Why Steve Ballmer Should Resign

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Remind me again why Steve Ballmer is CEO of Microsoft? He’s got no vision, no charisma, no engineering cred and no outside experience running a company. Ballmer himself admits to not being good at negotiating. And now his deal-making and decision-making skills are being questioned. (Plus, he looks like an 80s-era “Spider Woman” comic book villain and is more famous among Microsoft customers and detractors alike for his “Dance Monkeyboy” videos than his achievements as CEO of Microsoft.)

Ballmer even made Business 2.0 Magazine’s 2006 list of “10 People Who Don’t Matter” — quite a feat for the CEO of the world’s largest software company.

Ballmer’s only work experience before joining Microsoft in 1980 was as an assistant product manager at Procter & Gamble for two years. He headed various divisions at Microsoft for two decades before being named CEO in 2000. It was understood at the time, however, that founder, Chairman and former CEO Bill Gates was still actually running the company. This year — 2008 — is the first time in his life Ballmer has run any company all by himself.

The Yahoo Thing

Ballmer’s failed Yahoo acquisition was designed as a $47.5 billion fix for Microsoft’s failed Web strategy. Ballmer has said that he likes Microsoft’s strategy but doesn’t like its position – #3. But the relative “positions” of Google, Yahoo and Microsoft are the direct result of their respective strategies. Microsoft shareholders shouldn’t like Microsoft’s Web strategy.

When Yahoo rejected Microsoft’s offer, Ballmer chose to neither increase the bid nor go hostile. He wimped out and walked away. The failure of the Yahoo deal shows weakness on the part of Ballmer. He talks tough, but when actual toughness is required he backs down.

One executive who left Microsoft for Google claimed that Ballmer’s response to his defection included a tantrum punctuated by the claim that he (Ballmer) is “going to $#@!ing kill Google!” Nobody was surprised by the tantrum. The trouble is that Ballmer is not, in fact, going to $#@!ing kill Google. He just says he will.

Microsoft needs the opposite of a tough-talking wimp as CEO. Microsoft needs a sweet-talking killer, one who charms rather than intimidates, then pulls the trigger when required.

The Vision Thing

Steve Ballmer’s net worth last year ($15 billion) was far more than Google CEO Eric Schmidt’s ($6.2 billion) and Apple CEO Steve Jobs’ ($5.7 billion) combined! Is that disparity justified given the degree to which each CEO has realized the potential of their respective companies?

The product visions of Google and Apple are so clear and strong you can “feel” them when using their products. This is why customers leave Microsoft and choose Google and Apple.

Microsoft doesn’t get the “vision thing,” which isn’t necessarily fatal. But in lieu of vision, the Microsoft’s CEO needs some other quality beyond skill with numbers and bombastic blowups – something that affects products. Bill Gates, for example, had the “technology thing.”

In order to stop bleeding market share to Google and Apple, Microsoft needs a leader obsessed with product quality. Ballmer’s Microsoft is all about acquisitions, and reorganizations and alliances and strategies. Building products customers love is a secondary concern. That needs to change. But can the Microsoft board do anything about it?

Continued: The Governance Thing

The Governance Thing

In order for a company to function at full potential, the CEO needs to be accountable to the board. But how accountable is Ballmer?

The elephant in the boardroom is Ballmer’s relationship with Gates. Ballmer is the best friend and college buddy of the founder, chairman and biggest shareholder of the company. Ballmer probably can’t be fired unless Gates wants him to be fired. And Gates is a loyal friend. Ballmer is also a board member and major shareholder, with 4 percent of the company (Bill Gates himself owns less than 10 percent). It’s an unhealthy situation for Microsoft and its shareholders.

Maybe the Microsoft board can fire Ballmer, and maybe it can’t. But it’s a problem for Microsoft that firing Ballmer is an entirely different proposition than a normal board not dominated by the CEO’s best friend.

The Success Thing

The other problem, ironically, is that Microsoft is consistently profitable. But profits today won’t prevent disaster tomorrow. Microsoft is faced with challenges to its operating system dominance from the likes of Apple, Google, Linux and others. The company is still largely coasting on momentum from the past. The Titanic enjoyed smooth sailing and full steam ahead — right up until the point where the Captain’s errors sank the ship. The errors happened not during the disaster, but when all seemed well.

And, no, I’m not saying Microsoft is heading for decline. The problem is that on its present course, Microsoft will fail to live up to its potential. Keeping Bill Gates’ friend employed isn’t sufficient reason for Microsoft to allow itself to slouch toward second-rate status.

Ballmer is the wrong CEO for Microsoft, but he can’t easily be fired. That’s why he should do the company a favor and resign, initiate a controlled CEO headhunt and transition process, take his $15 billion and go away.

The Microsoft board needs a different kind of leader right now, and one it can fire.