Lateral Leadership

What opportunities for lateral leadership exist in your current professional role?

After watching this week’s videos and reviewing the course materials, consider how you would improve your approach to getting support for your initiatives in situations where you don’t have management authority.

Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.​

respond 1

 Yalanda Edwards RE: Week 7 Discussion

COLLAPSE

The opportunity for lateral leadership in my current professional role occurs when I can advise college students on the importance of the journey they have taken on. I recently change work careers from being an office manager in manufacturing to administrative assistant to Dean of Education at a college. This transition is a lot different from what I have been use to yet a lot more rewarding. The lateral leadership now is talking with young people making sure they understand this education journey they are taking will be challenging, but the reward will come.

There is a lot of support education; the problem exists when trying to bring all or most of the resources together — improving on getting support for initiatives in situations where management can also help with supplies. The problems come when attempting to get everyone on the same page. We tend to have the same goals in mind; just reaching the target the same way is the problem.

Ideas to getting support:

1. Give Subtitles for research
2. Creating teams
3. Bring teams together for brainstorming
4. Define an ultimate reachable goal

Article I found interesting:

Five winning strategies for Lateral leadership

Published on April 24, 2014

Chihttps://www.linkedin.com/pulse/20140424064618-21659755-5-winning-strategies-for-lateral-leadershipef Control Officer, Digital HSB

References:

Welch, J.: Chapter 18: Hard Spots

 Huffman, E.: 7 Tips for Managing Sideways

Prentiss, B.: Lateral Leadership: Tips for Leading Colleagues Even If They Don’t Report to You

respond 2

 

We are talking this week about working relationships and ways to make our relationships with coworkers more productive and efficient.  We have to make sure, as Jack says, that you have the most capable and highly developed people on your team. This encompasses more than technical knowledge and capability. It encompasses the ability of the team members to interact well with each other and contribute to the work of the organization. It also includes the concept of lateral leadership which is the ability to influence those with whom you work without occupying a position of formal authority.

The article below offers a unique perspective on this mandate. 

If Your Innovation Effort Isn’t Working, Look at Who’s on the Team  

JWI510: Leadership in the 21st Century

Lecture Notes

© Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be
copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University.

JWI 510 – Lecture Notes (1194) Page 1 of 4

Week 7: Leading through Relationships

As Jack counsels, leading is not about power and control; leading is about achieving results through
others. These others include, not only your employees, but also your boss and colleagues. Your
colleagues, especially in large multinational organizations, can be widespread and may be located in
different business units and different countries. Further, in businesses of any size, you may have to exert
influence over employees of other companies that are part of your supply chain, or you may have to deal
with virtual teams. As such, our focus this week is on achieving results through leading upwards and
laterally, and on getting work done in situations where you don’t have formal authority.

Lateral Leadership and Persuasion

Lateral leadership focuses on the particular capabilities all leaders must hone to ensure their
effectiveness in today’s organizations. Johnson (2003) states that the key capabilities include:

• Networking
Determine whose support you will need to achieve your current and potential initiatives, and
build those relationships.

• Persuasion and Negotiation
When bargaining, focus on mutual benefit. This will increase your influence and build solid
professional relationships.

• Consultation
Talk to people whose buy-in you need for an initiative about the best processes to achieve
results, and what will create support for the initiative and its implementation.

• Coalition Building
Alliances are more powerful than attempting to influence by oneself, so gather together the
people you need to support the initiative.

Honing these skills requires a leader to focus on the organization of the system, rather than focusing on
one functional silo. Clearly, all lateral leadership capabilities revolve around a conscious focus on
building relationships. Developing solid and enduring relationships is the surest way of building the trust
required to effectively influence.

JWI 510: Leadership in the 21st Century
Lecture Notes

© Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be
copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University.

JWI 510 – Lecture Notes (1194) Page 2 of 4

The Art of Persuasion

The key capabilities of lateral leadership are closely tied to effective persuasion. Persuasion is a
necessary approach to achieving results in today’s flat, multi-generational, team-oriented organization.
What you may think of as persuasion – a one-time, hard sell, well-reasoned, firm approach – is a recipe
for failure.

There are four factors necessary for effective persuasion (Conger, 1998):

1. Credibility

To persuade someone, they need to trust you. Be aware that you might think you are more
credible than you really are; this factor is about expertise. If you do not have a history of being
knowledgeable and making sound decisions, you need to learn more about your position, hire
someone who has the expertise needed, or support your position with respected outside sources.
Reflect on your relational history and, if there are gaps in your relationships, you may need to
meet personally with key individuals or gather groups of allies who have relationships with those
you want to persuade.

2. Shared Benefits
It is important to understand your audience and how they will perceive the issue presented to
them. This depth of understanding requires asking questions and carefully listening to feedback
from those impacted by the issue. Persuasion may transform during this process; some
adjustment is a positive step toward a successful outcome. Once the audience is understood, the
issue must be presented so that the advantages for your audience are clear.

3. Memorable Evidence
To effectively persuade, present the audience with a story that will make a meaningful impact and
be memorable. One of the most effective approaches is to vividly describe a comparable situation.

4. Show Emotion
Just as Jack advocates for passion as an essential quality of great leaders and good employees, it
is also important for effective persuasion. It is essential to show an emotional connection to the
issue presented – the audience must feel it. It is equally important to understand the mood and the
emotional state of the audience, so you can adjust tone accordingly.

Persuasion is difficult. It takes time, but it is a powerful force that can move an organization forward. Next
week, we will explore the topic of getting results. Try and weave what you have learned about persuasion into
what you will learn about leading an organization that executes to win.

JWI 510: Leadership in the 21st Century
Lecture Notes

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copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University.

JWI 510 – Lecture Notes (1194) Page 3 of 4

The Five Laws of Managing Up

If you are working, you are either self-employed and the owner of your business, or you have a boss. Just
as your lateral relationships are a central focus, so, too, is your relationship with your boss. The most
effective leaders know how to make the most of this. They know how to manage up.

In an age when you spend the majority of your waking hours at work, bosses can have an enormous
impact on your daily life and self-esteem. They hold power over your compensation and career. They can
make or break your ability to do your job well in terms of resources and coaching. In sum, a good
relationship with your boss can make work, not just deeply rewarding, but downright fun. A bad one can
cause misery. Either way, remember that upward relationships require special tending. With that in mind,
we now turn to five laws for effectively influencing your boss, developed by management expert Michael
Feiner (2004).

1. Make Your Own Bed

You are 100% responsible for the quality of your relationship with your boss. Sure, some bosses care
deeply about building a connection with each direct report, but most are too busy managing their own
jobs and their own bosses to care nearly as much as you do about forging a healthy and productive
personal bond. Do not expect your boss to jump in and “own” your relationship. You must jump first.
And why not? You most likely have more to gain than lose.

2. Get Behind the Mask
You can only influence your boss when you understand your boss. What motivates them? What
are their priorities, objectives, goals, and ambitions? What are their points of contention? And,
most importantly, what are their expectations of you? So, how do you find out about your boss?
Often, it can be as simple as asking them directly, but careful and dedicated observation also
helps. To whom does your boss talk most often? To whom do they listen? What do they read?
What makes them laugh? What drives them nuts? Each one of these details will open your eyes to
your boss’s values and concerns, showing you the path to a relationship that surpasses the
superficial.

3. Commit to the Success of Your Boss

This law is easy if you really like your boss. In such cases, of course, you’ll do everything you can
to assure their admiration and assent. But, even if you do not like your boss, you have to discipline
yourself to respect the position that they hold. That’s professionalism. That’s doing the right thing.
Keep your boss continually informed. Meet your obligations. Make sure you are dependable.
Nothing is more likely to enhance your relationship with your boss than seeing that their goals
were achieved because of you.

JWI 510: Leadership in the 21st Century
Lecture Notes

© Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be
copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University.

JWI 510 – Lecture Notes (1194) Page 4 of 4

4. Speak Truth to Power … Carefully

The most successful supervisors understand that people at high organizational levels are
sometimes cut off from what people really think about them and the company. The best leaders
do want to hear the bad news along with the good. They know that leaders cannot deliver their
best performance if the people who work for them will not relay the information they need to
make good decisions. You can confront your boss with unpleasant news by, first, ensuring the
information you want to convey is accurate. Next, make it clear that you are not seeking a gripe
session or a confrontation, but rather trying to raise important questions or share information you
think your boss should have. Lastly, know when and how to begin the conversation.

5. Act Like a Grownup

There will be times in your career when you have done all you can and tried everything you can
think of to build a solid relationship with your boss to no avail. It may seem to you that the boss
does not care about anything but their own success, that you are regarded as merely a factor of
production or some kind of inanimate object. You may conclude that your boss has no interest in
your personal growth and professional development. However accurate your perceptions, you
cannot feel sorry for yourself. You cannot play the victim. Confront your problem with a healthy
and productive mindset, and find an equally healthy and productive solution. And do not quit
abruptly, leaving your team in the lurch. If you are tempted to quit, remember that you can often
learn more from a bad boss than from a good one.

We do not want to leave you with the impression that most bosses bring you down. Indeed, many bosses
are good or even great, and, surely, most strive to be. But the quality of your boss’s management is
something you have little control over. You can only control the quality of your relationship. Own that
responsibility, and you’re managing up.

Your Leadership Journey

• If you are new to leadership, learn about why lateral leadership works

• If you are a team leader, consider how to solidify your boss-subordinate relationship

• If you are a senior/veteran leader, think about how to ask the right questions of your managers to help
them build the skills they need to appropriately manage up to you

Professor Herminia Ibarra, Professor Aneeta Rattan and Anna Johnston prepared this case based on public sources and interviews

with Jill Tracie Nichols and Joe W hittinghill.

London Business School cases are developed solely as the basis for class discussion and are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2018 London Business School. All rights reserved. No part of this case study may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means electronic, photocopying, recording or otherwise without written permission of
London Business School.

Satya Nadella at Microsoft:
Instilling a growth mindset

In early 2018, Satya Nadella celebrated his fourth anniversary as the CEO of Microsoft. Under his
stewardship, Microsoft has gone from a company perceived as a Windows-centric lumbering giant to
a $700 billion market cap tech player whose strategic bets on artificial intelligence (AI) and cloud
computing were paying off (see Exhibit 1). After a decade of flat growth under Nadella’s predecessor,
the company’s share price soared to an all-time high in June 2018.

Nadella remembered February 4, 2014 vividly in his book Hit Refresh: The Quest to Rediscover
Microsoft’s Soul and Imagine a Better Future for Everyone. It was the day he took charge of a company
widely portrayed by its own employees as plagued by internal knife fights, bickering and inertia. In his
mind, the company’s ability to make great technology was never lost. However, a culture of internal
competition and “not invented here” mentality had focused employees on a narrow vision of
performance over customers and increasingly expansive market opportunities.

An engineer, Nadella thus set out to change the human system at Microsoft. Four years later, he
prided himself on the company again becoming a magnet for top engineering talent, a world-class
competitor among the heavyweights of the tech industry, and valued partner to companies undergoing
their own digital transformation (see Exhibit 2).

“People often ask how it’s going,” said Nadella. “My response is very eastern: We’re making great
progress, but we should never be done.” 1

The “lost decade”
Just 17 days after founder and technical whizz Bill Gates handed over the reins to Steve Ballmer in
2000, the stock market crashed. In the decade that followed, a culture that crippled innovation
flourished at Microsoft.

Herminia Ibarra
Aneeta Rattan
Anna Johnston

LBS Ref: CS-18-008
HBP: LBS128

June 2018

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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 the politics, it’s 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 prioritised what would help them get
the highest ratings over the quality of their work. “I was told in almost every review that the political
game was always important for my career development,” reflected one former Microsoft engineer.
Ultimately, “staffers were rewarded not just for doing well but for making sure their colleagues failed.”
(See Exhibit 3.)

A wave of external competition crashed down on the firm, causing talent to jump ship. By 2004, thanks
to the rapid growth of upstart firms such as Google, some of Microsoft’s most talented employees were
leaving faster than they could be replaced. “Instead of a culture that said, ‘Let’s experiment and see
which ideas work,’ the culture is one of, ‘Let’s kiss enough ass so maybe they’ll approve of our product’,”
said one Microsoft executive who eventually quit in 2009 to work for Google 2. A former engineer said
it was like “designing software by committee.”3

Microsoft’s product development process lagged: Bing failed to extinguish Google search, and Zune
couldn’t compete with Apple’s iPod. In 1998, for example, a group of executives passionate about
bringing an e-book to market were waved away by Gates and told to report into an Office-run division.
“Potential market-busting businesses, such as e-book and smart phone technology, were killed or
delayed amid bickering and power plays.”4

Ballmer aggressively opposed open-source innovation, calling Linux a “cancer that attaches itself in
an intellectual property sense to everything it touches.” The industry labelled him “shortsighted”.

Morale plummeted. By 2011, Ballmer’s Glassdoor rating among his own employees was just
29%. Despite climbing to 46% the following year, it still lagged behind others at that time: Google CEO
Larry Page’s approval rating was 94% and Mark Zuckerberg’s was 99%.

After the tech bubble burst and with the stock price flat, “People realised they weren’t going to get
wealthy,” one former senior executive said. “They turned into people trying to move up the ladder,
rather than people trying to make a big contribution to the firm.” Meanwhile, companies like Google
were paying employees up to 23% above the industry average.5

By 2014, the Microsoft that Nadella inherited was fading toward irrelevance, heralded the press. The
tech industry had shifted from desktop computers to smartphones – from Microsoft’s Windows to
Apple’s iPhone and Google’s Android. Apple and Google had soared to record market valuations;

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Microsoft’s stock price had stalled, despite the fact that revenue had tripled and profits had doubled
during Ballmer’s reign as CEO from 2000 to 2014.6

As industry analyst Jan Dawson summarised: “It was an enormously profitable company. They were
in no danger of going out of business soon – it was just a question of whether they’d go into permanent
decline.”7

Satya Nadella
The consummate insider, Nadella grew up professionally in the Microsoft that Gates and Ballmer
created. The India-born cricket enthusiast started working at Microsoft in 1992 when products were
saved on disks and the world was powered by Windows 3.0. A computer scientist by training, Nadella
moved through a range of leadership roles, including heading up R&D for Online Services, and
ultimately becoming executive vice president of the Cloud and Enterprise group. He recalled taking
risks along the way:

I distinctly remember Steve saying, ‘Hey, look, you know if you go to Bing and you
don’t do a good job or succeed, it might just be your last job.’ But at the same time,
his own intellectual honesty and how he talked about that job made it, you know, very
enticing. It was tough to refuse to go there to learn. And it’s clear that if I had not gone
and learned… and if I had not run the cloud infrastructure business, I’m sure the
board would have not seen me as a candidate even for CEO.8

Reflecting on important influences in his life, Nadella cites his formative experiences: “It’s the language,
routines and mindset of my parents back in India and my immediate family in Seattle that helped form
me and still guide me today.”9

In particular, he traces the roots of his ideas about leadership to the birth of his first child, Zain, who
was premature, weighed just three pounds, and had cerebral palsy. “Empathy, we learned, was
invisible and was a universal value,” said Nadella. “And we learned that empathy is essential to deal
with problems everywhere, whether at Microsoft or at home; here in the United States or globally. That
is also a mindset, a culture.” 10

Taking charge
As Microsoft’s new CEO on February 4, 2014, Nadella scripted a letter to all employees (see
Exhibit 4):

Today is a very humbling day for me. It reminds me of my very first day at Microsoft,
22 years ago. Like you, I had a choice about where to come to work. I came here

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because I believed Microsoft was the best company in the world. I saw then how
clearly we empower people to do magical things with our creations and ultimately
make the world a better place. I knew there was no better company to join if I wanted
to make a difference. This is the very same inspiration that continues to drive me
today.

He spoke of focusing the company on its core values, but through a new lens. “We need to prioritise
innovation that is centred on our core value of empowering users and organisations to ‘do more’.”

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 person 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 organisation,
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.11

“We all knew something was going to be different when he assigned the Leadership Team to read
[Marshall Rosenberg’s] Nonviolent Communication: A Language of Life: Life Changing Tools for
Healthy Relationships,” recalled Phil Spencer, Head of Xbox.12 Microsoft president and chief legal
officer Brad Smith, a 24-year company veteran, agreed this was a clear indication that Nadella was
going to transform “not just the business strategy, but the culture as well.”13

Nadella devoted much of his first year to listening and learning from others:

I heard from hundreds of employees at every level and in every part of the company.
We held focus groups to allow people to share their opinions anonymously as well.
Listening was the most important thing I accomplished each day, because it would
build the foundation of my leadership for years to come. To my first question, why
does Microsoft exist, the message was loud and clear. We exist to build products that
empower others. That is the meaning we’re all looking to infuse into our work. I heard
other things as well. Employees wanted a CEO who would make crucial changes,
but one who also respected the original ideals of Microsoft, which had always been
to change the world. They wanted a clear, tangible and inspiring vision. They wanted
to hear more frequently about progress in transparent and simple ways. Engineers
wanted to lead again, not follow. They wanted to up the coolness. We had technology
the press would fawn over in Silicon Valley, such as leading-edge artificial intelligence,

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but we weren’t showing it off. What they really demanded was a road map to remove
paralysis.14

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.

In the spring of 2014, despite a contentious historical rivalry with Apple and lack of traction with their
own Windows phones, Microsoft made Office available on all iOS devices, including the iPhone and
iPad. The next year, the global launch of Windows 10 originated in a tiny village in Kenya.

“Articulating our core raison d’etre and business was a good first step. But I also needed to get the
right people on the bus to join me in leading these changes,” Nadella said. He wanted a senior
leadership team (SLT) that would “lean into each other’s problems, promote dialogue, and be effective”.

“I don’t mean yes-men and yes-women,” he explained. “Debate and argument are essential. Improving
upon each other’s ideas is crucial. I wanted people to speak up. ‘Oh, here’s a customer segmentation
study I’ve done’. ‘Here’s a pricing approach that contradicts this idea’. It’s great to have a good, old-
fashioned college debate. But there also has to be high quality agreement.”15

To her surprise, Nadella selected Jill Tracie Nichols, Ballmer’s communications lead 2009–2014, as
his chief of staff in 2014. When she questioned why, Nadella told her: “I’ve seen you work with others
and you treat them well. You show respect. I want my office to be about the culture we are trying to
create and not about power.”16

Peggy Johnson, a seasoned Qualcomm executive, became head of business development. Her job
would be to forge ties with former Silicon Valley rivals, such as Dropbox. “Satya was already on a
regular cadence of visiting the Valley, which was new for the CEO of Microsoft,” said Johnson. “And
he said to me, ‘I want you to be outside of Redmond as much as you are inside of Redmond’.”

Kathleen Hogan, who had experience at McKinsey and Oracle, would transition from leading
Microsoft’s global consulting and support business to partnering with Nadella on leading the cultural
transformation as chief people officer. Kurt DelBene, who “was handpicked by President Obama to fix
Healthcare.org” and once upon a time led the Office division, returned as chief strategy officer. Chris
Capossela headed up marketing and Scott Guthrie, an engineer who had worked with Nadella in
building the cloud business, would lead Cloud and Enterprise, Microsoft’s “fastest growing business”.

“Over time, these changes meant that some executives left,” recalled Nadella. “They were all talented
people, but the senior leadership team needed to become a cohesive team that shared a common
world view… We needed everyone to view SLT as his or her first team, not just another meeting they
attended. We needed to be aligned on mission, strategy and culture.” 17

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The 2015 annual executive retreat offered another opportunity to convey that things were changing.
“One aspect of the off-site really bugged me,” admitted Nadella. “Here we were with all this talent, all
this bandwidth, and all this IQ in one place just talking at each other in the deep woods. And frankly,
it seems like most of the talking was about poking holes in each other’s ideas. Enough.”

Nadella broke tradition by inviting the founders of companies Microsoft had recently acquired in the
year prior, such as Mojang, the maker of Minecraft. As Nadella said:

These new Microsoft leaders were mission-orientated, innovative, born in the mobile-
first and cloud-first world. I knew we could learn from their fresh, outside perspective.
The only problem was that most of these leaders did not officially “qualify” to go to
executive retreats given the person’s level in the organisation. To make matters
worse, neither did the manager, or even their manager’s manager… Inviting them
was not one of my more popular decisions. But they showed up bright-eyed,
completely ignorant of the history they were breaking. They asked questions. They
shared their own journeys. They pushed us to better.18

Another change “not universally loved” was scheduling customer visits during the retreat. Despite
some “eye-rolling and groaning,” executives from different business lines were shuttled off together to
visit customers. The invigorated executives ended up talking for days about what they had learned
and what that meant for the future of Microsoft. “The transformation was under way,” concluded
Nadella.

From know-it-alls to learn-it-alls
At Microsoft’s July 2015 global sales conference in Orlando, Nadella revealed a fresh company
mission: “To empower every person and every organisation on the planet to achieve more.” The
original mission enshrined by Gates was “a computer on every desk and in every home.”

After covering business plans, including building an intelligent cloud platform, with the spotlight on his
face, Nadella talked about his children and what learning each of their special needs had meant for
him and his wife, Anu. Nearing the end of the speech, he turned to talking about the Microsoft culture:

We can have all the bold ambitions. We can have all the bold goals. We can aspire
to our new mission. But it’s only going to happen if we live our culture, if we teach our
culture. And to me, that model of culture is not a static thing. It is about a dynamic
learning culture. In fact, the phrase we use to describe our emerging culture is ‘growth
mindset’, because it’s about every individual, every one of us having that attitude –
that mindset – of being able to overcome any constraint, stand up to any challenge,
making it possible for us to grow and thereby for the company to grow.19

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In early 2015, Anu had given him a best-selling book by Stanford psychologist Carol Dweck entitled
Mindset: The New Psychology of Success. She had found it helpful in thinking about creating
conditions for success for one of their daughters who has learning differences, but suspected it might
also give Nadella some ideas for Microsoft. People who operate with a fixed mindset, the theory says,
are more likely to stick to activities that utilise skills they’ve already mastered, rather than risk
embarrassment by failing at something new. People focused on growth make it their mission to learn
new things, understanding that they won’t succeed at all of them at first.20

This rang true for Nadella, who seized on the ideas to forge a plan for Microsoft. “Dweck divides the
world between learners and non-learners,” explained Nadella, “demonstrating that a fixed mindset will
limit you and a growth mindset can move you forward.”21 Microsoft’s culture change, he concluded,
would centre on “the belief that everyone can grow and develop; potential is nurtured, not
predetermined; and anyone can change their mindset”.22 They would shift from being “know-it-alls” to
“learn-it-alls.”

Nadella told Hogan that the primary things he wanted her to help him on was evolving the culture. At
an offsite with 180 executives divided into 17 teams, they started a dialogue on what kind of culture
they wanted to have. The 17 leaders became Hogan’s “culture cabinet,” charged with defining growth
mindset for Microsoft.23 After much debate, and consultation with experts like Dweck, the group
articulated three pillars, all in the service of making a difference in the world:

Customer obsession. We need to obsess about our customers. At the core of our
business must be the curiosity and desire to meet a customer’s unarticulated and
unmet needs with great technology. This was not abstract: We all get to practice each
day. When we talk to customers, we need to listen. We need to be insatiable in our
desire to learn from the outside and bring that learning into Microsoft.

Diversity and inclusion. We are at our best when we actively seek diversity and
inclusion. If we are going to serve the planet as our mission states, we need to reflect
the planet. The diversity of our workforce 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, don’t just listen – make it possible for others to speak so
that everyone’s ideas come through. Inclusiveness will help us become open to
learning about our own biases and changing our behaviours so we can tap into the
collective power of everyone in the company. As a result, our ideas will be better, our
products will be better, and our customers will be better served.

One Microsoft. We are one company, one Microsoft – not a confederation of
fiefdoms. Innovation and competition don’t respect our silos, so we have to learn to
transcend those barriers. 24

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Throughout 2015 and 2016, Nadella spoke widely about the importance of mindset. “The CEO sets
the tone for the culture,” explained Nichols. “Gates and Ballmer were super-smart, driven and hard-
charging. Their model was ‘precision questioning:’ picking apart ideas in meetings to test their validity
and the presenter’s conviction, and that approach flowed through the organisation. Satya models being
curious, seeking to learn as people bring him new ideas and information.25

Grounding the pillars
“We made big intentional changes that would grab people’s attention,” said Hogan, “like changing the
performance review system … and small changes like giving people a list of 10 inclusive behaviours
and asking them to pick one and discuss it.”26 “We never believed that there would be one thing that
would change the company. It would be a lot of things, big and small, reinforcing the change,” echoed
Nichols.27

Customer obsession required employees to get up from their chairs and into the field. Dorothee Ritz,
Microsoft’s general manager for Austria in July 2015, encouraged her team to speak with customers
on their turf:

One account manager spent a week out on a street with police officers, trying to
understand when and where remote data could help them. Another account manager
spent two days in a hospital to observe first-hand and understand what it would really
mean to become paperless.28

After a year of experimenting with “immersive experiences”, Ritz selected a set of key customers
(whom she calls partners) across industries ranging from car manufacturing to retailers to hospitals.
Fifteen executives from Microsoft went on-site to talk to their customers about their challenges. 29
“Getting to know each other in the context of solving a partner’s problems was more meaningful than
ropes exercises or off-site discussions,” explained Ritz.30

The commitment to making Microsoft a safe and inclusive place was less about training than the
behaviour modelled by senior managers. For example, when Xbox sponsored a party at the 2016
Game Developer’s Conference, featuring scantily-clad women dancers31, Xbox head Spencer made
a swift apology. “What made it easier for me to hold myself accountable was really believing in the
growth mindset piece of our culture.”32 And, to ensure the numbers reflected the intentions, diversity
targets were set for senior management.33

The infamous stack-ranking performance system was abolished, replaced by “continual feedback and
coaching”34 and a compensation process that put more influence in the hands of managers. Instead
of basing rewards such as bonuses on an algorithm driven by employee ratings, managers are given
a budget for compensation that they can hand out as they see fit.

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Microsoft’s annual Hackathon, OneWeek, is an example of the new “one company” ethos. Employees
are invited to step away from their work and concentrate on a hack: a problem that, when solved, could
benefit people, business, society or the environment. People team up, plot a business plan, create a
prototype and then pitch it company-wide; winning hackathon teams are funded to build their projects.
At first, people wondered if OneWeek was worth the effort. But the potential to reach millions of people
around the world held a strong allure.

On September 26, 2017, Nadella’s book, Hit Refresh was released, and every employee received a
copy with a letter inside (see Exhibit 5). “Writing it was more for employees and to advance culture
than anything else,” said co-author Nichols.35

Nudges and small reminders engage all 125,000 employees with the new culture. For example,
leaders close meetings with a reflection, “Was that a growth-mindset or fixed-mindset meeting? Why?”
Nadella issues monthly videos reviewing his top few learnings, prompting groups across Microsoft to
discuss their own learnings. Visitors to Redmond have been welcomed by elevator doors decorated
with the Chinese symbol for “listen”. Employees in the canteen are reminded to be lifelong learners
when they wipe their face – thanks to the napkin holders.

Role-modelling the change
Eight months into his tenure, Nadella gave the keynote speech at the Grace Hopper Celebration of
Women in Computing, an annual event for women in the tech industry. During the Q&A, Dr Maria
Klawe, a computer scientist and former Microsoft board member, asked Nadella what advice he had
for women seeking a pay raise who are not comfortable asking. He advised patience, and “knowing
and having faith that the system will actually give you the right raises as you go along.”

Nadella’s comments went viral, provoking outrage. He was mocked publicly as ignorant of well-
documented gender pay gaps, and his stated commitment to diversity was questioned. Instead of
waiting for the furore to settle, Nadella said, “I was determined to use the incident to demonstrate what
a growth mindset looks like under pressure.”36

By email, the CEO told his employees he had “answered that question completely wrong”. Nadella
explored his own biases and asked his executive team to do the same. It made an impression with his
top team, including Hogan, who said: “I became more committed to Satya, not less. He didn’t blame
anybody. He owned it. He came out to the entire company and he said, ‘We’re going to learn, and
we’re going to get a lot smarter’.”37

There were plenty of other opportunities to learn from public mistakes.

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In March 2016, researchers at Microsoft’s Future Social Experiences (FUSE) Labs unveiled Tay, an
AI-based chatbot. Tay soon became a powerful reminder that “AI can (and often should) behave in
ways human creators might not expect”.38 Twitter trolls discovered that if they “pummelled Tay’s
account with racism, sexism and other hateful rhetoric – a scenario Microsoft had not accounted for –
she would spew some of it back.”39 In just 24 hours, the bot tweeted 96,000 times in an “increasingly
vile fashion”. Microsoft’s public AI experiment “failed by its own standards”.

It was a “humiliation,” the press scorched. Undeterred, Nadella wrote to Tay’s creators, “Keep pushing,
and know that I am with you.” In December 2016, Microsoft launched Zo, a bot similar to Tay, but
designed to be more “troll-resistant.”

Reflecting on what he described as the most difficult lesson he had learned, at the 2016 Game
Developer’s conference Xbox chief Spencer echoed his boss. “When we make mistakes – and we
bump, or collide, into each other – the easy way is to retreat, maybe even to deny there’s a problem.
Instead, I think we have to be humble. I think we have to be active learners – read, educate ourselves,
try to understand other people’s journeys, and read some more. And then, better informed, I think we
commit to leading with deliberate purpose.”40

Four years on
Today, Microsoft is once again a magnet for top engineering talent, rated as one of five best AI
companies for employees 41, and Nadella has a Glassdoor employee approval rating of 95%.

“Our industry doesn’t respect tradition,” said Nadella, “it respects innovation.” His first four years have
seen a number of bold tech decisions; for example, investments in quantum computing and mixed
reality, and innovations such as HoloLens, a holographic computer that enables people to interact with
holograms.

Today, over 95% of Fortune 500 companies choose Azure, Microsoft’s cloud computing service. Azure
has announced 50 regions globally, with 40 generally available today – more than any other major
cloud vendor. The company has embraced Linux, the open-source Windows rival “rather than clinging
to Windows like a security blanket.” Nadella’s $26 billion deal for LinkedIn, which combines LinkedIn’s
500 million professional users with the 85 million people who use Office 365, “gives Microsoft a
formidable data hoard for its AI operations.”42

“After years of intensive focus,” Nadella said of the culture change, “we began to see some
encouraging results.”

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Employees told us they felt the company was heading in the right direction. They felt
we were making the right choices for long-term success and they saw different
groups across the company working together more…

But we also saw some trends that were not as encouraging. When asked whether
their vice president, or group leader, was prioritising talent movement and
development, the results were worse than they’d been before our culture-building
project began. Even the most optimistic workers will become discouraged if they are
not being developed. I had set a clear mission and envisioned an empowering culture.
Employees and senior leaders were on board, but we had a missing link-middle
management. 43

Expecting 125,000 people to take a learning-oriented approach to their work is a significant task. Not
everyone gets it right away. “It’s a lot like love, grace, or forgiveness,” said Nichols. “Words don’t
describe it until you experience it.”

At a meeting of 150 Microsoft executives that Nadella convened to discuss developing high potentials,
he shared a story. One of his managers had told him that five of his team members didn’t have a
growth mindset. “The guy was just using growth mindset to find a new way to complain about others,”
Nadella told the group. He declared the whining over. “To be a leader in this company, your job is to
find the rose petals in a field of shit.”44

“Cultural transformation is hard and demanding work,” agreed Spencer. “Four years into it, it’s still
sometimes incredibly slow and incredibly painful to get everyone on board, much less to admit our
own biases.”45

The future
In September 2017, at Microsoft Ignite, an annual conference for developers and IT professionals,
Nadella closed with an ambition:

The core soul of our company is to empower every person and every organisation on
the planet to achieve more. That means we want to democratise the access to
technology.

I was reminded of a poem I’ve read by Vijay Seshadri, the Pulitzer Prize-winning poet
from 2014, called Imaginary Number. The last line goes: ‘The soul, like the square
root of minus 1, is an impossibility that has its uses.’ It definitely does.

We all seek to unlock the unimaginable and solve the impossible. That’s the quest
we are on.46

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Exhibits

Exhibit 1: Evolution of Microsoft’s share price

Source: Macrotrends

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Exhibit 2: Top players by market share and revenue growth in cloud computing, Q2 2017

Source: Synergy Research Group

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Exhibit 3: Organisation-chart cartoon courtesy of Manu Cornet

Source: http://bonkersworld.net/

This file is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported

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http://bonkersworld.net/

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Exhibit 4: Satya Nadella’s first letter to employees as Microsoft CEO

From: Satya Nadella

To: All Employees

Date: Feb. 4, 2014

Subject: RE: Satya Nadella – Microsoft’s New CEO

Today is a very humbling day for me. It reminds me of my very first day at Microsoft, 22 years ago.
Like you, I had a choice about where to come to work. I came here because I believed Microsoft was
the best company in the world. I saw then how clearly we empower people to do magical things with
our creations and ultimately make the world a better place. I knew there was no better company to join
if I wanted to make a difference. This is the very same inspiration that continues to drive me today.

It is an incredible honor for me to lead and serve this great company of ours. Steve and Bill have taken
it from an idea to one of the greatest and most universally admired companies in the world. I’ve been
fortunate to work closely with both Bill and Steve in my different roles at Microsoft, and as I step in as
CEO, I’ve asked Bill to devote additional time to the company, focused on technology and products.
I’m also looking forward to working with John Thompson as our new Chairman of the Board.

While we have seen great success, we are hungry to do more. Our industry does not respect tradition
— it only respects innovation. This is a critical time for the industry and for Microsoft. Make no mistake,
we are headed for greater places — as technology evolves and we evolve with and ahead of it. Our
job is to ensure that Microsoft thrives in a mobile and cloud-first world.

As we start a new phase of our journey together, I wanted to share some background on myself and
what inspires and motivates me.

Who am I?

I am 46. I’ve been married for 22 years and we have 3 kids. And like anyone else, a lot of what I do
and how I think has been shaped by my family and my overall life experiences. Many who know me
say I am also defined by my curiosity and thirst for learning. I buy more books than I can finish. I sign
up for more online courses than I can complete. I fundamentally believe that if you are not learning
new things, you stop doing great and useful things. So family, curiosity and hunger for knowledge all
define me.

Why am I here?

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I am here for the same reason I think most people join Microsoft — to change the world through
technology that empowers people to do amazing things. I know it can sound hyperbolic — and yet it’s
true. We have done it, we’re doing it today, and we are the team that will do it again.

I believe over the next decade computing will become even more ubiquitous and intelligence will
become ambient. The coevolution of software and new hardware form factors will intermediate and
digitize — many of the things we do and experience in business, life and our world. This will be made
possible by an ever-growing network of connected devices, incredible computing capacity from the
cloud, insights from big data, and intelligence from machine learning.

This is a software-powered world.

It will better connect us to our friends and families and help us see, express, and share our world in
ways never before possible. It will enable businesses to engage customers in more meaningful ways.

I am here because we have unparalleled capability to make an impact.

Why are we here?

In our early history, our mission was about the PC on every desk and home, a goal we have mostly
achieved in the developed world. Today we’re focused on a broader range of devices. While the deal
is not yet complete, we will welcome to our family Nokia devices and services and the new mobile
capabilities they bring us.

As we look forward, we must zero in on what Microsoft can uniquely contribute to the world. The
opportunity ahead will require us to reimagine a lot of what we have done in the past for a mobile and
cloud-first world, and do new things.

We are the only ones who can harness the power of software and deliver it through devices and
services that truly empower every individual and every organisation. We are the only company with
history and continued focus in building platforms and ecosystems that create broad opportunity.

Qi Lu captured it well in a recent meeting when he said that Microsoft uniquely empowers people to
“do more.” This doesn’t mean that we need to do more things, but that the work we do empowers the
world to do more of what they care about — get stuff done, have fun, communicate and accomplish
great things. This is the core of who we are, and driving this core value in all that we do — be it the
cloud or device experiences — is why we are here.

What do we do next?

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To paraphrase a quote from Oscar Wilde — we need to believe in the impossible and remove the
improbable.

This starts with clarity of purpose and sense of mission that will lead us to imagine the impossible and
deliver it. We need to prioritize innovation that is centered on our core value of empowering users and
organisations to “do more.” We have picked a set of high-value activities as part of our One Microsoft
strategy. And with every service and device launch going forward we need to bring more innovation
to bear around these scenarios.

Next, every one of us needs to do our best work, lead and help drive cultural change. We sometimes
underestimate what we each can do to make things happen and overestimate what others need to do
to move us forward. We must change this.

Finally, I truly believe that each of us must find meaning in our work. The best work happens when
you know that it’s not just work, but something that will improve other people’s lives. This is the
opportunity that drives each of us at this company.

Many companies aspire to change the world. But very few have all the elements required: talent,
resources, and perseverance. Microsoft has proven that it has all three in abundance. And as the new
CEO, I can’t ask for a better foundation.

Let’s build on this foundation together.

Satya

Source: Microsoft

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Exhibit 5: Satya Nadella’s letter to “the two families that have shaped my life”

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References and Notes

1 Fast Company. (2018). Satya Nadella: The C In CEO Stands For Culture. [online] Available at:
www.fastcompany.com/40457741/satya-nadella-the-c-in-ceo-stands-for-culture

2 Fortune. (2018). Microsoft’s office: Why insiders think top management has lost its way. [online] Available at:
http://fortune.com/2011/03/31/microsofts-office-why-insiders-think-top-management-has-lost-its-way/

3 Eichenwald, K. (2018). How Microsoft Lost Its Mojo: Steve Ballmer and Corporate America’s Most Spectacular
Decline. [online] The Hive. Available at: www.vanityfair.com/news/business/2012/08/microsoft-lost-mojo-steve-
ballmer

4 Eichenwald, K. (2018). How Microsoft Lost Its Mojo: Steve Ballmer and Corporate America’s Most Spectacular
Decline. [online] The Hive. Available at: www.vanityfair.com/news/business/2012/08/microsoft-lost-mojo-steve-
ballmer

5 Bergen, J. (2018). Google pays 23% more than industry average, and then there’s the perks – Geek.com. [online]
Geek.com. Available at: www.geek.com/news/google-pays-23-more-than-industry-average-and-then-theres-the-
perks-1390323/

6 Paragraph excerpted from Fast Company and adapted by case writer to include chronology. (2018). Satya
Nadella Rewrites Microsoft’s Code. [online] Available at: www.fastcompany.com/40457458/satya-nadella-
rewrites-microsofts-code

7 Jackdaw Research. (2018). Media. [online] Available at: https://jackdawresearch.com/media/
8 Harvard Business Review. (2018). Microsoft’s CEO on Rediscovering the Company’s Soul. [online] Available at:

https://hbr.org/ideacast/2017/09/microsofts-ceo-on-rediscovering-the-companys-soul.html
9 Nadella, S., Shaw, G. and Nichols, J. (2017). Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine

a Better Future for Everyone. William Collins, p.92.

10 Ibid, p.93.
11 Fast Company. (2018). Satya Nadella: The C In CEO Stands For Culture. [online] Available at:

www.fastcompany.com/40457741/satya-nadella-the-c-in-ceo-stands-for-culture
12 Phil Spencer (2018). 2018 Dice Keynote Transcript. [online] Slideshare.net. Available at:

www.slideshare.net/PhilSpencer/2018-dice-keynote-transcript
13 Fast Company. (2018). Satya Nadella Rewrites Microsoft’s Code. [online] Available at:

www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code
14 Nadella, S., Shaw, G. and Nichols, J. (2017). Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine

a Better Future for Everyone. William Collins, p.75-76.
15 Ibid, p.81.
16 Interview with Jill Tracie Nichols, Satya Nadella’s Chief of Staff 2014–2017 and co-author of Hit Refresh: The

Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone, London, May 1, 2018
17 Ibid, p.80.
18 Ibid, p.83.
19 Ibid, p.93-94.
20 Fast Company. (2018). Satya Nadella Rewrites Microsoft’s Code. [online] Available at:

www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code
21 Nadella, S., Shaw, G. and Nichols, J. (2017). Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine

a Better Future for Everyone. William Collins, p.92.

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22 Microsoft.com. (2018). Empowering Our Employees – Microsoft Corporate Social Responsibility. [online] Available

at: www.microsoft.com/en-us/about/corporate-responsibility/empowering-employees
23 Interview with Kathleen Hogan. www.youtube.com/watch?v=4kf7mhkG6cM
24 Nadella, S., Shaw, G. and Nichols, J. (2017). Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine

a Better Future for Everyone. William Collins, p.101.
25 Interview with Jill Tracie Nichols, Satya Nadella’s Chief of Staff 2014–2017 and co-author of Hit Refresh: The

Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone, London, May 1, 2018
26 Interview with Hogan www.youtube.com/watch?v=4kf7mhkG6cM
27 Ibid.
28 Cable, D. (2018). Alive at Work: The Neuroscience of Helping Your People Love What They Do. Harvard

Business Review Press, p.168.
29 Ibid, p.169.
30 Ibid, p.170.
31 BBC News. (2018). Xbox apologises for go-go dancer party. [online] Available at:

http://www.bbc.co.uk/news/technology-35861212
32 Phil Spencer (2018). 2018 Dice Keynote Transcript. [online] Slideshare.net. Available at:

www.slideshare.net/PhilSpencer/2018-dice-keynote-transcript
33 The Verge. (2018). Microsoft says it will tie executive bonuses to diversity hiring goals. [online] Available at:

www.theverge.com/2016/11/18/13681738/microsoft-diversity-goals-executive-bonuses-women-in-tech
34 McKinsey & Company. (2018). Ahead of the curve: The future of performance management. [online] Available at:

www.mckinsey.com/business-functions/organisation/our-insights/ahead-of-the-curve-the-future-of-performance-
management

35 Interview with Jill Tracie Nichols, Satya Nadella’s Chief of Staff 2014–2017 and co-author of Hit Refresh: The
Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone, London, May 1, 2018

36 Nadella, S., Shaw, G. and Nichols, J. (2017). Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine
a Better Future for Everyone. William Collins, p.113.

37 Fast Company. (2018). Satya Nadella Rewrites Microsoft’s Code. [online] Available at:
www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code

38 West, J. (2018). Microsoft’s disastrous Tay experiment shows the hidden dangers of AI. [online] Quartz. Available
at: https://qz.com/653084/microsofts-disastrous-tay-experiment-shows-the-hidden-dangers-of-ai/

39 Fast Company. (2018). Satya Nadella Rewrites Microsoft’s Code. [online] Available at:
www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code

40 Phil Spencer (2018). 2018 Dice Keynote Transcript. [online] Slideshare.net. Available at:
www.slideshare.net/PhilSpencer/2018-dice-keynote-transcript

41 Chamberlain, D. (2018). Who’s Hiring AI Talent in America? – Glassdoor Economic Research. [online] Glassdoor
Economic Research. Available at: www.glassdoor.com/research/studies/ai-jobs/

42 Fast Company. (2018). Satya Nadella Rewrites Microsoft’s Code. [online] Available at:
www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code

43 Nadella, S., Shaw, G. and Nichols, J. (2017). Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine
a Better Future for Everyone. William Collins, p.117.

44 Ibid, p.119.

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45 Phil Spencer (2018). 2018 Dice Keynote Transcript. [online] Slideshare.net. Available at:

www.slideshare.net/PhilSpencer/2018-dice-keynote-transcript
46 News.microsoft.com. (2018). [online] Available at: news.microsoft.com/uploads/2017/09/Satya-Nadella-transcript-

Ignite-2017

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• Structure Bookmarks

Satya Nadella at Microsoft: Instilling a growth mindset
The “lost decade”
Satya Nadella
Taking charge
From know-it-alls to learn-it-alls
Grounding the pillars
Role-modelling the change
Four years on
The future
Exhibits
Exhibit 1: Evolution of Microsoft’s share price
Exhibit 2: Top players by market share and revenue growth in cloud computing, Q2 2017
Exhibit 3: Organisation-chart cartoon courtesy of Manu Cornet
Exhibit 4:
Exhibit 5: Satya Nadella’s letter to “the two families that have shaped my life”

References and Notes

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/NLD (Gebruik deze instellingen om Adobe PDF-documenten te maken waarmee zakelijke documenten betrouwbaar kunnen worden weergegeven en afgedrukt. De gemaakte PDF-documenten kunnen worden geopend met Acrobat en Adobe Reader 6.0 en hoger.)
/NOR
/POL
/PTB
/RUM
/RUS
/SKY
/SLV
/SUO
/SVE
/TUR
/UKR
/ENU (Use these settings to create Adobe PDF documents suitable for reliable viewing and printing of business documents. Created PDF documents can be opened with Acrobat and Adobe Reader 6.0 and later.)
>>
>> setdistillerparams
<< /HWResolution [600 600] /PageSize [612.000 792.000] >> setpagedevice