It’s almost a meme among HR professionals – wanting a “seat at the table” while often being relegated to routine problem solving and dealing with the messier sides of humanity. But whoa, when its done right, the results are super impressive!
It was 2018. I’d been invited to speak at Microsoft’s annual leadership event, the Global Leadership Summit, held near the company’s headquarters in Bellevue, Washington. Just off the plane, I dashed over to the hotel where the event was being held, opened the door at the back of the packed ballroom, and beheld the projection, in letters as tall as I am, of the word “EMPATHY.” “Shoot,” I thought, “I must be in the wrong location!”
But what I was actually looking at, in real time, was the in-progress rapid transformation of a company culture. While I was out there, I had the opportunity to meet Kathleen Hogan, Microsoft’s then-and-now director of Human Resources. She and I hit it off immediately, and have kept in touch since. It is such a thrill, therefore, to notice that she’s being honored with HR Executive’s “HR Executive of the year” award, a well deserved honor!
People talk a lot about culture, and culture change, however the massive transformation at Microsoft really is remarkable.
A competence culture run amok
When people ask me about how to think about culture in an organization, I’m very fond of the framework created by William Schneider in his book from the 90’s, The Reengineering Alternative: A Plan for Making Your Current Culture Work. In the book, he posits two axes that help shape culture – what people pay attention to, and their orientation toward working with others. By using these dimensions, you can quickly begin to understand what levers of action operate in particular cultures which is a good place to start to make changes.
While over the years different people have used different terms, the first axis is whether a company tends to be focused on the here-and-now, or whether it is looking at future possibilities. On the other axis, Schneider asks whether the decision-making system in the organization tends to be more focused on personal relationships or impersonal factors such as facts and figures. Out of this comes a set of four cultural archetypes.
Cultivation cultures are future-focused and often intensely personal. Most new organizations start here, and the influence of the founder is often outsize. These cultures are often motivated by a compelling vision and the whole organization is focused on bringing new, “insanely great” things into being (to quote Apple’s Steve Jobs). Such cultures, however, tend to be unstable as they are highly influenced by the founding team’s preferences. When they go wrong, cultivation cultures can degrade into cults.
Collaboration cultures are team or group oriented and very focused on helping teams succeed in the here-and-now. When collaboration cultures are at their best, they are deeply committed to customer success and to winning together. When they are at their worst, they can degrade into clans with outsiders finding it very hard to become accepted, and with “in” groups and “out” groups. Classic Hewlett Packard was a collaboration culture.
Control cultures love plans – they operate through fairly strict processes with lots of practices that reinforce “how things get done around here.” Armies and large, hierarchical firms such as classic IBM would fall into this category. They’re motivated by making the plan and definitely don’t like uncertainty.
And finally, we come to competence cultures, which are focused on new possibilities, but motivated by impersonal qualities such as competition and being the best.
For years, I can attest that the culture at Microsoft fit pretty nicely into that “competence” model. I distinctly recall a conversation there that went something like this, “If you leave my team, you’re dead to me!” Said by one Microsoft manager to another, at the prospect that a team member might want to join another team – at Microsoft!
Competence cultures, at their best, are extremely high performing. But, like all cultures they can degrade – they become the velociraptors of the business world (think Enron).
Designer Manu Cornet created a cartoon that was replicated many times over to illustrate the siloed and internally competitive culture at Microsoft, which was for many leaders painful to see.
This was the situation Kathleen Hogan inherited when she was tapped by Satya Nadella to make a big cultural shift. So what are some of the elements that led to a major culture shift in what has been a pretty short period, not to mention better traction with customers and innovation that has caused the company’s valuation to skyrocket? A few worth noting are below.
The CEO lives it
Satya Nadella took the CEO role on in 2014, and among the first priorities he articulated was to shift Microsoft’s culture – not to lose what was great about the company, such as its wealth of talent and bold ambitions – but to operate much more as “One Microsoft” than the fiefdoms that existed before. Aside from his personal behavior, he co-authored a book-length description of how he planned to re-imagine Microsoft’s culture in his 2019 book Hit Refresh.
He personally led and modeled the behaviors he hoped to influence others to adopt. Such CEO commitment is crucial for a big cultural shift such as this one.
Finding talent in unexpected places with a growth mindset
A big part of the desired cultural shift was heavily influenced by the work of Stanford’s Carol Dweck who has discovered the importance of creating a “growth mindset” as part of a culture of innovation and learning. When people have what she calls a fixed mindset, the emphasis is on what you know, as if the knowledge were a fixed property that could not be changed. Fixed mindsets are associated with risk-aversion, incremental change and unwillingness to try novel ideas out. Growth mindsets, in contrast, are associated with people investing in developing new stocks of knowledge that allow them to take on progressively more difficult challenges.
Hogan and Dweck described how they used the concept as a huge part of the shift in what Microsoft employees would be paying attention to. They supported the basic concept with a changed view of who could assume and be promoted to leadership roles by shifting performance evaluation criteria.
- Hackathons helped the company identify promising ideas that people could volunteer to staff, potentially gain some funding and show off leadership potential even if the projects weren’t formally vetted;
- Supporting high risk projects and the leaders who step up to them, such as the ambitious effort to commercialize the Hololens2 technology (which I’ve written about elsewhere).
Changing Performance and Compensation Metrics
Finally, of course, a huge cultural lever is how people are evaluated, promoted and compensated. Previously, Microsoft had operated a forced ranking system in which managers were required to compare employees and assign them into pre-designated buckets, which required a certain proportion of the workforce to be placed in the ‘lowest’ bucket. Those team members were then given remedial opportunities or in some cases let go. Such “rank and yank” programs were extremely popular at one point, famously championed by GE’s former CEO Jack Welch.
While the system might help companies with poor performance management approaches, they make very little sense for high talent-density operations such as Microsoft. Among other problems, it led to greater levels of internal competition, massive amounts of game-playing, and in a case of unintended consequences, having managers hold on to poor performers just so that they would have someone to put in the bottom bucket at the end of the evaluation period.
Shortly before Steve Ballmer stepped down and Nadella moved into the CEO slot, Microsoft announced its intention to abandon the practice. Instead, their philosophy is moving much closer to one which Garry Ridge, CEO of DW40 articulates, as “don’t mark my paper, help me get an “A”.
Another huge change was for the CEO to get away from a focus on lagging indicators of success such as revenues and profits. Instead, Nadella wanted everyone to get interested in leading indicators such as “customer love.” It was a symbolically radical moment for a Microsoft leader to start talking about having customers “love” us!
A program called “Talent Talks” opened the aperture for people who might not have been recognized under Microsoft’s traditional management approach, with a particular emphasis on growing people into new roles. Although as they describe, it takes almost a week of the CEO’s time, the payoffs have been substantial.
Bringing the CHRO community together and a CRM for the human side of things?
Among other ways to bring new ideas into the company, Hogan launched a LinkedIn Series called #Peopletalk, and brings in other HR experts to share their ideas about culture and transformation. Check it out, it’s terrific.
Finally, and I guess this should not have surprised me, Microsoft is announcing an “Employee Experience Platform” called Microsoft Viva. As Hogan and CEO Nadella discussed when launching it, it is intended to do for employees and their firms what CRM systems did for other parts of the company. Create new connections and user interfaces to vastly improve the employee experience and, yes, reinforce the culture. You can watch a #peopletalk session about it here.
With these kinds of successful people innovations, that seat at the table is looking pretty secure for now.