Satya Nadella’s Amazing First Year at Microsoft

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This week is Satya Nadella’s one-year anniversary at the head of Microsoft, and his success so far holds a lesson for the industry: unless technology firms are about to go out of business and need a turnaround specialist, their CEOs need to be subject matter experts. If you put someone at the head of a company who doesn’t intimately understand the technology underneath the firm’s products, it won’t end well.

Now clearly other skills like leadership, management and understanding of operations, marketing, finance and diplomacy are also needed. But if an executive doesn’t get the fundamentals of the firm’s products, he or she can’t move the company forward.

Satya Nadella’s big difference over Steve Ballmer wasn’t his history at Microsoft because Steve had been there longer. The difference was that Satya understands the products more intimately, and as a result, he has been able to accomplish more in the one year he’s been there than Steve did in the decade he ran the firm. And both men came into the job with the same basic goals.

Let’s talk about that.

Ballmer’s Setup

We won’t focus on Steve’s decade; that’s been beat to death. The guy poured his heart into the job only to fall short, not because he didn’t work hard, but because he was the wrong guy for the job.

I actually met with Steve just after he took over as CEO, and his goals then weren’t really that different than Satya’s. However, I believed he lacked the skill set and support necessary to get the job done. Having said that, Steve did do some critical things before he left that set the stage better for Nadella than it had been set for Ballmer.

He reorganized the firm, basically blowing up the silos. And he eliminated the Forced Ranking practice that had been a curse on most technology companies. One of the big reasons Microsoft couldn’t execute was that rather than fighting its competitors it was constantly fighting itself. The siloes, which began while Bill Gates was running the firm, created mini-companies that were always in conflict. In addition, Forced Ranking, which came out of the GE turnaround, forced employees to compete with each other and created back-stabbing behaviors that cripple every company were this practice exists. Like a virus, once Forced Ranking is in a company, it is a royal pain to get out.

Fixing these two mistakes set a strong foundation that allowed Nadella to accelerate into massive change.

Nadella’s Microsoft

I’ve spoken to lots of Microsoft employees over the last year, and they seem amazed at how much change they have seen in the firm. They are cooperating again, and the people seem focused on moving projects forward rather than focused on making sure a peer doesn’t out-execute them. There are far fewer stories of backstabbing. In short, the place sounds more like someplace you’d like to work than a cesspool of political intrigue.

In talking to the Microsoft partners who had been up in arms about their bad treatment during the Vista and Windows 8 disasters, it is like they are talking about a different company—one that listens and actually addresses their concerns. Now employees are far more likely to complain about Google, which strangely appears to be worse than Microsoft was when it comes to caring for and about its workers.

Microsoft’s cloud efforts are accelerating, and they suddenly look like they can compete with Google and Amazon rather than looking like roadkill in the dim glow of those firms’ taillights. While still far from the dominance they enjoyed in the 1990s, Microsoft looks like it again could get there again. The stories of its demise, which were rather common last decade, have largely evaporated.

This is perhaps Nadella’s biggest accomplishment: he has changed what seemed like wishful thinking about Microsoft’s future success into assurance that the company again can execute. He restored a sense of purpose and hope for the firm, which is now at a level more in line with how it performed in the 1990s when it was young.

Wrapping Up: Lessons Learned

I’m often fascinated by the ways that boards for technology companies seem to avoid learning things. At companies like HP and Yahoo, you’ve seen different boards try different things. Boards never seem to learn that you need someone with a deep technical skill set to advance the firm. It also amazes me how many technology firms still use Forced Ranking given how deeply that practice has been discredited.

Satya Nadella’s selection, and the foundation that was set for him, should stand as a shining example. Siloed companies, Forced Ranking, and idea that CEOs need a generic skill set generally are company killers. It shouldn’t be a surprise that if you put the right person in the right job and then give him or her the support necessary, success is virtually assured. None of that is optional if success is in fact the goal. In most failed companies, while the CEO tends to get the blame, I believe it is often more the firm’s board that caused the problem.

In this instance, Microsoft’s board deserves a great deal of the credit for making the right decision by putting the right person in the job and giving him what he needed to be successful.

Photo courtesy of Shutterstock.