The IUP Journal of Organizational Behavior
Case Study:
Microsoft: Building a Collaborative Work Culture to Foster Innovation

Article Details
Pub. Date : October, 2021
Product Name : The IUP Journal of Organizational Behavior
Product Type : Article
Product Code : IJOB351021
Author Name : Radha Mohan Chebolu* and Jitesh Nair**
Availability : YES
Subject/Domain : Arts & Humanities
Download Format : PDF Format
No. of Pages : 12



The case describes how Microsoft, a market leader in desktop computing in 1995 with a 95% market share, faced its share of problems from 2000 to 2010 with existing products losing market share and new products not taking off. Microsoft executives blamed the system of stack ranking for the lack of innovation in the company compared to competitors like Google and Apple. Upon realizing this, Microsoft ditched its traditional performance management system in 2013 and took several initiatives to help create a new Performance and Development (P&D) system. The new P&D system focused on employees' skills and competencies and facilitated open conversations. Through 'Connects', employees received real-time feedback that helped them learn, grow, and focus on their strengths and key learning areas. Satya Nadella's push for a cultural shift and a growth mindset created an enthusiasm for a new era of innovation at Microsoft. These efforts to improve innovation, collaboration, and communication also led to a business shift. In November 2019, Microsoft achieved a one-trillion-dollar valuation, a 200% increase since Satya Nadella became CEO in 2014.

The company was sick. Employees were tired. They were frustrated. They were fed up with losing and falling behind despite their grand plans and great ideas. They came to Microsoft with big dreams, but it felt like all they really did was deal with upper management, execute taxing processes, and bicker in meetings.1
- Satya Nadella, CEO, Microsoft, in 2017

Going from feedback provider, to a manager, and then to the employee made it harder and slower to get valuable insights to the employee who needed it most. It wasn't as helpful as it could be. And our process didn't go far enough in promoting brain-friendly behaviors like asking for feedback that we learned about in our research.2
- Liz Friedman, Director - Global Performance and Development at Microsoft, in 2018

We decided to pilot a new program that shifts the mindset from traditional "feedback" to one of gathering "perspectives"-combining learning culture and behavior change with a new feedback approach that helps employees understand how to engage in the process in a more constructive way.3
- Kristen Roby Dimlow, Corporate Vice President - Total Rewards, Performance and HR Business Insights at Microsoft, in 2018


In 1995, Microsoft Corporation (Microsoft) was a market leader in desktop computing with a 95% market share. Over the next decade, this dominance reduced and the company began to face a series of problems. Existing products were losing market share and new products were not taking off. This was especially the case from 2000 to 2010 when Microsoft lost considerable market share to companies like Apple and Google. By 2010, the company's market share had dropped to 70% (PC and Mobile OS combined)4 (Refer to Exhibit I for products launched in the 2000s). Ed McCahill, former marketing manager at Microsoft, said, "You look at the Windows Phone and you can't help but wonder, How did Microsoft squander the lead they had with the Windows CE devices? They had a great lead, they were years ahead. And they completely blew it. And they completely blew it because of the bureaucracy."5