HR 4.0

How the right mindset got Microsoft growing again

March 10, 2022 - 4 minutes reading time
Article by Marcel De Dood

The digital world is changing, and even large companies must keep up with the change to remain relevant and successful. Take Microsoft: profitability was great, but growth in new domains had stopped and in 2014 the company was overtaken by the competition. The appointment of Satya Nadella as the new CEO ushered in a transformation, and now Microsoft is once again at the forefront of the competition. The key to its renewed success: culture change. Microsoft's story offers many valuable insights that other organizations can also benefit from.

In 2014, Satya Nadella succeeded Steve Balmer as CEO of Microsoft. Through his years of career at Microsoft, Nadella knew that Microsoft had several silos with different strategies that sometimes worked against each other. Manu Cormet, Google employee and illustrator captured the culture within Microsoft in a cartoon that typified the different corporate cultures of big tech. Microsoft employees recognized all too well the image of a top-down controlled organization where different business units competed more with each other than with the outside world.

Nadella: "Our innovation had been replaced by bureaucracy. Teamwork had been supplanted by internal politics. We were lagging behind the market as a result." The analysis was not difficult to make: Microsoft had lost the battle in the mobile market, Google was firmly in control of search, and in the cloud field Amazon was the big growth driver.

Top Microsoft employees left for the competition, out of frustration with the culture: "At Microsoft it was no longer about the best ideas, but about knowing the right people to get your idea realized." For the market and for Nadella, it was clear: to restart growth, the course had to be changed.

CEO, with the C of Culture

The main driver of change was the culture program Nadella introduced. "Our ability to adapt the culture is the most important predictor of future success," Nadella told shareholders in 2015. "For me, the C of CEO stands for Culture, not Chief."

After appointing several new leaders who shared his vision, Nadella introduced the growth mindset within Microsoft. After all, "the learn-it-all does better than the know-it-all." The core of this philosophy, developed by Carol Dweck, professor at Stanford University, is that children, athletes and employees with a growth mindset perform better than those with a fixed mindset. People with a growth mindset cope better with setbacks and dare to do more outside their comfort zone. The environment and culture strongly determine whether the growth mindset, which everyone has within them, is stimulated or inhibited.

‘What have you shared that others have benefited from?’

The Microsoft chief believes that all people want to grow and do the best for the organization. He sees it as his job to remove the bureaucracy and systems that impede growth. Therefore, to support the necessary culture change, Microsoft is changing the appraisal system. "How did you leverage someone else's work, ideas and efforts?" and "What did you share that benefited others?" are the manager's questions that every Microsoft employee can now dream about.

Diversity and inclusiveness also become pillars in Microsoft's mission because different opinions and perspectives are needed for good decision-making and strategic choices. After all, the company develops products and services that must be successful within all cultures of the world. Growth is only possible if it is also your mindset.

Impact as included in Microsoft's appraisal system

The change was not successful overnight. Getting 125,000 people to adopt a growth- and learning-oriented mindset at work is a huge task. "It takes a lot of love, dedication and forgiveness," states Jill Nichols, Nadella's Chief of Staff. "People really have to experience that making mistakes is part of the job before they believe the story." Getting middle management on board was crucial and took a long time. Nadella: "Managers complained that some of their employees didn't have a growth mindset. They used it as an excuse. That had to be broken. At Microsoft, as a manager you have the task of developing the growth mindset in the team."

With Azure and Microsoft 365, Microsoft has become a leader once again, where the best talent wants to work. "People often ask me how Microsoft is doing," says Nadella. "In Oriental fashion, I then answer: we are moving forward, and we are far from being there."

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