Please Don’t Go! Microsoft Boosting Pay Across Company After Watching Silicon Valley Encroach on Its Turf and Talent

Looks like Microsoft is officially tired of having people poached by the Silicon Valley raiders setting up shop in its backyard. CEO Steve Ballmer’s new memo on employee compensation changes, in wide circulation this morning, looks somewhat like the Redmond, WA-based software giant’s version of Google’s abrupt companywide raise-and-bonus combo of late last year.

Microsoft (NASDAQ: MSFT) is making this move after several years of watching San Francisco Bay Area companies establish beachheads in Seattle to recruit talent. Google (NASDAQ: GOOG) has been in the Northwest since 2004 and keeps on growing, saying that it ended 2010 with about 800 people in the Puget Sound area.

Salesforce.com, a direct Microsoft competitor on certain business software, recently moved into expanded offices and has been tied up in a non-compete lawsuit with Redmond over its hiring of a Microsoft employee. Meanwhile, IT infrastructure company Splunk started its Seattle offices with Microsoft veteran Brad Lovering, and two of the first hires at Facebook’s Seattle office were from—you guessed it—Microsoft.

Ballmer’s memo does what we in the news business call “burying the lede”—he starts off talking a lot about rejiggering the review process. Let’s face it: Most employees in any large company will eventually come to hate their reviews, and probably will no matter how you structure them. The real meat of the memo—first reported by GeekWire from what I can tell—is in the take-home pay.

Ballmer’s email, which Microsoft has confirmed as authentic with ZDNet, said the company is “increasing our investment in compensation across the board.” Ballmer called the changes, which take effect in September, “the most significant investment in overall compensation we have ever made.”

Specifically, Ballmer wrote that all employees would see some of their stock compensation converted into up-front cash—probably welcome, considering that a Microsoft stock is still well below its roughly $37 high of a few years ago, and isn’t making anyone rich in the way it did 15 years ago. The changes also would mean possible merit raises for all employees, raises targeted at specific job categories and cities “where the market has moved the most,” and more money overall set aside for raises and stock awards. Also, don’t forget that in 2013, Microsofties are going to have to start paying for part of their healthcare benefits for the first time.

Also significantly, Ballmer ended with a bit of rah-rah that seemed intended to quell the criticism that Microsoft is a lumbering behemoth that can’t get out of its own way enough to do inspiring things: “Through our history, we have been THE place people came when they wanted to make a difference in the world through software, hardware and services. This is as true today as it has been at any time in our history, and the changes we’re rolling out today will help ensure Microsoft continues to be the place that top talent comes to change the world.”

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