Review Application 8.2 regarding Microsoft.

"Microsoft turned 40 years old in 2015, and a year before that, the board of directors named Satya Nadella as the company's third CEO following Bill Gates and Steve Ballmer. In the run-up to Nadella's appointment, a variety of stakeholders were routinely criticizing Microsoft. The criticisms included an overly competitive culture that discouraged collaboration, a too slow rate of innovation that prevented it from keeping pace with Google, Apple, and other more nimble organizations, a strategy overly focused on sales and margins, and a stock price stuck below $40/share. Almost everyone agreed it was time for a shake-up. But how do you shake-up a 40-year-old giant?

Under Nadella, early moves included streamlining engineering processes, speeding up decision making, describing a "mobile first, cloud first" world, announcing a reversal of the closed mindset to an open-source policy, acquiring Minecraft, and divesting the Nokia acquisition. Behind the scenes, however, was a far deeper set of moves whose intent was to change the culture at Microsoft. Early in his tenure, Nadella tapped Kathleen Hogan, who previously led 22,000 employees in Microsoft's Services Business, to head up HR. And he quickly made it clear that Hogan's job was to orchestrate a culture change under the banner of a new vision and mission. But re-fashioning a vision or culture cannot be done overnight nor can it be done by declaration and edict.

The purpose of this process, according to Hogan, was to come up with what she calls "the words to describe what we believe." The words were to be the mission and cultural attributes of Microsoft.

When Hogan was asked about how one goes about changing the vision, mission, and culture of a 100,000+ person organization, she said, "humbly and intentionally." For her, intentionality involved getting input and support from a lot of people. In the first year of the process, Hogan spent significant time getting feedback from employees. To zero in on the message, she led an elaborate process of employee surveys, roundtable discussions, off-site meetings, and internal focus groups. Hogan and her HR leaders looked at and conducted a battery of surveys at different levels of the organization. They organized focus groups that looked at different dimensions: sales versus engineering, millennials versus non-millennials, men versus women, U.S. versus non-U.S. The idea was to take a step back and look at every possible angle, be as inclusive as possible, and work to ensure a culture that reflects both what people already valued about Microsoft as well as aspirations for the future.

In a three-day executive off-site, Satya asked Microsoft's senior leadership team and corporate vice presidents to engage on the topic of culture. In all, there were 17 breakout groups that addressed the current and future culture at Microsoft, and the leader of each breakout in turn became a "culture cabinet." Over the next three months, the culture cabinet provided feedback and guidance that was iterated until a pivotal moment when Nadella declared that Microsoft would ground its culture in the concept of a growth mindsetand that growth mindset meant becoming more customer obsessed, more diverse and inclusive, focused on 'One Microsoft'all in service of making a difference in the lives of employees, customers and partners. The focus on a growth mindset, a concept pioneered by Dr. Carol Dweck, has become the X factor at Microsoft.

The guide for the culture change at Microsoft was a letter from Nadella to Microsoft employees. The letter itself is the most comprehensive statement of the mission, and excerpts from the letter as well as other interview data are presented here utilizing the vision framework proposed by Collins and Porras. In this case, the outcome of the processthe wordsstart with Microsoft's mission: "Empower every person and every organization on the planet to achieve more." They also include bullet points on the company's strategy, ambitions, leadership principles and culture, with the growth mindset at the heart.

Core Ideology

In terms of ideology, Hogan noted that Microsoft needed to think about its beliefs. It needed to recognize that while there might be some beliefs that required updating, there were also some beliefs that should not change, beliefs that had been central to the organization's long-term success. At the top of her list was this: "We're proud of our culture of taking on big, bold ambitions as well as our commitment of giving back. If you look at what our founder, Bill Gates, has done, you can see that is an important part of our legacy." There is, at Microsoft, a belief or strongly held value that the organization chooses big projects and then persists at achieving them. That persistence is a hallmark of the organization. Additionally, the spirit of giving is paramount, both through creating technology that matters but also through company and employee philanthropic efforts.

Nadella's memo to Microsoft was clear regarding its mission and purpose. "I'm proud to share that this is our new official mission statement. This mission is ambitious and at the core of what our customers deeply care about. We have unique capability in harmonizing the needs of both individuals and organizations. This is in our DNA. We also deeply care about taking things global and making a difference in lives and organizations in all corners of the planet."

Envisioned Future

In keeping with its longstanding values, Nadella described Microsoft's strategy "to build best-in-class platforms and productivity services for a mobile-first, cloud-first world. Our platforms will harmonize the interests of end users, developers, and IT better than any competing ecosystem or platform. We will realize our mission and strategy by investing in three interconnected and bold ambitions.

Reinvent productivity and business processes

Build the intelligent cloud platform

Create more personal computing"

Microsoft's desired future state is best captured by the culture it wants to create. "We fundamentally believe that we need a culture founded in a growth mindset. It starts with a belief that everyone can grow and develop; that potential is nurtured, not predetermined; and that anyone can change their mindset. Leadership is about bringing out the best in people, where everyone is bringing their A game and finding deep meaning in their work. We need to be always learning and insatiably curious. We need to be willing to lean in to uncertainty, take risks and move quickly when we make mistakes, recognizing failure happens along the way to mastery. And we need to be open to the ideas of others, where the success of others does not diminish our own."

For Microsoft, continuity in its mission is better than disruption. The various parts of Microsoft's mission are extensions of what has made it successful, not radical departures from its values and identity. A "too different" mission might be viewed suspiciously by organization members as "this is not who we are." But a mission of what could be done by an organization with its ambitions was a great way to inspire a successful 40-year-old organization operating in over 190 countries.

Early Success

A USA Today article said, "seismic cultural shift is rocking Microsoft . . .," and the proof is in the numbers. In the two years since Microsoft's culture work began, there have seen measurable strides in its annual employee poll in measures around culture, leadership, and pride in working for the company. Employee churn is reducing, and many of those who left the company in the past are returning. In fiscal year 2017, 14 percent of new hires were actually re-hiresthe return of former employees who heard about the big changes and returned to the company to be a part of it.

Even with positive feedback from employees and customers about the evolving Microsoft, the company isn't resting on its laurels. Hogan noted it's important to, "stay humble and stay the course. Our Senior Leadership Team continues to meet weekly to discuss our progress on our journey, because it is a journey, not a destination. It's important to not declare victory; culture is something you will need to work on in perpetuity to see success." (Cummings & Worley, 2020, p. 172).

After reviewing the case, answer the following questions.

How did culture influence Microsoft's change? What did Nadella do to help manage the change? Is there anything Microsoft should have done differently? Why or why not? How can you relate this case to your own experience? What are two takeaways from this case?