Shrimp and Weenies

• Economic Context and Microsoft’s Paranoia: In 1993, amidst a broader economic downturn, Microsoft faced its own challenges. There was a fear within the company that the PC market had reached saturation, a concern amplified by the general recession. This backdrop set the stage for the memo, with Microsoft grappling with complacency and the fear of a potential downturn in their own success.
• Risks and Company Reputation: The memo was a bold move, especially considering Microsoft’s image at the time. Referred to as a “Velvet Sweatshop” in 1989, the company had a reputation for providing a comfortable yet demanding work environment. Introducing cost-cutting measures risked exacerbating employee concerns about work conditions.
• Memo’s Key Elements:
  • Shrimp and Weenies Analogy: Murray’s memo emphasized frugality with clear guidelines: “…we fly coach class; we stay in reasonably priced hotels; we don’t ride in limos; we don’t have executive dining rooms; our office furniture is of good quality, but reasonably priced; when dining at company expense, we order weenies not shrimp.”
  • T-shirts and Stupid Dog Tricks: The memo critiqued unnecessary expenditures, like the growing practice of handing out T-shirts for trivial reasons, stressing that they should be a reward for significant achievements like shipping a product on time.
  • Headcount Growth Philosophy: The memo explained Microsoft’s “n-1” theory of headcount growth – if a task needs five people, allocate four, exemplifying what Murray termed “weenier thinking.”
  • Cultural and Organizational Impact:
    • The memo was a critical cultural touchstone, especially in a company known for its modern, lean approach. It emphasized the importance of aligning with the company’s values and the customer’s needs.
    • The analogy of “shrimpy” behavior became a shorthand within Microsoft for practices not aligned with the company’s ethos.
  • Internal Support and Reinforcement:
    • Following the memo, an OpEd titled “Microsoft Did Not Promise You Club Med” was published in the company’s newsletter, “MicroNews”. It supported the memo’s themes and criticized those who were resistant to these changes, emphasizing the need to align with the company’s frugal and practical ethos.

Steven Sinofsky Twitter

The “Shrimp and Weenies” memo from Microsoft in 1993, authored by HR head Mike Murray, was a pivotal moment in the company’s history, symbolizing a shift towards cost-efficiency and frugality. This memo, written during a time of economic downturn and corporate expansion, aimed to clamp down on lavish spending and promote a culture of financial responsibility. It emphasized the importance of modesty in employee perks, spending, and headcount growth, encapsulating the idea that frugality contributed to Microsoft’s success.

Steven Sinofsky, a former Microsoft executive, reflects on this memo and its long-term impact in a Twitter thread. He notes that the memo led to a cultural shift within the company, where employees began to view company funds as shareholder and investor money rather than their own. This mindset was exemplified by his personal experience in 1991, where he, like a school teacher, paid for a team t-shirt out of his own pocket, seeing it as part of his job.

However, Sinofsky points out that this frugal approach did not last indefinitely. By 2004, Microsoft faced challenges in maintaining this culture, as evidenced by the controversy over the removal of free gym towels, which were later reinstated in 2006. This incident highlighted a growing sense of entitlement among employees.

Sinofsky also mentions the broader implications of this cost-cutting culture in the tech industry. He notes that some companies, like Google, recognized the potential downside of excessive perks and benefits, which could be “penny wise and pound foolish.” He also comments on rumors about Google cutting back on PC purchases, emphasizing the significant financial implications of such decisions.

The thread underscores that the issues addressed in the “Shrimp and Weenies” memo are not unique to Microsoft or the tech industry but are common challenges for growing companies. Sinofsky observes that at scale, there’s a tendency for cost and savings responsibilities to be diffused among various groups within a company. He concludes that the stages of cutbacks experienced by Microsoft and other tech companies are a natural evolution and part of a “mean reversion” or cultural reset that every scaling company must navigate.

Steven Tweeted. I’ve provided his commentary, but you can read the original here.

1. One of the most famous memos in all of Microsoft history was a first memo about cost-cutting which came about in 1993 (see early 90s recession). Mike Murray, leading HR, wrote the memo “Shrimp and Weenies”—before MS, Mike was at Apple, having led OG Mac marketing. 1/ (third try)
2. The company was going through challenges like much of the macro-economy. Only we were worried “maybe this is it? PCs are saturated—MSFT paranoia. GDP was down. Sales were slowing. We were getting complacent.
   1. Still, memo could have backfired. MS in 89 was a “Velvet Sweatshop”
3. Yet the memo had not only the intended effect but it was a (re-)turning point for the company. Mike wrote about 3 challenges—things we needed to change—featuring allegories we would never forget.
4. Shrimp and Weenies: “…we fly coach class; we stay in reasonably priced hotels; we don’t ride in limos; we don’t have executive dining rooms; our office furniture is of good quality, but reasonably priced; when dining at company expense, we order weenies not shrimp.”
5. T-shirts and Stupid Dog Tricks “…T-shirt can and should be a great team building device for a group … (i.e., shipping a product on time). On the other hand, we need to halt the growing practice of handing out random T-shirts…for simply attending a required business meeting.
6. Headcount Growth & Lack Thereof “The company has always enjoyed an “n-1” theory of headcount growth. If a task absolutely, positively needs 5 people in order to get the work done, we allocate 4 heads to the task (and the work does get done). This is classic weenier thinking.”
7. The Bottom Line – “Excess will destroy success. Is your team fueled by weenies or shrimp?”
8. In a company with private offices, casual dress (a thing), and prided itself on being modern and lean this was a big huge deal. Every company was experiencing “belt tightening” but this seemed different because we were a symbol of national success. This could have backfired.
9. Instead it became a cultural touchstone—much like how BillG thought of the company 15 years earlier which was to always have cash on hand to meet payroll for a year. The idea of being “shrimpy” was a shortcut for not being aligned with the company, customer, etc.
   1. 9A/ An OpEd to the weekly printed newsletter “MicroNews” a month later in support of Shrimp & Weenies going against the hold-out whiners was titled “Microsoft Did Not Promise You Club Med” and was widely posted on doors (we still had those).
10. People started to talk about money not as their own but as shareholder and investor money. I was reminded of my first t-shirt in 91 I made for the team which I paid for myself and like a school teacher buying supplies was just part of the job.
11. This didn’t last forever. As Mike warned us, being a big company is a constant fight to avoid Shrimp. In 2004 (other tough times) we famously did away with free (to use) gym towels—a favorite of joggers and bikers alike. The company practically imploded. Towels retuned in 06.
12. The key failure was a sense of entitlement had taken over. Some companies in the news today are struggling with this reaction.
    1. One company took a forward-looking view saying perqs and other benefits could easily be “penny wise and pound foolish”. Here’s Google’s S-1
13. Not to “told you so” but there is no way this was going to last. I’d been battling these benefits in recruiting for a couple of years and just “knew”.
    1. 13A/ Google is even rumored to be cutting back on PC purchases. Oh my!
    2. Being well-known for being thoughtful (aka frugal) in this regard, do the math. $5000/year for R&D can easily be $250M dollars domestic. And what gain (esp for a cloud company!) But Sheets and Slides, yikes!
14. Many are using the “tech layoffs” to pile on to anti-BigTech or Silicon Valley. That would be dumb. As Mike noted, this is not unique to tech in any way. It is a product of scale.
    1. At scale, everyone thinks some other group will make up for costs/savings. Just a fact.
15. These stages of cutbacks are a natural evolution not just of tech companies but all companies. It is sad that it happens and feels like a cultural reset or “mean reversion”. It is. Scale is a challenge for every company and this is one of the steps.