Book Extract

Steve Ballmer: Remaking Microsoft

Microsoft has not been the same since Bill Gates stepped aside as CEO. Steve Ballmer assumed the challenge of taking over a company from an icon while core business was becoming mature. Did the institution of more management routine get in the way of producing great software?

There isn’t another company in the world that’s as closely identified with its leader as Microsoft Corporation has been with William H Gates III. When the PC revolution erupted in the mid-1980s, it was Gates who emerged as chief pitchman for the clunky machines that suddenly appeared on many desktops. When tech stocks soared to unimaginable heights, Gates’ multibillions landed him atop the lists of the world’s wealthiest. And when Microsoft found itself in the crosshair of federal antitrust regulators, Gates personified the abuse of market power. He was lord of a software behemoth that in 27 years has racked up nearly $50 billion in profits and that calls the tune for one of the world’s most crucial industries. Gates is to our era what Rockefeller and Carnegie were to theirs.

But Gates no longer runs Microsoft. He gave up the chief executive role 2 ½ years ago and turned it over to his best friend and longtime management sidekick, Steven A Ballmer. The burly, eats-nails-for-breakfast Detroit native thrives on the discipline of organisational management the way Gates thrills to the intricacies of technology. In 2000, Gates gave his pal free rein to restructure the way Microsoft manages finance, sales, product development, marketing, even strategic planning. And Ballmer took him up on it, big time.

Today, after a transition that had its rocky moments, it’s clear that a new era has dawned at Microsoft: the powerhouse that Gates built is being reconstructed by Ballmer. And Gates doesn’t seem to mind. Ask Gates about Ballmer’s thumbprint on the company, and he laughs at the understatement. “Thumbprint? He’s got big thumbs,” Gates says. “Steve’s the number one guy, and I am the number two guy. I have a strong voice, a strong recommendation, but Steve has to decide.”

Indeed, if Gates is Rockefeller, then Ballmer is shaping up to be Microsoft’s Jack Welch—not a visionary founder, but a leader, like the legendary General Electric Company CEO, with the force of personality and the management chops to reinvent a company in his own image. The 46-year-old Ballmer is not content to merely tend the machine that Gates designed. His goal is to create a “great, long-lasting company” that will be even more successful in its second quarter-century than it was in its first. “We have done well,” Ballmer says. Now, “there’s an opportunity to really be amazing—to be amazing as a business, to be amazing in the positive impact that we have no society. But we have to do some things a little bit differently to be as amazing as we hope we can be.”

Realising potential

After more than two years of trial and error as a new CEO, Ballmer has come up with his prescription for achieving amazingness. He spelled it out publicly for the first time in a June 6 memo to 50,000 employees under the heading “Realising Potential”. Typically, crossing-the-Rubicon moments in Microsoft’s history have been heralded by a call-to-arms memo. The “Internet Tidal Wave” e-mail that former CEO Bill Gates sent out in 1995, for instance, spurred a sleepy Microsoft to become a force to be reckoned with on the Net. Ballmer’s memo, too, is a clarion call. He lays out a new mission statement—agreed upon by the company’s top executives during a March meeting—and describes the path to get to arrive at the new goal.

The new mission sounds simple enough, but it’s audacious in scope: “To enable people and businesses throughout the world to realise their full potential.” That’s far broader than the company’s basic goal of building software for any device, anywhere. For the first time, Microsoft’s mission is not simply about technology. It is also about improving the way that the company handles relationships with customers and with others throughout the technology industry. “This is not just a fluffy statement of principles, but really a call to action,” Ballmer writes.

Indeed, the CEO is calling on his colleagues to do nothing less than rethink every aspect of the way they do their jobs. He has put in place a set of management processes aimed at bridging the gap between the sales and product—development sides of the company. He has empowered a second tier of executives to run their businesses with less supervision, breaking from Microsoft’s heritage of placing every important decision in the hands of Gates and Ballmer. And, in response to the frustration of corporate customers, he has ordered his engineers, sales force, and managers to improve the quality of their products and services.

A new code of conduct

To make it all stick, Ballmer has concocted a dizzying array of meetings, reviews, and examinations that force people to do their jobs differently. It includes everything from rank-and-file employees grading their supervisors to an accounting system for managers that helps them weigh spending trade-offs to quarterly offsite brainstorming meetings for top executives. Each new process is designed to hook into the next so that decisions can be made quickly—and can later be measured. This is light-years away from the ad hoc way Microsoft took action before. The final touch: Ballmer is making adoption of the new corporate values part of every employee’s annual performance review.

Ballmer’s hope is that his code of conduct will also make Microsoft a better corporate citizen. He says that the company’s core values of honesty, integrity, and respect must shine through with customers, partners, and the tech industry. Microsoft’s five-year antitrust case has put a severe strain on its relationships with the rest of the industry, but Ballmer believes that by being open with others about its plans, Microsoft can regain the industry’s trust. “Whether that means an investment of time, an investment of energy, or bring honest and open and respectful,” he says.

To rivals, making Microsoft kinder and gentler is like getting a tiger to not only change its stripes but become vegetarian, too. Indeed, in spite of the tentative settlement Microsoft reached with the Justice Department, which is being contested by nine states, Ballmer doesn’t plan to handcuff the software giant. Microsoft will continue to enter new businesses. Recent forays already have made it a competitive threat to a new set of companies, such as Sony in the game-console business and SAP in the accountant-software market.

“The dialogue with us from the industry has always been, tell us what you are not going to do. If you ask me today, I will tell you there’s nothing I am not going to do,’ Ballmer says. To Jonathan Schwartz, Chief Strategy Officer at rival Sun Microsystems, Ballmer’s statement signals that Microsoft hasn’t changed its ways. Ballmer is acting friendly, he says, because “they have committed a few felonies and they are trying to get out on parole”. And in a June 5 speech, SAP AG boss Hasso Plattner chided Microsoft for putting barriers in front of rival software, comparing the company to the Berlin Wall. “I want to say, like a famous American once did, ‘Mr Gates, tear down this wall’,” Plattner said.

Excerpt from ‘Leadership Power Plays’. Reproduced with permission © 2007, Tata McGraw-Hill Publishing Company Limited. Price: Rs 299. E-mail: vishwanath_mum@tatamcgraw-hill.com