Learning from Steve Ballmer: A Primer for Microsoft’s Next CEO

Rob Enderle

As I discussed in my previous post, I’ve spent a lot of time thinking about Steve Ballmer’s tenure at Microsoft. His failure points to what the next CEO must do to be a success. Realize that the next guy has the unenviable position of coming in behind someone who has been perceived to have not done well. But actually, for most of his tenure, he performed rather well in terms of revenue and profit, even though the market has shifted substantially.

The next CEO must do three things, on top of what Steve Ballmer did well, to assure their success, and not one of them has to do with bringing out an MP3 player, smartphone or tablet.

Win Over the Employees

In my last post, I pointed to Steve Ballmer’s initial plan to connect to the employees and win them over. What I think he found was a huge pool of critics, and because he was sensitive to his apparent inferiority to Bill Gates, he killed this effort and became isolated. The next CEO has to engage the employees and get them behind him. This can be done in a number of ways, including the Thomas Watson Jr. method (the guy who created the modern IBM) of just talking to them one on one.

The new CEO should eliminate forced ranking. This is broadly hated by the employees and assures that Microsoft’s average employee is average. Smart managers have to hire bad employees that they know they can fire and discipline or they end up losing their good ones. Forced ranking also creates a combative environment where employee incentives work against collaboration and where the focus turns to blame instead of understanding and correcting a problem so that it won’t be repeated. When you focus on blame, the employee who made the mistake—and is the least likely to make it again—is pushed out, which is partially why Microsoft seems to repeat so many mistakes.

Removing forced ranking and engaging with the employees would address much of the core problem that has lead to some of its failures. Incentives and direct engagement promoting collaboration would, I believe, significantly increase their successes.

Fix Intelligence

The right way to provide intelligence is to tell the executives what they need to know. The more lucrative way is to tell them what they want to hear. I have seen more business units destroyed by companies that take the latter path than I have seen successes from those that do it correctly. I spent some time looking at Microsoft’s research team a few years back and they were clearly on the wrong path which, I think, explains why a smart guy like Ballmer (he was top of his class at Harvard) made so many stupid mistakes.

Even the smartest people can’t make good decisions if they are constantly given bad information. I actually saw this when I did the post-mortem analysis of why John Akers was fired at IBM. He was the only IBM CEO to be fired. He was a smart guy, too, but had been isolated and given reports that told him only what he wanted to see. He gave out promotions and bonuses until he was fired and a huge chunk of the employees got laid off. IBM almost went under.


 

The new CEO must ensure that his information stream accurately reflects what is going on in the company. Much like radar on a plane or sonar on a boat, if the screen shows that everything is clear, particularly when it’s not, you are going to crash. Steve certainly crashed a number of times.

Wrapping Up: Causal Analysis

We live in a culture that focuses on blame and then punishment. Often it doesn’t even seem to matter if we get that right. In this instance, the problems at Microsoft likely have less to do with any CEO, given how distributed the management is, but more to do with a lack of cooperation between divisions and horrid intelligence on everything from what competitors were doing and what customers wanted to what was actually happening in the company. If the people won’t work together and the system penalizes folks that do, even the best executive will fail.

However, if you can get a team of folks working together who have a good sense of what is happening inside and outside the company, well, you get something much closer to what Steve Jobs had at Apple. If the new CEO fixes just two things—ending the blame game and gaining good intelligence—he or she will be far more likely to end their tenure at Microsoft with a success.



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