The C in CEO Stands for Culture
Microsoft’s mind-set for transforming from a place full of know-it-alls to one filled with learn-it-alls
The CEO is the curator of an organization’s culture. Anything is possible for a company when its culture is about listening, learning, and harnessing individual passions and talents to the company’s mission. Creating that kind of culture is my chief job as CEO.
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 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.
The culture change I wanted was centered on exercising a growth mind-set every day in three distinct ways. First, 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.
Second, 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 behaviors 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.
Finally, 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. It’s our ability to work together that makes our dreams believable and, ultimately, achievable.
Taken together, these concepts embody the growth in culture I set out to inculcate at Microsoft. I talked about these ideas every chance I got, but the last thing I wanted was for employees to think of culture as “Satya’s thing.” I wanted them to see it as their thing. The key to the culture change was individual empowerment. We sometimes underestimate what we each can do to make things happen, and overestimate what others need to do for us. I became irritated once during an employee Q&A when someone asked me, “Why can’t I print a document from my mobile phone?” I politely told him, “Make it happen. You have full authority.”
Because I’ve made culture change at Microsoft such a high priority, people often ask how it’s going. My response is very Eastern: We’re making great progress, but we should never be done. This is a way of being. It’s
about questioning ourselves each day.
I’m not exempt from having to ask myself these questions. Do a search for me and karma. It’s a fall day in Phoenix, Arizona, and I am attending the Grace Hopper Celebration of Women in Computing, the world’s largest gathering of women technologists. Diversity and inclusion is a bedrock strategy in building the culture we need and want, but I recognize that as a company and as an industry we’ve come up far too short. Which makes what I said that day in Phoenix all the more perplexing, not to mention embarrassing.
Near the end of my interview onstage, Dr. Maria Klawe—a computer scientist, president of Harvey Mudd College, and a former Microsoft board member—asked me what advice I had for women seeking a pay raise who are not comfortable asking. It’s a great question, because we know women leave the industry when they are not properly recognized and rewarded.
I only wish my answer had been great. I paused for a moment and remembered an early president at Microsoft who had told me once that human resource systems are long-term efficient but shortterm inefficient. “It’s not really about asking for the raise but knowing and having faith that the system will actually give you the right raises as you go along,” I responded. “And that might be one of the additional superpowers that women who don’t ask for the raise have, because that’s good karma. It’ll come back. Long-term efficiency solves it.”
Dr. Klawe, whom I respect enormously, kindly pushed back. She used it as a teaching moment, directing her comments to the women in the audience but clearly giving me a lesson I won’t forget.
She told the story of a time when she was asked how much pay would be sufficient, and she just said whatever is fair. By not advocating for herself, she didn’t get what was fair. She encouraged the audience to do their homework and to know what the proper salary is. Afterward, we hugged and left the stage to warm applause. But the damage was done.
The criticism, deserved and biting, came swiftly through waves of social media and international radio, TV, and newspaper coverage. My chief of staff smugly read me a tweet capturing the moment: “I hope Satya’s comms person is a woman and is asking for a raise right now.” I was frustrated, but I also was determined to use the incident to demonstrate what a growth mind-set looks like under pressure.
A few hours later I shot off an email to everyone in the company. I encouraged them to watch the video, and I was quick to point out that I had answered the question completely wrong. “When it comes to career advice on getting a raise when you think it’s deserved, Maria’s advice was the right advice.” A few days later, in my regular all-employee Q&A, I apologized, and explained that I had received this advice from my mentors and had followed it. But this advice underestimated exclusion and bias—conscious and unconscious. Any advice that advocates passivity in the face of bias is wrong.
Since my remarks at Grace Hopper, Microsoft has made the commitment to drive real change—linking executive compensation to diversity progress, investing in diversity programs, and sharing data publicly about pay equity for gender, racial, and ethnic minorities. In some ways, I’m glad I messed up in such a public forum because it helped me confront an unconscious bias I didn’t know I had, and it helped me find a new sense of empathy for the great women in my life and at my company.
I had gone to Phoenix to learn, and I certainly did.
is maybe even a smart decision for you, but I want you to do it. Think wisely, and choose. And by the way, if you fail, there’s no parachute. It’s not like I’m going to come and rescue you and put you back into your old job.’ ”
In search, Microsoft was an extreme underdog to Google. To compete, it had to operate in a looser way than it did in other domains. “I remember when most of the senior execs at Bing carried around ipads to meetings,” says Mark Johnson, who worked at the company after Microsoft acquired the startup where he worked and who is now CEO of geographic data provider Descartes Labs. “It was seen as very hip and a symbol of defiance against the Microsoft machine.”
Nadella honed an outsider perspective at Bing, which was enhanced when Netflix CEO and then–microsoft board member Reed Hastings invited Nadella to shadow him at Netflix meetings. Nadella did so on and off for about a year. “Oh, my God, I learned so much,” remembers Nadella. “One of the things I felt was a big handicap for me was, having grown up at Microsoft, I’d never seen any other company.”
Though Nadella cut his Netflix adventure short when he was given control of Azure, Microsoft’s web-tools division that competes with Amazon Web Services, he leveraged the experience to make a case for his promotion to CEO. “Netflix pivots very quickly based on new data,” Valueact’s Morfit recalls Nadella telling him. “He thought that was very interesting compared to the bureaucracy Microsoft had built up.”
Nadella made his first public appearance
as Microsoft’s CEO at a San Francisco press conference eight weeks after he got the job. He strode out without any introductory hoopla— dressed in black, enthusiastic but calm, a trifle owlish in his chunky black-frame eyeglasses. It made for a sharp contrast with the often bombastic Ballmer, and that was before Nadella began paraphrasing T.S. Eliot to describe Microsoft’s goals: “You should never cease from exploration, and at the end of all exploration, you arrive where you started and know the place for the very first time.”
During the press event, Nadella announced the first version of Office for Apple’s ipad. It was a meaningful way to mark a new era for Microsoft, even though the software had been in the works long before he took the helm. “We’re not going to say, ‘Only use this device,’ ” Nadella tells me, referring to Microsoft’s Surface tablet and other Windows devices. The company had long aimed to control its ecosystem; by putting ambitious versions of Word, Excel, and Powerpoint on Apple’s tablet—before it had comparable touch-screen-friendly
versions ready for Windows—microsoft was forging a new direction.
Nadella “is bringing Microsoft into [today’s] more open and integrated computing environment,” says Scott Mcnealy, cofounder and former CEO of Sun Microsystems, one of Microsoft’s principal rivals in the 1990s and Nadella’s first employer. “He’s brought a level of diplomacy to it.”
When Nadella hired Peggy Johnson from Qualcomm in 2014, it reinforced this message. Her job, as executive VP of business development, would be to strengthen Microsoft’s ties with Silicon Valley and pursue deals with companies it once solely considered rivals, such as Box and Dropbox. “Satya was already on a regular cadence of visiting the Valley, which was new for the CEO of Microsoft,” Johnson says. “And he said to me, ‘I want you to be outside of Redmond as much as you are inside of Redmond.’ ” Today, some of the startups that once would have defaulted to Amazon Web Services are choosing Azure, which—though still playing catch-up—posted 93% revenue growth in the most recent quarter.
Nadella also updated Microsoft’s mission statement—once, in Bill Gates’s words, “A PC on every desk and in every home”—with a more modern mantra: “To empower every person and every organization on the planet to achieve more.” Then he began refining the company’s efforts to reflect it, leaning into areas with ambitious strategic promise (Surface, Hololens) and pruning smaller-impact initiatives like the Fitbit-esque Microsoft Band (which he had proudly sported the first time I met him, during a press dinner at a Tuscan restaurant near Microsoft headquarters in November 2014). He wrote off Ballmer’s $7 billion acquisition of Nokia’s mobile phone business as a loss, eliminating more than 20,000 jobs in a tacit acknowledgment that Windows was not going to catch the iphone and Android on mobile any time soon. The company has released more than 100 IOS apps and even embraced Linux, the open-source Windows rival. Microsoft joining the Linux Foundation was a hell-has-frozen-over moment, given that Ballmer famously called Linux “a cancer.”
And then there’s Nadella’s $26 billion deal for Linkedin. Investors have largely applauded the move. Combining Linkedin’s 500 million professional users with the 85 million people who use Office 365 gives Microsoft a formidable data hoard from which it can glean insights— arguably as valuable and impossible to clone as Facebook’s social network or Google’s search engine. (This past January, Microsoft acquired a hotshot startup in Montreal called Maluuba with technology geared to parse such data.) “We get very excited about this unique Microsoft AI,” says Harry Shum, executive VP of AI and research at Microsoft.
Nadella isn’t letting all this activity and achievement swell his ego. As he told me at one point, describing the benefits of the dark-horse perspective he developed during his ascent at Microsoft, “When everybody’s celebrating you is when you should be most scared.”
Nadella’s management worldview is deeply
influenced by Stanford professor Carol Dweck’s book Mindset, which outlines two types of thinking. Those who operate with a fixed mind-set are more likely to stick to activities that utilize skills they’ve already mastered, rather than risk embarrassment by failing at something new. Those focused on growth make it their mission to learn new things, understanding that they won’t succeed at all of them.
Nadella’s wife, Anu (whom he asserts is the real reader in the family), turned him onto the book a few years before he became Microsoft’s CEO. They found its guidance useful as parents. But it’s easy to see why Nadella would apply its concepts to Microsoft, a company whose philosophy was once so fixed that it could be summed up as “everything has to be on Windows and God forbid we do something that works well on another platform,” as Creative Strategies analyst Carolina Milanesi puts it.
After Nadella’s promotion to CEO, as he was crafting a new manifesto for Microsoft employees, he consulted with Dweck and incorporated themes from her work. “We needed a culture that allowed us to constantly refresh and renew,” he explains. For her part, Dweck pronounces Microsoft a “spectacular” example of a large organization with a hunger for new knowledge, and praises Nadella for leading by example. “We’ve seen a lot of places where leaders preach growth mind-set but don’t practice it,” she says. “It’s not easy to grasp it and implement it, especially in a culture of scientists, who tend to worship natural ability.”
Nadella admits that some Microsoft managers have misunderstood the concept of fixed and growth mind-sets, seeing them as unalterable personality traits rather than behaviors. He says that some of his colleagues have even attempted to sort members of their team into these two buckets. Mostly, though, he believes that people get it. “No one at Microsoft is inspired by growth mind-set because of Satya Nadella, the CEO,” he says. “It’s because of what it means to them as a better parent, a better partner, a better colleague.”
Encouraging a growth mind-set among all employees, Nadella adds, carries some responsibilities, including “flying air cover for someone at some point when they’ve gotten something wrong.” So it was in March 2016, when the researchers at Microsoft’s Future Social Experiences (FUSE) Labs unveiled Tay, an Ai-based chatbot trained to converse in the slangy patois of an 18- to 24-year-old American woman (“omg totes exhausted”).
Twitter trolls discovered that if they pummeled Tay’s account with racism, sexism, and other hateful rhetoric—a scenario Microsoft had not accounted for—she would spew some of it back. Over the course of one day, trolls brainwashed the bot, who tweeted 96,000 times in increasingly vile fashion, turning Microsoft’s public experiment in AI into a humiliation. “In the morning it was great, and by the evening it wasn’t so great,” says Lili Cheng, FUSE Labs’ general manager.
Nadella’s response: to offer encouragement to Tay’s creators, writing in an email, “Keep pushing, and know that I am with you.” Cheng and her colleagues were moved by the gesture. And push they did: That December, Microsoft launched Zo, another bot similar to Tay, but designed to be more troll-resistant. (She’s available on Facebook Messenger and Kik, but so far not Twitter.)
The CEO experienced his own difficult lesson in growth just eight months into his tenure. Invited to participate in a Q&A at the Grace Hopper Celebration of Women in Computing, a major annual event, he told the largely female audience that women in the tech industry should forgo asking for raises and instead trust that the system would reward them appropriately.
“OURCOMPANY’S IDENTITYIS FUNDAMENTALLY ABOUTCREATING TECHNOLOGYSO THATOTHERSCAN CREATEMORE TECHNOLOGY.”
The negative reaction was swift, with attendees quickly tweeting out their pushback.
Nadella realized his mistake, and the next day issued an apology. “I answered that question completely wrong,” he wrote in an email to Microsoft employees. Today, he describes his onstage comments as “a nonsense answer from this privileged guy.”
But Nadella did more than deliver a mea culpa; he explored his own biases—and pushed his executive team to follow suit. “I became more committed to Satya, not less,” says Microsoft chief people officer Kathleen Hogan, the former COO of worldwide sales, whom Nadella promoted into her current role soon after the kerfuffle. “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.’ ”
It was a rare public falter for Nadella, but Microsoft got stronger. In the aftermath, one longtime rank-and-file Microsoftie told me, the company stepped up internal messaging that encouraged employees to respect diversity and combat their unwitting biases. Nadella set an example for the rest of the company: We make mistakes, but we can learn to do better.
If you rummage around on Youtube, you
can unearth an entertainingly archaic 1993 Microsoft “Devcast” video, produced in the prebroadband days for distribution to developers via satellite uplink. Nadella, then a youthful technical marketing manager a little over a year into his time at the company, appears an hour and 45 minutes into the clip. He sports bushy black hair, and his accent is pronounced. Watching the confident but raw effort today, it’s clear just how far he’s come.
At Microsoft’s Build developer conference this past May, Nadella publicly wrestled with the implications of artificial intelligence. Within the first few minutes of his keynote address, he’d flashed on a screen the covers of George Orwell’s 1984 and Aldous Huxley’s Brave New World as he warned of technology’s dark possibilities. It’s hard to envision Facebook’s Mark Zuckerberg or Google’s Sundar Pichai indulging in anything so foreboding as part of a public address.
Backstage after his keynote, in the bowels of Seattle’s Washington State Convention Center, I asked Nadella why he chose to bring up his AI fears. “Everyone in our industry should be able to acknowledge that there are unintended consequences of technology,” he says, leaning forward and laughing dryly. “Our company’s identity is fundamentally about creating technology so that others can create more technology. And it’s essential that it is being used for empowering more people.”
Nadella’s sense of responsibility, for Microsoft and global society, has been on display in the political realm this year as well. When President Donald Trump signed his initial immigration order in January, Microsoft called it “misguided and a fundamental step backward,” and Nadella personally critiqued it citing his own experience as an immigrant: “[There’s] no place for bias or bigotry in any society.”
Nevertheless, Nadella traveled to Washington, D.C., in June to participate in the first meeting of the American Technology Council—a group run by Microsoft’s EX-CFO and charged with exploring ways to modernize government services. Along with Tim Cook, Jeff Bezos, and others, Nadella met with Trump in the White House’s State Dining Room and participated in breakout sessions. “There cannot be a more important conversation for us to be having with the government, and I’m sort of thrilled to engage in it,” he told me four days later. “Quite frankly, this is not about one administration versus the other. It’s not about one party versus the other. It’s about American competitiveness, and I’m glad to see this administration take that on.”
Most major tech CEOS have been loath to poke at the administration, though some in the industry assert that prominent immigrants such as Nadella have a particular duty to speak out, especially in light of comments former White House chief strategist Steve Bannon made in 2015 expressing concern about the number of South Asian and Asian executives in Silicon Valley. In Hit Refresh, Nadella’s new book melding personal memoir and technological futurism (see excerpt, page 56), the CEO seemingly alludes to Bannon’s remark without mentioning him by name, writing, “Even when some people in positions of power have remarked that there were too many Asian CEOS in technology, I’ve ignored their ignorance.” He adds that it “infuriates” him to think of his kids and their friends having to grapple with racial slurs. Yet that’s as far as he goes. “I was not elected by anybody,” he tells me. “And so I want to make sure that we don’t act like we have a mandate.”
At Microsoft, however, Nadella has certainly earned a mandate, and in the wake of the white supremacist riot in Charlottesville, Virginia, in mid-august, he expressed his vision for leadership in the context of the national conversation, showing just how powerful Nadella’s approach can be. In an email to his senior staff and direct reports on the Monday after the weekend’s violence and racial animus, he shared the “profound impact” the “horrific” event had on him. “In these times,” he wrote, “to me only two things really matter as a leader. The first is that we stand for our timeless values, which include diversity and inclusion . . . . The second is that we empathize with the hurt happening around us. At Microsoft, we strive to seek out differences, celebrate them and invite them in . . . . Our growth mindset culture requires us to truly understand and share the feelings of another person . . . . Together, we must embrace our shared humanity, and aspire to create a society that is filled with respect, empathy and opportunity for all.”