Leadership Then and now - microsoft case-study
As I recently completed the Women’s Executive Leadership Program at Yale, I wanted to take a moment to reflect and share my learnings. This journey has been profoundly eye-opening, highlighting the significant transformation in leadership over time. The evolution from traditional, hierarchical models to modern, connected, and inclusive approaches is truly remarkable.
This 8-weeks course was incredibly enlightening and thought-provoking. While there is much to unpack, in this blog, I will focus specifically on Microsoft's transition from a Fixed to a Growth Mindset, a case study first published by the London Business School and the Yale School of Management.
Reflection on Leadership Evolution
Leadership paradigms have shifted dramatically over the years. Traditional leadership often emphasized hierarchy, control, and competition. However, modern leadership values connection, inclusivity, and collaboration. This shift is essential for organizations to thrive in today's dynamic and interconnected world.
Microsoft’s Transformation: Fixed to Growth Mindset
One of the most compelling case studies we explored was Microsoft's cultural transformation under CEO Satya Nadella. When Nadella took the helm in 2014, Microsoft’s culture was plagued by internal competition and political infighting. Microsoft’s infamous “stack ranking” performance management system pitted employees against each other every six months. Like a stack of LEGO bricks, employees were essentially slotted into top, good, average, below average and poor positions. The forced distribution meant that one in 10 people would always receive a poor rating, regardless how much they contributed. As one product manager remembered: “If you don’t play politics, its management by character assassination”.
Management practices like the stacking system killed collaboration: developers feared that giving away their best ideas could damage their position. Employees prioritized what would help them get the highest ratings over the quality of their work. The focus was on individual performance, often at the expense of collaboration and customer satisfaction. As one former engineer succinctly put it, “Team members were rewarded not just for doing well but for making sure their colleagues failed” (Ibarra, Rattan, and Johnston 2018).
To address these issues, Nadella communicated the limitations of the existing fixed mindset culture to all employees and articulated a vision for a new growth-oriented culture at Microsoft. As Nadella reflected on what needed to shift, he set his sights on what he himself called “a vague and amorphous term”:
Microsoft’s culture had been rigid. Each employee had to prove to everyone that he or she was the smartest in the room. Accountability - delivering on time and hitting numbers - trumped everything. Meetings were formal. If a senior leader wanted to tap the energy and creativity of someone lower down in the organization, she or he needed to invite that person’s boss, and so on. Hierarchy and pecking order had taken control, and spontaneity and creativity had suffered.
To address these challenges, Nadella abolished the competitive performance review process to foster collaboration, held team meetings to enhance accountability, cross-pollinated leadership teams to mitigate detrimental group dynamics, included leaders from recently acquired companies to inject fresh perspectives, and promoted cross-functional communication. Much of Nadella’s first year was dedicated to listening and learning from employees through focus groups and anonymous surveys. Listening was a cornerstone of his daily routine, as he believed it was crucial for establishing a solid foundation for his long-term leadership.
Nadella’s to-do list for the first year included preparing Microsoft for a mobile- and cloud-first world, building “new and surprising partnerships” and working to ensure they could truly empower every person on the planet as their new mission stated. To ensure leadership buy-in and signal a commitment to cultural and strategic transformation, Nadella required the leadership team to read "Nonviolent Communication: A Language of Life: Life-Changing Tools for Healthy Relationships" by Marshall B. Rosenberg. This move demonstrated Nadella's intent to overhaul both the organizational culture and strategy from the top down. He encouraged people to speak up.
Nadella shifted the company’s mindset from know-it-all to learn-it-all. The newly revealed mission was “To empower every person and every organization on the planet to achieve more”. His one of three main pillars that helped them with this transformation was:
Diversity and Inclusion: He stated, “We are at our best when we actively seek diversity and inclusion. To serve the planet as our mission states, we need to reflect its diversity. Our workforce diversity must continue to improve, and we need to include a wide range of opinions and perspectives in our thinking and decision-making.” In every meeting, he not only emphasized listening but also ensured everyone had the opportunity to speak, so all ideas could be heard. This inclusiveness helped the team become aware of their own biases and change behaviors, allowing them to tap into the collective power of everyone in the company. As a result, their ideas were better, their products improved, and their customers were better served. The infamous stack-ranking performance system was abolished, replaced by “continual feedback and coaching”.
Today, Microsoft is rated as one of five best AI companies for employees and Nadella has a Glassdoor employee approval rating of 95%.
