Dear Mr Ballmer:
I normally react negatively to companies that undertake massive reorganizations as you in July. Typically, it is a sign of desperation by a frustrated CEO who is in the middle of a crisis and sees no other option than to turn the organization on its head. In your case I am more optimistic.
Microsoft’s five business-unit structure served it well over the years and enabled it to become the world’s largest software maker. On the downside, the company has experienced a loss in competitiveness in recent years because it failed to see major shifts in technology and market preferences. You have been hampered by poor communication between the business units, conflicts among the units emerged as they competed for resources, and individual business unit goals have been pursued at the expense of the company’s long-term viability. It was ludicrous to see Windows 8 launched last year in a form that was not compatible with other Microsoft devices, and the Surface RT tablet, Bing and the MSN web portal have met mixed consumer interest. At the same time Apple and Google have embraced shifting market preferences for devices that integrate into everyday life. They have invented experiences for customers to communicate socially at home and at work.
I can criticize you for being a poor observer of the emerging reality of consumer preferences, but I admire your courage to confront the root cause of the problem with your company—its organization structure. You seek a shift in culture and you are using an organization change to enable it. That is a valid use of organization change. I would be worried if the change were made merely to close a gap in current financial results. The new seven functions that you have created along with the cross-functional initiative teams will not only redefine the formal relationships among individuals, but they will also alter the collective behavior within the company—and that’s a good thing. You will see greater specialization of skills, especially in the engineering groups, enhanced communication, quicker decision-making, and greater cross-organization learning.
That said, I have three concerns to share with you. First, recognize that companies often fail at transitions of this scale because employees feel threatened. It is a normal response to a perceived loss of status or autonomy especially during a time of uncertainty-ladened change. Fear is typically an unconscious threat response, and employees often behave in counterproductive and self-destructive ways. Reasoning seems to goes out the door as fear overwhelms the capacity to think clearly, learn and engage. To get ahead of this problem I would encourage you to make expectations clear as soon as possible and constantly reinforce them. Manage your messages wisely and provide context generously to your executives so they can cascade it throughout the organization. Quickly modify the performance management system to fit the new organization and use recognition as a powerful reward. Look for multiple ways to get everyone involved in the change, ask a lot of questions and encourage team-building social events. Most importantly, offer opportunities for executives and other employees to have choice, preferably over major aspects of their jobs, but even minor choices will have a surprisingly positive impact.
Second, there is a dark side to functional organizations. They tend to develop an internal language and focus that can blind them to what is really going on in the marketplace. Perceptions and observations can narrow to internal mental models and beliefs rather than being outwith the organization. To combat this weakness, ensure that you and the other executives have conversations that encourage staff to constantly interrogate reality. Stop making declarations of opinions or views and start making proposals that open up the possibility that you could be wrong. Allow yourself to be vulnerable and resist the temptation to constantly defend your ideas. And, within each function put in processes that engage the consumer environment to understand what can be created. Each function must actively encounter the environment by nurturing relationships with it. Innovations and technology leadership come into existence because of these relationships.
Lastly, be careful with your own well-learned behaviors. The changes you desire in the company must start with you and cascade through your leadership team. The organization structure that you have put in place is really based on relationships versus the previous structure that was driven by official authority. In such a change it is not uncommon for employees and managers to become confused about authority and accountability—and this can be fatal for a company. You must make these clear and constantly reinforce them through the messages that you send into the organization. And most importantly, you and your top team must be mindful of your new relationships with the organization. You all must demonstrate the leadership behaviors of self-awareness, self-control, motivation, empathy and sociability. At the same time you must continue to be courageous, intolerant and highly protective of your personal integrity.
About the Author
Al Bolea is the founder of Applied Leadership Seminars, a company offering clients 10 leadership seminars, ranging from one to five days in length, and the annual Alaskan Executive Leadership Retreat in Ketchikan, Alaska. He is the former CEO/GM of Dubai Petroleum and a retired BP executive. He is currently the Distinguished Adjunct Professor of Leadership at the University of Alaska and a leadership lecturer at the University of Houston.
More info: www.albolea.com or email appliedleader@gmail. com