., company has proved better than most of its competitors at recruiting and retaining talent. The incoming class of nearly 600 new college graduates, part of this year's crop of 4,000 new employees, is the largest in Microsoft's history. Last year, the company's overall attrition rate of about 7%and 5.4% for top managers -- was below its historical average and less than half the rate for the software industry as a whole. However, those figures don't reflect the personnel on leave or the rash of recent departures. Many software developers, of course, make their biggest technical contributions early in their careers. For the 30- and 40-somethings near the top of the organizational chart, the idea that there is more to life than Microsoft appears to be spreading like a computer virus. Since last year when he promoted Steve Ballmer to president, Mr. Gates, 43, has himself cut back on his business responsibilities and work hours and is spending more time on philanthropy and with his family. Other high-profile executives have gone off-line completely. John Ludwig, 38, an important player in Microsoft's assault on Netscape Communications Corp. in the so-called Browser Wars, last week gave up his post as vice president of the company's Consumer and Commerce Group to go on a leave and says he doesn't know whether he will return. The previous week, Nathan Myhrvold, 39, chief technology officer and Mr. Gates's favorite big thinker, left for at least a year to dig for dinosaur bones and go fly-fishing. He was beaten to the exit by his younger brother, Cameron Myhrvold, 38, vice president of the unit that cut deals with Internet service providers, who resigned in April. And in May, Steve Perlman, 38, resigned as president of Microsoft's WebTV unit, despite entreaties from top executives that he was critical to the company's digital television strategy. In addition to Nathan Myhrvold, two other members of the company's old nine-member executive committee, which was replaced with a 14-member body in March, remain on leave or reduced duty. "I'm going to play some hooky," Group Vice President Pete Higgins, 41, said when he resigned as head of Microsoft's interactive media group this past November. Brad Silverberg, 45, the senior vice president who delivered Windows 95 and then led the company's Internet resurgence, has been on leave since 1997 and recently rejected a plea from Mr. Ballmer to take over the company's Web commerce and services efforts, though he did return part-time as a consultant. Even Mike Murray, 43, who as vice president of human resources was responsible for recruiting and retaining talent, decided to call it quits in March, embarking on a plan for "doing good" by helping children and families. For Microsoft, such departures are a double-edged sword. The old-timers' contributions probably will be missed, but if they were no longer motivated, the company may be better off with new blood. That's especially true given the customerfriendly face Mr. Ballmer, 43, is trying to put on a company long known for a certain harsh arrogance. "Some people go voluntarily," Mr. Ballmer says. "Some people are pushed." Either way, he says, their replacements are fresher and smarter. "We have a bench that is very deep," says Mr. Ballmer. "We have people who are looking for new opportunity. We have people who are fired up -- driven -- to lead the next generation." In December, Mr. Ballmer convinced Microsoft executive Brian Valentine, a skilled motivator, to take over the chronically late Windows 2000 project. Moshe Dunie, Mr. Valentine's predecessor as vice president of Windows, "was wearing down a little bit," Mr. Ballmer says. Mr. Dunie, 49, who pushed six successive versions of the company's flagship Windows software out the door in the past decade, admits he was tired, but says the decision to take a leave of absence was his own. "Burnout is too strong a word," he says. "But at some point, you have to say to yourself, `It's time.' " For those who have stayed on, independent wealth injects an unusual dynamic into worker-boss relations. "Sometimes I feel like I'm running a volunteer organization," says Tod Nielsen, vice president for developer marketing. Even the people who report to the people who report to him have enough money to retire, he says. "It's like the school fair. Everybody wants to work in the kissing booth. It's a management challenge to say, `No, you have to sell raffle tickets.' " In a effort to keep this well-heeled work force happy, Mr. Ballmer reorganized the company in March into a half-dozen business units structured around specific customers and competitors. The strategy was designed to give managers more autonomy, making them feel less like cogs in a giant machine. For nonexecutives, Microsoft in May sweetened its salary and options packages and doubled the number of steps in its pay scale to foster more frequent promotions. To combat burnout, project managers now encourage teams to leave work earlier, knock off weekends and make time for their families. As a software developer and later as a top manager, Mr. Peters, the aspiring bowler, was as hard core as anybody at Microsoft. As leader of the team that developed Excel, the spreadsheet software that displaced Lotus Development Corp.'s once-dominant 1-2-3 program in the early 1990s, he said his team was motivated not by money but by the "sheer joy" of defeating what was then the largest personal-computer-software company. Working at Microsoft "was totally fun," says Mr. Peters, who cashed in at least $4.5 million of Microsoft stock several years ago, leaving him with shares valued at about $10 million and options on many more. "But I did it, and it was time to do something else." That included supervising construction of a new home for his family -- his wife, June, and his 13 year-old stepdaughter -- working out three days a week, and taking up bowling, a sport the self described computer nerd, eager to reform his sedentary habits, thought he might be able to master. "Not that he has any innate ability," says Gary Larson, manager of the pro shop at Sun Villa. At first, Mr. Peters couldn't even coordinate his swing with his steps, Mr. Larson says. "Now it looks like he's bowling, rather than doing something else with the ball." These days, Mr. Peters finds his joy in bowling a 278, out of a perfect 300, as he did recently. If he can raise his average to 200 from his current 170, he will qualify for the Professional Bowlers Association tour, though he concedes that he is nearly guaranteed to lose every tournament. Bowling, however, is a welcome antidote to programming, Mr. Peters says. Each ball is a new beginning, independent of everything that came before. While continuing to pursue his bowling career, however, Mr. Peters returned to Microsoft in December as a half-time consultant in its computer-games group, but he says he is looking for another project to fire his competitive juices. In fact, Microsoft says that more than 90% of its employees who take leaves return to the company, though not always to the same jobs. Mr. Peters himself believes that many of the recent departures will prove only temporary: "We don't hire well-rounded people. We tend to preselect for computer freaks," Mr. Peters says. "They may want to go see Europe. They go see it. But they're still computer freaks when they get back." Such corporate sabbaticals, officially called Microsoft Achievement awards, give employees eight weeks of paid time off after seven years of high performance. They can add as many as four weeks of vacation time, to get up to three months off. Senior executives may take much longer leaves, a policy aimed at helping them recharge their batteries and discouraging them from joining competitors. But even for some who still have the fire in their bellies, Microsoft may not be the most attractive venue. "It's hard to complain about what Microsoft did for me from a financial point of view," says Peter Neupert, 43, the former vice president of the interactive-media group who left last year to become chief executive of Drugstore.com, a Seattle e-commerce start-up. "But the opportunity to prove to myself that I could create something, with me as the leader, as opposed to Bill and Steve -- there wasn't anything comparable." If Microsoft can't replace the departing talent in-house, it will be forced to do battle for top managers in the frenzied executive-recruitment market, where demand is voracious and supply limited. The top job in its consumer and commerce division has been vacant for more than six months, despite overtures to many of the top Internet executives in Silicon Valley and elsewhere. Mark Booth, 42, former chief executive of News Corp.'s British Sky Broadcasting satellite network, rejected the job after News Corp. Chairman Rupert Murdoch agreed to set him up with a $300 million venture fund. Meanwhile, some new Microsoft hires think the glory days for the company's stock are past, a concern that has forced Microsoft to rely less on stock options and more on its $20 billion cash hoard in structuring compensation. That marks an inevitable passage in the life cycle of a company once viewed as a zealous insurgent out to conquer the world. "You can't be an insurgent all your life," Mr. Ballmer says, "unless you're unsuccessful." Copyright © 1999 Dow Jones & Company, Inc. All Rights
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