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The Microsoft Case: The Importance of CEO Evaluation
The Microsoft case illustrates how a redesigned CEO evaluation and development process can profoundly transform an organization. Not only does this lead to improved performance, but it also significantly improves financial results.
The challenge
When Satya Nadella took the helm at Microsoft in 2014, investors and market observers saw Microsoft as a technology company that had missed key market trends and was at risk of losing relevance. Employee surveys revealed a workforce characterized by frustration, resignation, and fatigue. The prevailing culture was status quo oriented, not very innovative, and characterized by a complex organization that allowed managers and employees to avoid accountability. This culture meant that product development cycles were complicated, lengthy, and error-prone. As a result, new trends such as mobile and cloud computing were missed. In addition, Microsoft was falling behind in the highly competitive market for tech talent.
Our impact
The starting point for a comprehensive cultural transformation was to redesign the CEO evaluation process by introducing 360-degree feedback, self-reflection, and benchmarking. A stronger focus on cultural transformation capabilities and driving innovation was added to the evaluation criteria. The annual results of the CEO evaluation were also discussed intensively and transparently within the Board of Directors and formed the basis for a continuous development program for the CEO.
At all levels of the organization, these strategic changes served as a catalyst for a realignment of performance and development metrics. This fostered a culture of growth mindset based on continuous learning, improvement and adaptation. The success of this transformation was based on two key pillars: recognizing that change starts at the top and that culture starts there, and ensuring consistent global implementation of the new performance standards.
The results
This cultural transformation led to significant improvements in the company’s financial metrics and shareholder value. From 2004 to 2014, Microsoft’s earnings grew by 26.5 percent1. In the decade from 2014 to 2024, earnings growth accelerated to 34 percent2. In 2013, Microsoft was the fifth most valuable company in the world, with a market capitalization of $310 billion. By 2024, the market cap will have grown to an impressive $3,000 billion, making Microsoft the world’s most valuable company3. At the same time, employee satisfaction, as measured by regular surveys, has improved significantly. Today, Microsoft is one of the world’s top employers of technology talent.
These improvements are a direct result of the redesign of the CEO evaluation and development process and the subsequent realignment of evaluation standards at all levels of the organization, which was identified as a key success factor. Today, Microsoft is recognized by analysts and market observers as one of the most innovative and high-performing companies in the world. This is reflected in the company’s leadership in artificial intelligence.
Authors
1, 2 Microsoft net income 2023 | Statista. (2024, 6. März). Statista. https://www.statista.com/statistics/267808/net-income-of-microsoft-since-2002/
3 Companies ranked by Market Cap – CompaniesMarketCap.com. (o. D.). https://companiesmarketcap.com/
