Bill Gates co-founded Microsoft in 1975 and built it into the most profitable technology company in the world. But as the company grew larger, the functional structure became ineffective. Employees began complaning about the growing bureaucracy and the snail's pace for decision marking. A functional structure was just too slow and inflexible for a large organization operation in the fast-moving technology industry.
To speed things up and better respond to environmental changes. top executives created seven business units based on Microsoft' major products: Windows Group; Server Software Group; Mobile Software Group; Office Software Group; Video Games and XBox Group; Business Software Group; and MSN-Internet Group. Each division is run by a general manager and contains most of the function of a stand-alone company, including product development, sales, marketing, and finance.
What really makes the new structure revolutionary for Microsoft is that the heads of the seven divisions are given the freedom and authority to run the businesses and spend their budgets as they see fit to meet goals. The general managers and chief financial officers for each division set their own budgets and manage their own profit and loss statements. Previously, the two top executives, Bill Gates and Steven Ballmer, were involved in practically every decision, large and small. Managers of the division are charged up by the new authority and responsibility. One manager said he feels "like I am running my own little company.