Article: The CHROs must earn their stable seat at the table

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It’s almost a meme among HR professionals – wanting a “seat at the table” while often being relegated to routine people or admin problem solving and dealing with the messier sides of humanity. But whoa, when it’s done right, the results are super impressive!

A couple of years ago, Rita was invited to speak at Microsoft’s annual Global Leadership Summit, and she almost thought she entered the wrong venue when greeted with the word ‘empathy’ in huge letters. But she was actually looking at, in real time, the in-progress rapid transformation of company culture.

Most of our clients talk a lot about culture, and culture change, but it takes a mammoth task to make a transformative change, even with robust strategy execution frameworks. One of us (Muneer) has been using the strategy focused organisation framework for driving the cultural change directly aligned to the strategic change agenda.

A model proposed by William Schneider posits two axes that help shape culture – what people pay attention to, and their orientation toward working with others. By using these dimensions, one can begin to understand what levers of action operate in particular cultures. While different people have used different terms, the first axis is whether a company tends to be focused on the here-and-now, or whether it is looking at future desirables. On the other axis, Schneider asks whether the decision-making system in the organisation tends to be more focused on personal relationships or impersonal factors such as facts and figures. Out of this comes a set of four cultural archetypes.

Cultivation cultures are future-focused and often intensely personal. New or young organisations start here, and the influence of the founder is often outsize. These cultures are often motivated by a compelling vision and the whole organisation is focused on bringing new, “insanely great” things into being (to quote Apple’s Steve Jobs). Such cultures, however, tend to be unstable as they are highly influenced by the founders’ preferences. When they go wrong, cultivation cultures can degrade into cults.
Collaboration cultures are team or group-oriented and very focused on helping teams succeed in the here-and-now. When collaboration cultures are at their best, they are deeply committed to customer success and to winning together. When they are at their worst, they can degrade into clans with outsiders finding it very hard to become accepted, and with “in” groups and “out” groups. Hewlett Packard was a collaboration culture.
Control cultures love plans – they operate through fairly strict processes with lots of practices that reinforce “how things get done around here.” Armies and large, hierarchical firms such as IBM, Reliance and almost all PSUs would fall into this category. They are motivated by making the plan and definitely don’t like uncertainty.
Competence cultures are focused on new possibilities, but motivated by impersonal qualities such as competition and being the best. Many progressive clients embrace this culture purely from a strategy point of view. If you leave my team, you’re dead to me typifies such cultures. Competence cultures, at their best, are extremely high performing. But, like all cultures they can degrade – they become the velociraptors of the business world (think Enron).

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So how did Microsoft under Nadella achieve the culture shift in a pretty short period that led to better traction with customers and innovation? Here are a few insights….

The CEO should live it

Satya Nadella took the CEO role in 2014, and among the first priorities he articulated was to shift Microsoft’s culture – not to lose what was great about the company, such as its talent pool and bold ambitions – but to operate much more like “One Microsoft” than the fiefdoms that existed before. Aside from his personal behaviour, he co-authored a book in 2019 (Hit Refresh) on how he planned to re-imagine Microsoft’s culture. He personally led and modelled the behaviours he hoped to influence others to adopt. In our experience, any major cultural shifts need such CEO commitment.

Find talent in unexpected places

A big part of the desired cultural shift was heavily influenced by the work of Stanford’s Carol Dweck who has discovered the importance of creating a “growth mindset” as part of a culture of innovation and learning. When people have a fixed mindset, the emphasis is on what one knows, as if the knowledge were a fixed property that could not be changed. Fixed mindsets are associated with risk-aversion, incremental change and unwillingness to try novel ideas out – typical of most traditional Indian companies. Growth mindsets, in contrast, are associated with people investing in developing new stocks of knowledge that allow them to take on progressively more difficult challenges.

The HR team at Microsoft supported the above concept with a changed view of who could assume and be promoted to leadership roles by shifting performance evaluation criteria.

Hackathons helped the company identify promising ideas that people could volunteer to staff, potentially gain some funding and show off leadership potential even if the projects weren’t formally vetted.
Supporting high-risk projects and the leaders who step up to them, such as the ambitious effort to commercialise the Hololens2 technology.

Tweak performance and compensation metrics

What gets measured will get achieved and the right metrics typically should drive both performance and behaviour, especially when undertaking a culture change. How people are evaluated, promoted and compensated will propel the change faster. Traditionally, Microsoft had operated a forced ranking system in which managers were required to compare employees and assign them into pre-designated buckets, which required a certain proportion of the workforce to be placed in the ‘lowest’ bucket. Those team members were then given remedial opportunities or in some cases let go. Such ’rank and yank‘ programs were extremely popular at one point, famously championed by Jack Welch at GE, which was followed by many Indian companies including Infosys for years.

While the system might help companies with poor performance management systems, they make very little sense for high talent-density enterprises like Microsoft. It also leads to greater levels of internal competition, massive amounts of game-playing, and in a case of unintended consequences, having managers hold on to poor performers just so that they would have someone to put in the bottom bucket.

Shortly before Steve Ballmer stepped down and Nadella moved into the CEO slot, Microsoft announced its intention to abandon the practice. Instead, their philosophy moved closer to what Garry Ridge, CEO of DW40, articulated, as ’don’t mark my paper, help me get an ”A”.’

Another huge change was to move away from a focus on lagging indicators of success such as revenues and profits. Instead, Nadella wanted everyone to get interested in leading indicators such as ’customer love’. It was a symbolically radical moment for a Microsoft leader to start talking about having customers ’love‘ them!

Among other ways to bring new ideas into the company, Microsoft CHRO launched a LinkedIn Series called #Peopletalk, and brought in other HR experts to share their ideas about culture and transformation.

Interestingly, Microsoft also launched something of a CRM for employees, which we have written about in a few columns to enhance the internal customer relationships within the company. The “Employee Experience Platform” called Microsoft was to create new connections and user interfaces to vastly improve the employee experience and, yes, reinforce the culture.

By implementing such kinds of successful people and cultural innovations, the CHRO can ensure a stable seat at the table despite the rising noise of bad reputation for his/her function.