In July 2020, Microsoft was the second company after Apple to surpass 1,500 billion in valuation, 1,546 billion to be precise. And that's just the beginning! 10 years earlier, under its former CEO Steve Ballmer, its valuation was estimated at (only?) 215 billion, and Microsoft was struggling to keep up with the pace of digital transformation, launching itself without much success in the smartphone and SaaS software markets.

Through a textbook case of corporate transformation, it's interesting to see how its new CEO Satya Nadella managed to change the culture of a company with 130,000 employees, but also, and above all, what lessons the leaders of each company can learn from it on their own scale.

‍Thechanging mindset at Microsoft from 2010 to 2020

When he took the helm at Microsoft in 2014, Satya Nadella's observation was of a dispersed company of engineers, with an internal culture of competition, and closed in on itself... 

Here are just a few examples of the customs observed within the teams: 

• Classification of employees every 6 months, 
• Internal mistrust of other teams and working in silos, 
• Few incentives to study external innovations, as R&D takes place behind closed doors.

On the whole, Microsoft employees operated in an individualistic way, with few internal synergies and a certain aversion to risk. 

In just a few months' work, here is Microsoft's new state of mind, summarized in a list of 3 guidelines drawn up by Satya Nadella:

1. "We need to be obsessed with our customers. At the heart of what we do must be curiosity and the desire to address a customer's unarticulated and unmet needs with cutting-edge technology."
   
2. "We give our best when we actively pursue diversity and inclusion."
   
   
3. "We are one company, one Microsoft, not a confederation of fiefdoms."

This change of mindset embodied by the Microsoft leader is based on Carole S. Dweck's theory of the fixed mindset versus the growth mindset. Dweck, which contrasts the fixed mindset with the growth mindset. To caricature, this radical change was originally due to the fact that Steve Ballmer believed in the Fixed Mindset, while Satya Nadella believed in the Growth Mindset.

‍Take the test Are you a Fixed or Growth Mindset person?

‍

It remains to be seen how, in concrete terms, Satya Nadella has succeeded in bringing about this cultural change and making it permanent.

Change management: Nadella's steps to change Microsoft's culture

The cultural factor is the heart of corporate transformation. At Microsoft, the Growth Mindset theory was used to translate the values espoused by Nadella: recognition of individual potential and continuous improvement efforts. 

Microsoft's cultural transformation itself then went through 3 key stages to accompany the change: 

• The embodiment of strong cultural principles by Satya Nadella himself
• Aligning internal and organizational culture
• Implementing cultural principles in the day-to-day work of all employees

Step 1: Embody strong cultural principles

A few months after taking up his post, Microsoft's CEO came close to disaster during a public speaking engagement on the controversial subject of gender equality. Let's take a look at why, in the end, he proved exemplary in embodying the company's values, and emerged from the event having strengthened his leadership.

Background: In October 2014, Satya Nadella attended a convention promoting women in tech (Grace Hopper Celebration of Women in Computing in Arizona). Microsoft board member Maria Klawe asks him for advice for women who aren't comfortable asking for a raise. 

And then the drama begins! Satya Nadella replies: "The problem isn't so much asking for the raise, you have to have confidence in the system's ability to give you the right salary" . The controversy started on social networks. He is accused of being passive on the subject of gender inequality.

Nadella's reaction: an e-mail sent the same day to all Microsoft employees.

Takeaway: More than the initial situation, it was Satya Nadella's reaction that made him a leader who embodies his cultural principles: 

• Firstly, it didn't take him long to admit his mistake, and he did so directly and frankly, without trying to make excuses: "my answer was very bad".
• He then took the opportunity to point out that his colleague had had the right reaction on the subject, which translates into action the principle of recognizing the potential of each individual and encourages humility within teams, at all hierarchical levels: "Maria's advice was the right one".
• He seized the opportunity to rephrase his message and affirm his objective: "I am convinced that men and women should receive equal pay for equal work".
• Finally, he concludes by saying that this experience has been a learning experience for him, and opens the discussion to make sure there are no ambiguities.

While the embodiment of cultural principles in the CEO's leadership is a good first step in anchoring Microsoft's new culture, when you're at the head of a company, that's not enough. You also need to provide your teams with the right operational levers to bring these principles to life on a daily basis.

Step 2: Align internal and organizational culture

Microsoft's priority was to define the right performance criteria, i.e. those that would reflect the company's values. And this began with the transformation of the employee appraisal system to a new, impact-based foundation:

‍

We have analyzed the changes brought about by this new reading grid developed by Satya Nadella and the Microsoft management team: 

• The very rigid system of ranking employees is replaced by a dynamic system that takes into account individual and collective results. Employees are assessed on the basis of their contribution and how they have helped their team. This shift from a culture of individual to collective performance fosters team spirit and a sense of belonging to a group.
• Human capital is back at the heart of the discussions. Satya Nadella interacts directly with each of the team managers: they discuss employee mobility and the best methods for developing them. 
• The Talent Talks program makes it easier to promote internal mobility. The idea behind this program is that everyone has potential and that profiles are not static. An organization with a Growth Mindset like Microsoft will be more inclined to recruit from within than to seek external talent. Promoting internal mobility is a good indicator of employee confidence. Managers are no longer encouraged to keep talent within their teams, but are instead valued for their ability to attract new talent and boost their employees' careers. 

In order to anticipate and address possible resistance, and to stay as close as possible to the teams, Microsoft also set up a "culture commission" headed by Chief People Officer Kathleen Hogan. The annual survey is replaced by weekly consultations on specific subjects, with simple questions to guide the agenda. Here are just a few of the topics on which Microsoft's culture committee has intervened:  

• For the design of the Microsoft France campus in Issy-Les-Moulineaux, employees were consulted on every aspect: the distribution of closed and open spaces, furniture, convivial areas, cafeterias... 
• To improve work hygiene: no e-mails at weekends, or meetings before 9:30am or after 6pm. 
• For the development of teleworking rules.

You can't manage change in a company without involving employees in the process. This means constantly surveying teams to remove any obstacles to change, and ensuring that employees buy into the transformation project.

Step 3: Anchor the culture in the daily lives of all employees

To change the organization at all levels of the hierarchy, a new managerial model is taking shape after extensive consultation with Microsoft employees. 

This model places managers at the heart of the company's culture, and its long-term survival depends above all on its human capital: 

• Redefining the manager's role: ensuring success by empowering teams.
• The manager's role is now based on 3 key competencies: model, coach, care.
• All managers receive training in this management model. 

Conclusion

Managing culture change at a company as established as Microsoft was a major challenge. If your context isn't quite the same as Nadella's when he arrived, you may find some of the practices adopted to bring about change useful, and among them : 

• Driving change: embodying and communicating cultural principles to everyone
• Carry out a global organizational transformation: performance assessment, creation of new bodies, etc.
• Involve management in anchoring the culture: new managerial model, upgrading.