For years Microsoft (NASDAQ: MSFT) has taken the approach that it is best to fill senior management jobs from within the company. While this may have worked in areas like running the operations for Windows OS, server software, and Office, it has not worked in the device and internet businesses. Microsoft's software divisions can be run by engineers, but other areas of the company probably cannot.

To fix this, CEO Steve Ballmer is turning outside the company for management.

Brian McAndrews, who now runs Microsoft's online ad business, has insisted that certain engineering groups report to him, according to The Wall Street Journal. The company also brought in its chief operating officer, Kevin Turner, from Wal-Mart (NYSE: WMT) and Don Mattrick, who runs video games, from Electronic Arts (NASDAQ: ERTS).

Why the change of heart? Microsoft has done poorly in several of its divisions, and its online and devices operations lose hundreds of million of dollars each year. While the Xbox has moved ahead of Sony's (NYSE: SNE) PS3, it still trails the Nintendo Wii. Microsoft's MSN and Live online operations have failed to gain ground on Yahoo! (NASDAQ: YHOO) and Google (NASDAQ: GOOG).

It could be argued that Microsoft should never have gotten into businesses so far afield from building PC and server software. Investors probably would have been better off if the company had not been saddled with losses from these new divisions.

But, if Ballmer insists on going down the road of diversification, he might as well do it right.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Microsoft (MSFT) tries new management approach originally appeared on BloggingStocks on Wed, 26 Sep 2007 04:42:00 EST. Please see our terms for use of feeds.