Let’s take out of the mix whether you think Bill Gates has been an asset or a liability over the past decade and talk about how you do a company turnaround.
Microsoft’s flat valuation has clearly frustrated many investors, and the three institutional investors pushing for Gate’s to be sacked showcase this frustration. However, what they propose has a higher likelihood of harming then helping the company because it represents too much unrelated unplanned change over too short a period of time. Whether you want to cure a person of an illness or a company of a major problem, it is never wise to just go in and start hacking away without first seeing if any of the changes individually work. Too much change can actually assure things get worse because of the complexity of the result. Let me explain.
Often the problem with any turnaround effort is that the cause of the problem is ill defined and the cause can’t accurately be determined. The end result is a series of theories about what the problem is.
In Microsoft’s case, folks have concluded that the issue may be any or all of the following: Lack of innovation, inability to execute, excessive infighting, poor leadership, Steve Ballmer, Bill Gates, organizational structure, a culture of blame, the inability to keep top talent, the inability to get top talent, too much bureaucracy, not enough rigor in the development process, lack of collaboration, bad market intelligence, poor customer interaction, lack of developer focus, and lack of confidence in management. And I’ll bet that list isn’t exhaustive.
Personally I think the problems in Microsoft come down to two areas: bad market intelligence and excessive internal competition. The first is the result of a need to give executives information they want rather than information they need (which is generally why smart executives make dumb decisions). The second is the result of practices like Forced Ranking, which pits employees at each other’s throats. But that is just a theory and it is in partial conflict with what is being done.
At Microsoft it’s clear that those in charge think the problem was organizational structure (thus the resent massive reorganization), Steve Ballmer (which is why he is stepping down), and most recently Bill Gates. And while all of these could be accurate, you’d never want to do them all at once.
The issue is, when you start piling major change upon major change, even if the first change was accurate you’ll likely fail.
The first major change in Microsoft (this cycle) is the reorganization. The architect of the reorganization was Steve Ballmer, who clearly knew what he was attempting to accomplish. But before the reorganization is settled Microsoft is going to replace Steve with someone else.
This new CEO will come in to see an unsettled company and likely want to make his own changes. Because the firm will be in mid change his view of it, once he is inside, won’t be of the firm the way it was, or of the firm the way it will be. Instead, he’ll see the mess – a transitioning firm in progress – and likely move to fix it.
This would be like a doctor walking in on an operation without a clear idea of what the doctors are trying to accomplish and immediately taking over from the operating doctors. It wouldn’t end well.
So this change pretty much assures the reorganization won’t meet expectations. Yet the new CEO would typically be able to rely on the board that selected him or her to back them up.
But if Gates, as Chairman, steps down, whoever replaces him may have a different idea about who the new CEO should be, and suddenly the one they are now in the process of selecting will be a short-termer.
Just as bad, the new Chainman will come in mid process, not be privy to what has already occurred, have little experience with the company, but have the need to showcase their leadership by directing the outcome. You replace what is currently a process with what amounts to be near random result.
Now we’ll add on other aspect. Bill Gates represents continuity and he was the iconic CEO for Microsoft, much like Jobs became at Apple. You lose both the continuity he represents and the massive brain trust that is Bill Gates at the same time you are reorganizing the company and replacing the CEO.
The combined level of change could be a company killer. It isn’t about Gates. You can’t continue to pile major change on major change without first allowing the company to settle, because the problem will become the disruptions that result – and they may make the problems you were trying to fix in the first place seem trivial.
If you look at what is happening at Microsoft it is already clear they are going about this backwards. If folks believe Bill Gates is the problem, he should have been replaced first. Then if the new Chairman felt Steve Ballmer was the problem, he or she would have replaced them, but only after they had reached that conclusion themselves.
Then the new CEO, if they believed Microsoft needed to be reorganized, after taking time to make that determination, would have done that. Each layer of the executive team would then be in place to assure the success of each succeeding change in the company. Doing it backwards means the new CEO will likely not support the reorg and the new Chairman may not support the new CEO, which would actually be worse than the way things are today.
There is a reason for a process. I think we are going to see the downside of not remembering this with Microsoft shortly. Architecting a process that assures a company you have invested massively in will get worse defines stupid in my book, which is why I think replacing Bill Gates at this time would define stupid.
Photo courtesy of Shutterstock.