Describes Microsoft’s human resource philosophies and policies and illustrates how they work in practice to provide the company with a major source of competitive advantage. Summarizes the evolution of Microsoft’s human resource philosophies and policies. Describes employee development, motivation, and retention efforts in one of Microsoft’s product groups. Focuses on Matt MacLellan, a 26-year-old, 5-year Microsoft veteran, particularly on his careful development as a project manager under Jim Kaplan, his boss and mentor. Dissatisfied with his project management role, MacLellan decides to become a developer despite the fact that he had never written code professionally. Kaplan is faced with a difficult decision of whether to support his protege’s radical career shift, and how to do it not only to MacLellan’s satisfaction but also in the organization’s best interest. Teaching Purpose: To illustrate the role of senior management as developer and coach of scarce human assets and the role of human resource policy in supporting an organization’s development of competitive advantage. (A decision-oriented implementation case).