Satya Nadella became a CEO of a company, which growth was hindered by its organizational culture.
Despite Microsoft’s revenue tripling between 2000 and 2014, the company was falling behind its
competitors with “most talented employees leaving [the organization] faster than they could be
replaced” (p.2). Yet from the moment Nadella became Microsoft’s CEO in 2014, the company
experienced a continued rise of its share price as well as became a “magnet for top engineering talent”
(p.1) within the next few years.
My analysis suggests that the success behind the turnaround at Microsoft led by Nadella comes from
his understanding that the strong organizational culture breeds positive organizational performance.
His effectiveness in building a strong culture at Microsoft comes from personal and professional
background. Having worked at Microsoft for 22 years in various roles before taking over as a CEO,
Nadella not only had the perception of an insider but also deep knowledge of the industry. As a leader,
Nadella’s drew on his personal experiences and learnings and influenced the change of the employees’
attitudes, behaviors, and in turn their performance. He successfully transformed the mentality of his
employees from performance over customer to collaboration- and customer-centered. One of the
biggest contrasts between the old and new manifestations of the Microsoft’s culture is the system for
the employees’ performance evaluation (see appendix 1 for others). Prior to Nadella becoming the
CEO, the organization was using a ‘stack ranking’ system, which categorized all employees in a ranking
based on their performance and as a consequence prevented the teams from working together or
exchanging ideas. Under Nadella’s leadership, this has evolved into a compensation program, in which
the mangers allocate the bonuses as they see most fitting.
Nadella’s goal was to transform the culture at Microsoft but without affecting the original core values
of the company. He started the change process by trying to identify the visible artifacts of culture, “he
devoted much of his first year to listening and learning from others” (p.4). To get a better understanding
on the values and attitudes within the organization, Nadella held focus groups to allow the employees
share their opinions. He co-created the new Microsoft’s culture with other team leaders and
underlined the importance of being united as a team.
Schein (2010) suggests that the change of organizational culture can begin when the manager knows
that the tasks that were so far successfully solved in the organization will change in the future. In the
case of Microsoft, Nadella saw the change within the industry, in broad terms – the need to foster
innovation. With that as a leading driver, he proposed a new mission statement for Microsoft and
guided the change of culture accordingly.
Despite Microsoft’s revenue tripling between 2000 and 2014, the company was falling behind its
competitors with “most talented employees leaving [the organization] faster than they could be
replaced” (p.2). Yet from the moment Nadella became Microsoft’s CEO in 2014, the company
experienced a continued rise of its share price as well as became a “magnet for top engineering talent”
(p.1) within the next few years.
My analysis suggests that the success behind the turnaround at Microsoft led by Nadella comes from
his understanding that the strong organizational culture breeds positive organizational performance.
His effectiveness in building a strong culture at Microsoft comes from personal and professional
background. Having worked at Microsoft for 22 years in various roles before taking over as a CEO,
Nadella not only had the perception of an insider but also deep knowledge of the industry. As a leader,
Nadella’s drew on his personal experiences and learnings and influenced the change of the employees’
attitudes, behaviors, and in turn their performance. He successfully transformed the mentality of his
employees from performance over customer to collaboration- and customer-centered. One of the
biggest contrasts between the old and new manifestations of the Microsoft’s culture is the system for
the employees’ performance evaluation (see appendix 1 for others). Prior to Nadella becoming the
CEO, the organization was using a ‘stack ranking’ system, which categorized all employees in a ranking
based on their performance and as a consequence prevented the teams from working together or
exchanging ideas. Under Nadella’s leadership, this has evolved into a compensation program, in which
the mangers allocate the bonuses as they see most fitting.
Nadella’s goal was to transform the culture at Microsoft but without affecting the original core values
of the company. He started the change process by trying to identify the visible artifacts of culture, “he
devoted much of his first year to listening and learning from others” (p.4). To get a better understanding
on the values and attitudes within the organization, Nadella held focus groups to allow the employees
share their opinions. He co-created the new Microsoft’s culture with other team leaders and
underlined the importance of being united as a team.
Schein (2010) suggests that the change of organizational culture can begin when the manager knows
that the tasks that were so far successfully solved in the organization will change in the future. In the
case of Microsoft, Nadella saw the change within the industry, in broad terms – the need to foster
innovation. With that as a leading driver, he proposed a new mission statement for Microsoft and
guided the change of culture accordingly.
