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3 CEOs who got the people side of change right

Insight

15 June 2018

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During change, CEOs play one of the most vital roles within an organisation. Their approach and actions have a direct impact on those around them and the outcome of the change.

The best CEOs lead change by communicating its significance, modelling the desired changes, building a strong leadership team, and getting personally involved.

Here we explore 3 CEOs who got the people side of change right:

Satya Nadella: Microsoft

Background:

Following the success of the Windows operating system and the suite of Office products, Microsoft struggled to maintain its success.  There was a toxic environment created by internal competitiveness, as teams fought to think of the next great idea, and the company became reliant on regular refreshes of Windows and Office. They struggled to keep up with the online success of Google and mobile success of Apple. The products created by Microsoft (e.g. Zune) were subpar in comparison and internally there wasn’t even backing1.

The change:

Satya Nadella was named CEO in February 2014. He undertook a major restructuring to remove the destructive internal competition. Products and platforms were no longer separate groups competing against each other, but instead, everyone had shared goals which they worked together to achieve. These shared goals came from Nadella sharing a new mission with employees “to empower every person and every organisation on the planet to achieve more” 2. He encouraged employees to think about what culture they wanted and what would be missing in the world if the company disappeared. Nadella shook things up again in 2016 when he merged teams to create a new AI and Research Group. 5,000 engineers and computer scientists were driven to be innovative around artificial intelligence across the Microsoft product line.

Results:

 Because of this change Microsoft has added $250 million to its market cap. Also, even long-time Microsoft veterans praise Nadella's leadership style even though his ideas were initially not universally loved. Since the reorganisation, Microsoft’s future is looking brighter, but the greatest achievement is that employees now believe that their work has real meaning.3

Larry Page: Google

Background:

Google plays a part in all our lives, whether we use it for maps, emails or as a search engine. By the early 2000s Google was a phenomenal success; indispensable in our lives. Their research and development teams were interested in everything, searching for ways to make impossible things happen. From human longevity and autonomous vehicles to wearable tech, smart home devices and artificial intelligence, the list goes on. As a company, Google grew enormously diverse and complex which created challenges for leadership. It became an increasingly impossible entity to manage, with intertwining goals, teams, funds and managers.

The change:

Larry Page decided the company was getting out of control and believed it was time to deconstruct the entire business. He split Google up into its constituent parts, making each one its own company under a new umbrella corporation called Alphabet. Each of the separate companies now has their own CEO and goals. This allowed people to focus and run things independently without having to think about Google as a whole. Page admits that the reorganisation was radical but in the tech industry you need to be a bit uncomfortable to stay relevant4. Page got all of Google’s employees involved in the reorganisation and explained how they will benefit – allowing them to concentrate more productively and happily. By getting them involved in the change it meant that they understood and cared about the change increasing its success.

Results:

Now, Google meetings are spent on Google alone, allowing their employees to become much more focused on their specific goals. Whereas before, meetings were taken up with discussion of a variety of projects – self-driving cars, drone deliveries and internet balloons. People can now run companies with the autonomy and speed they need. It also allows each company to work independently and compete against each other or overlap in ways that may have once seemed like conflicts of interest. For example, before the change Google was working on a ride-sharing app, until finance experts pointed out the competition with Uber, which Google had invested $250 million in. Today, a situation like that wouldn't have to face the same criticism.

Alan Mullaly: Ford

Background

In 2006, Ford was suffering due to high gas prices, high labour costs and rising interest rates 5. Its stock price had fallen suddenly, it had a poor credit rating and 2006 was its worst year in history, as it made a $12.7 billion loss 6. Many assumed the company would eventually file for bankruptcy.

The change

But, when Alan Mulally took over in September 2006 this all changed. Mulally worked to create a compelling vison for Ford as a ‘mobility company’. He turned the focus from creating great cars and trucks to exploring the technology inside them, making personal technologies a core component of their vehicles They also reduced their product range down from 97 different automotive products to just 20. This allowed people to focus on manufacturing, product development and customer service excellence. But, the biggest change Mulally brought about was cultural. He persuaded managers to work together instead of focusing on internal rivalries, and to tackle problems head on rather than avoid responsibility. To be successful they needed to break through that culture, where there was little sharing and where people were afraid to talk about how things really were.

Result

The changes Mulally put into action transformed the organisation. It went from one of rivalry to one of collaboration. Managers started turning up for meetings with evidence of failures and asking for help, rather than pretending they didn’t exist – a big move that helped to turn Ford around. The company also benefitted financially, when Mullaly retired in 2014 the company had made a profit of $7.2 billion the previous year.

1 https://www.wired.com/2015/09/what-to-do-with-your-zune-rip-zune/

2 https://www.theverge.com/2014/2/4/5377318/microsoft-ceo-satya-nadella-first-letter-to-employees

3 https://www.microsoft.com/en-us/about/corporate-responsibility/empowering-employees

4 https://www.telegraph.co.uk/finance/11795715/Larry-Page-explains-Googles-transformation-to-Alphabet.html

5 http://www.slate.com/articles/business/moneybox/2006/09/have_you_driven_out_a_ford_lately.html

6 https://www.theguardian.com/business/2005/may/06/usnews.internationalnews

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