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What She Learned Leading Microsoft’s Culture Change

One of the most successful culture transformations, at a company with over 140,000 employees, is unfolding before our eyes. Microsoft’s Chief Executive Officer Satya Nadella has written about this journey in Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone, and Chief People Officer Kathleen Hogan has shared early insights on progress. But I wanted a closer look. In 30 years of organizational consulting, I’ve had to clean up my fair share of failed culture-change efforts. They’re usually attempts at creating the illusion of change, sloganeering campaigns void of the long term work it takes to truly transform a company’s culture.

 

When I sat down with Hogan, she readily qualified her efforts, saying, “By no means are we declaring victory. We have a ways to go, and we have to earn our aspired culture every day. We have momentum, but we’re always trying to close the gap between our aspired culture and the daily experience of our employees. You can’t freeze culture in a declaration.” The progress they’ve made is impressive, though, given the staying power of Microsoft’s 40-year culture, coupled with the fact that Nadella is only their third CEO. If you are embarking on, or salvaging, a culture transformation, Hogan’s insights will provide a reliable guide.

 

Starting with a deep diagnostic is key. I’ve seen many culture-change efforts do little more than a survey and a few focus groups. The problem is that a mere snapshot can’t reveal the origins of behaviors worth preserving and changing. Microsoft spent nine months in deep, engaged listening across the organization. “We spoke with experts, senior leaders and VPs, and numerous focus groups with a wide variety of diverse employee groups to learn about their experience, the culture they desired, what we were passionate about preserving from our history, and what we needed to leave behind,” Hogan said.

 

When they were done, they had more than 50 different ways to describe their aspirations. They assembled a “culture cabinet” to boil them down to simple statements to enact, which embodied the Growth Mindset they wanted to embed—being customer obsessed, diverse and inclusive, accruing to one Microsoft. Microsoft’s history of taking on bold technological challenges with real impact, and giving back to the world, were examples of cultural attributes they desired to retain. But it was time to shed the highly individualistic and internally competitive culture that feared failure and struggled to collaborate—what Nadella called a culture of “know it alls.” “We knew we couldn’t just put out dogma or platitudes,” Hogan said. “It takes time to tap into something people really care about and want to achieve. That power has real teeth. If people recognize your final destination as someplace they want to go, they will help you get there.”

 

Hogan emphasized being sure to measure, learn, and course-correct. Many culture-change efforts fall short because they don’t monitor progress honestly and apply what they’ve learned. In the absence of measurable evidence that change is happening, teams can regress to familiar norms. “We leveraged our technological DNA,” Hogan said. “We collect daily pulse-data from employees to gain real-time insights about their experience and where we are falling short. We also use data to help disconfirm unfolding misperceptions.” Beyond tracking progress, the use of honest data has a secondary benefit. Acknowledging shortfalls about culture efforts enables further change. In a culture where people struggle to admit ignorance, calculating risk can be tricky. “Being open about failure helps us balance a growth mindset with accountability,” Hogan said. “We are learning to not just reward success, but also reward people who fell short while getting us closer. We don’t need people to show up in meetings having memorized pages of information to look smart. We want it to be perfectly acceptable to say, ‘I don’t have that information, but I can get it.’ Learning from our mistakes gets us closer to our desired results—that’s a new form of accountability for us.”

 

Hogan shared her personal experience of this. She and her human resources team had a misstep on the rollout of one of its programs. She anxiously approached her boss, Nadella, about how to handle it. She’d drafted an email apologizing to employees with a plan for how she and her team would rectify the problem. She reflected, “I’m not in the habit of having my boss proofread my emails, and I was uneasy about how he might respond to the mistake we’d made. My team was down the hall equally anxious about what I would hear. But Satya just said, ‘You’re overly apologetic. You’ve acknowledged the mistake, stated what you’ve learned and how you intend to fix it. Now move on.’ I felt like a huge weight was lifted.” How leaders act in tough moments when someone skins their knees shapes how a culture treats failure and learning.

 

Hogan stressed the effects of grounding culture change in purpose. It’s not news that employees today want to know their contributions matter. Nadella has stated that he wants every Microsoft employee to discover a deep sense of purpose in their work. Many well intentioned culture-change efforts set out to reach and inspire all employees. But “reaching” and “inspiring” can translate to inconsequential momentary interactions. “We are trying to enlist every one of our 140,000 employees in this effort,” Hogan said. “We need them. We’ve activated our 18,000 managers with tools and approaches to help them engage their teams. I wish we’d done even more—the role of leaders can’t be overstated. They have to embody the culture. Having Satya as an amazing role model has made a huge difference.”

 

Hogan described a leadership meeting offsite where Nadella’s team sat casually on couches (versus a conference table) talking about their own sense of purpose in the world, and how they hoped the Microsoft platform would enable them to realize it. “That ability to connect our own purpose to the mission sustains us,” Hogan said. When you can zoom out and see how we are making a difference, that’s energizing in the face of the day to day challenges. We’re feeling like a united team more than ever. While strategy will evolve, your culture and sense of purpose should be long-lasting. Culture paired with a purpose-driven mission allows your employees to use your company platform to realize their own aspirations and passions.” That’s cascaded through the organization. The Microsoft annual meeting used to be a global, five-day barrage of presentations “talking at” people, but has been repurposed to include a “hackathon,” with highly interactive product expos and learning sessions. The more engaged in change people are, the more they believe their contributions matter, resulting in a genuine sense of purpose.

 

Another lesson Hogan hit on was never neglecting to integrate multiple levers. The most successful culture-change efforts choreograph a set of interrelated activities around factors that shape people’s behavior. Communication practices, strategy and resource allocation processes, and the full gamut of human-resources activities, from hiring to rewards and promotion, all play vital roles in changing behavior. But too many culture change efforts fail to pull these levers holistically, strafing the organization with random, disconnected efforts that work at cross-purposes and confuse employees. Hogan says, “You have to embed culture change into who you are. We’ve shifted our performance review emphasis on individual contribution to a more balanced focus that adds contribution to others (collaborating and helping) and leveraging others (asking for help and building on other’s ideas). By evaluating and rewarding a more cohesive set of behaviors, people are learning to work more collaboratively.” Microsoft has also built a new leadership platform focused on developing leaders who “model, coach, and care.” Together, these shifts in performance focus are helping leaders and employees change how they contribute. Hogan has also overhauled hiring practices from “screening out to screening in,” creating a more inclusive and diverse workforce. They used to hire from only a few top universities, but now recruit top talent from more than 500.

 

Consistent and constant communication has also been critical. While many organizations ratchet up “information disbursement” during culture change that do little more than clog inboxes, Microsoft figured out that people feel communicated to when they are talking. For example, employees are able to join (in person or virtually) Nadella’s monthly Q&A to hear from him as well as ask direct questions. Through Yammer and Skype, they give real-time feedback, which helps leaders understand what resonates and what doesn’t. “There are no silver bullets. You can’t have a ‘favorite’ culture lever, or over-index on any one tactic,” Hogan said. “Culture change is a complex set of levers that you have to pull in concert. Be prepared for three steps forward, two steps back. It’s a learning journey.”

 

Hogan is also keen on helping to shape the company narrative. She understands that successful culture change is an epic story within the larger context of the organization’s past and future chapters. The stories you do and don’t tell create the folklore and legend that transmit through the organization. Soon into his time as CEO, Nadella instituted a practice on his team called “research of the amazing.” At each Friday’s leadership meeting, one member of the team is responsible for researching a story from somewhere in the Microsoft ecosystem of employees doing amazing things and embodying the aspired culture. They discovered stories like an innovation director at Microsoft’s Cambridge R&D lab whose compassion led to developing a hand-stabilizing watch for a women suffering with Parkinson’s disease. They’ve heard stories of employees helping customers transform business models, enabling more efficient cancer research, and helping teachers be more effective in their classrooms.

 

“We now have almost five years of weekly stories,” Hogan said. “Can you imagine how that many stories have shaped the narrative of our culture?” Of course, this doesn’t mean ignoring stories of cultural failure. But in the face of difficult challenges and cultural setbacks, having a bounty of representative stories helps fuel leaders with needed energy during protracted seasons of change. Importantly, the narrative around you has to reconcile with the narrative within you. “One of the hardest parts of the journey is hearing stories where we’ve failed to live up to our aspired culture—where an employee’s experience didn’t match what we’ve promised,” Hogan said. “We all want Microsoft to be an exceptional place to work, and when we fail, it’s painful. I also know that with 140,000 employees, no matter what decision I make, I’m going to disappoint someone. That’s the reality of leadership. I have to stay centered on what we’re trying to accomplish, remain grateful and grounded in my own purpose, and on days we fall short, let my inner yardstick be the narrative that helps me see the forest for the trees.” There will always be critics on the sidelines jeering about how your change isn’t working. Prevent those voices from hijacking the story of your culture journey by proactively narrating the entire story for the organization.

 

Hogan remains humble. No leader embarks on cultural transformation prepared for its grueling requirements. Many cover up feelings of fear and inadequacy with contrived confidence, or prematurely declare victory at the smallest sign of change. Humility is a powerful antidote to these traps. “You’re never done. Culture is something you have to earn every day and you’re only as good as your last day,” Hogan said. “But the greatest joy I have is seeing people being their authentic self, bringing their A-game. That’s the privilege of this role.” But Hogan reflects that it didn’t start that way. As a seasoned executive leading Microsoft’s services business, she didn’t grow up in human resources. She says, “The steep learning curve kept me humble. I had to surround myself with technical experts in HR who complimented what I didn’t bring to the table. I spent time with my industry CHRO peers learning how they onboarded into their roles. I had a lot to learn, and there’s lots more to learn.”

 

Hogan’s posture of modesty models a profound example of “learn it all” in a historically “know it all” culture. By making her learning journey transparent, she has no need to fake it. As a seasoned executive, owning that she still has things to learn enables others to embrace their own path of discovery. Hogan is engaged in one of the greatest challenges for any management team, and her insights can help any leader contemplating the audacious task of cultural transformation. I’ve seen some do it remarkably, and others fail miserably. Those that succeed stay the course over time. They avoid superficial approaches that temporarily hide old behavior, and do the hard work that drives lasting change.

 

Ron Carucci is an Advisory Board member of Ethical Systems as well as cofounder and managing partner at Navalent, working with CEOs and executives pursuing transformational change for their organizations, leaders, and industries. He is the bestselling author of eight books, and his work has been featured in Fortune, CEO Magazine, Harvard Business Review, BusinessInsider, MSNBC, BusinessWeek, and Smart Business.

 

This post was reprinted with permission from Forbes.

 

Photograph is courtesy of JC via Flickr.