The Microsoft Corporation; an Introduction

Microsoft Corporation

Technology is an integral part of life in today’s constant and fast-paced world. A plethora of companies have worked to advance this technology, and the Microsoft Corporation is one of the largest in the industry. Since its founding in 1975 (Isaacson 337), the company has grown into one of the more prominent leaders in the field. With its success and prominence, however, the company has had to deal with a variety of problems, including a lack of product innovation, bad communication and rivalry between departments, and power struggles. With its current work at restructuring and establishing new leadership within the company, Microsoft is still a strong company that exhibits good management concepts.

Before becoming a behemoth in the technology industry, Microsoft began small and grew considerably through the years. Bill Gates and Paul Allen, the two founders of Microsoft, attended high school and worked together on programming projects early on in life (Stevenson). After graduating in 1973, Gates went to attend Harvard University but left after Allen and him decided to start their own business with inspiration from the Altair 8800, “an inexpensive and easily constructed home computer” (Stevenson). Together, they founded Micro-Soft, named simply to express that they wrote software for microcomputers (Isaacson 337), in Albuquerque, New Mexico, and contracted their programming skills for the Altair using their own modified version of the programming language BASIC (Stevenson).

While unsuccessful for the first few years, Bill Gates and Paul Allen finally made success with their work for IBM. After moving from Albuquerque, New Mexico, to Washington State, Microsoft was hired by IBM to code an operating system for their line of personal computers (Stevenson). Instead of working from the ground up, Microsoft bought an operating system called QDOS and modified it, renaming it MS-DOS (Stevenson). The sales were phenomenal, which led to the decision to take Microsoft public in 1986 (Stevenson). In 1987, Microsoft released its first version of the Windows operating system, which would quickly become its most well-known and popular product (Stevenson). Throughout the following years, Microsoft has released several iterations of Windows, created an office suite, helped shape the Internet into what it is today, and expanded into many other ventures from software to hardware.

With its many products and services, Microsoft has created a large and complex organizational structure to support its many offerings. Microsoft’s 99,000 employees are divided into five departments based upon a divisional structure system. These departments include the Windows Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division (Facts). These departments branch out into many sub-departments and groups, but they all ultimately report back to the VP of the department. The VP’s report to the CEO, who is a member of the board of directors. This setup creates a very tall pyramid with a centralized authority; the CEO and the board of directors make all the major decisions and the hierarchy of people in charge is quite expansive. This expansive hierarchy makes for a rather formal atmosphere with both written and culture rules; while there are aspects within smaller segments of the departments that are informal, the majority of Microsoft is quite the opposite.

While still very rigid with rules, this current structure has been influenced by a current restructuring at Microsoft, which is slowly changing the company’s strategy. Microsoft’s current CEO Satya Nadella has been carrying out a restructuring program entitled “Microsoft One,” with the intention of improving innovation and efficiency (Facts). While based upon previous CEO Steve Ballmer’s strategy of “devices and services (Reisinger),” Nadella has gone beyond and focused in on four overall main products and services he believes is offered by the company: operating systems, apps, the cloud, and devices (Mangalindan). This concentration on select categories will allow Microsoft to focus on their most important products and stay alert to the ever-changing world of technology. Similar to other technology companies, Microsoft uses both reactor and analyzer responses to uncertainty; with some products, such as Windows, Microsoft will hardly change anything unless forced to sustain success while other products are built from the ideas that have been amassed from analyzing the products and services of competitive companies.

Satya Nadella, however, is working on one other problem within Microsoft during the restructuring phase: the culture. While obtaining success, the culture that has grown within Microsoft over the years, developed mainly by the founder Bill Gates and his CEO successor Steve Ballmer, has inhibited innovation within the company. Most of these issues and problems are core beliefs, or hidden or overlooked issues, and deeply ingrained habits rather than visible or eye-level problems. For example, the “forced ranking” system used makes units rate employees based upon a rigorous review process (Mangalindan); this causes a lack of product development and innovation since employees are always worried about their upcoming evaluations. As well, the concept of “licking the cookie,” or showing favoritism towards a certain product – such as Windows – and ignoring others (Rivlin), kills innovation and creates silos in the company due to miscommunication between departments. This kills trust among employees, preventing teams from working successfully and creating synergy. These restraining forces have kept Microsoft from pushing past the status quo with its driving forces: new products and streamlined interfaces.

Satya Nadella is accomplishing change in both the culture and structure at Microsoft by taking a different leadership approach than the previous CEO Steve Ballmer. Before Nadella became CEO in 2014 (Anders 67), Ballmer led the company with little room to grow beyond his own vision. While the departments within Microsoft were able to work without oversight, Ballmer always had the last word on all decisions (Rivlin) and usually commanded his will from above – a directing leadership style – using his position as CEO as his base of power; in one case, Ballmer shut down an entire project – a specialized tablet codenamed Courier – just because it overlapped with the goals of Windows, his favorite department (Rivlin). However, instead of just managing employees like Ballmer, Nadella leads employees by aligning and motivating them, all enhanced with his openness to change. As a person, Nadella is a very humble man that uses his quiet nature to work with employees and get answers (Lashinsky). In Nadella’s mind, he believes this nicer attitude – a supporting or delegating leadership style – will help breed more innovation within the company. The qualities that Nadella possesses are characteristics that are in line with Level 5 leadership: humble, quiet, and putting the company’s success before one’s own fame.

Microsoft, while having a social responsibility to its employees and consumers, makes a majority of their decisions based more upon what is best for the company. In 2015, Microsoft is expected to lay off 18,000 employees to improve its growth and overall success (Reisinger); Nadella says the move is “necessary” to change Microsoft into a “productivity and platform company (Reisinger).” While this isn’t the best decision to benefit its employees, it will help Microsoft’s bottom line more. On Carrol’s hierarchy of social responsibility, the decision meets economic and legal requirements of a business – which is required by society – but does not move on to ethical or discretionary realms. However, Microsoft does reach the discretionary level with its many donations to the Bill and Melinda Gates Foundation (Stevenson) and rides the line of meeting the legal level with some of its practices avoiding American taxes (Cassidy).

Even with its ups and downs in the last few years, the Microsoft Corporation is a company setting itself up for a future of continued success with its use of management concepts. With its current restructuring and establishment of new leadership, Microsoft is moving beyond its chaotic history and breaking down silos and miscommunications within the company to improve innovation. With Satya Nadella’s Level 5 leadership, Microsoft is headed towards a future focused on bringing together its many products and services (operating systems, apps, cloud, and devices) and creating a streamlined experience. These goals will take Microsoft into the next era of technology and, in Microsoft’s hopes, take them back to their ultimate prominence in technology.