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How Microsoft Reviews Suppliers

Microsoft is justifiably famous for its hard-charging approach to employee performance. Don’t worry about managers at this company pulling their punches during reviews. (You might worry about some of them throwing punches, however.)

Microsoft is justifiably famous for its hard-charging approach to employee performance. Don’t worry about managers at this company pulling their punches during reviews. (You might worry about some of them throwing punches, however.)

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Recently, one Microsoft division extended its review process beyond the Redmond, Washington campus to its suppliers. The Employee Services Group – responsible for everything from travel to 401K programs to the on-site library – outsources more than 60% of the services it provides. The group was doing more and more business with suppliers, but not providing enough feedback on how well Microsoft thought they were doing – feedback that the suppliers said they wanted to get and that the company wanted to give.

“Why do you do reviews with employees?” asks Roxanna Frost, group program manager in Microsoft’s Executive Management and Development Group. “So everyone can talk about accomplishments and improvements. The same should go for suppliers. There was a gap between what we wanted our suppliers to do and the feedback they were getting.” Adds Kevin Ostic, manager of business and technology, Employee Services Group, “It’s all about improving clarity in terms of goals and expectations.”

So Frost and her colleagues asked, Why not apply Microsoft’s employee-review process to suppliers? The group uses the same five-point scale to evaluate outside companies that Microsoft uses with its in-house staffers. It has created rigorous definitions of five performance criteria – financial value, delivery, quality, customer satisfaction, and innovation – that it evaluates every six months.

Frost says that clarifying Microsoft’s definition of success for suppliers, measuring it rigorously, and evaluating it frequently has had a big impact: “We had one supplier – this was before the new system – that would have scored a 1.2 out of 5. After we started giving this feedback, and the supplier understood our expectations, its performance improved dramatically. Within six months, it scored a 4. If you’d asked me before we began the feedback system, I would have said that was impossible.”