In 2014, when the Microsoft board asks Satya Nadella to become its 3rd CEO, Nadella gives a very subdued answer: “only if you want me to be.” Nadella has never shown ambition like other CEOs have. And yet, under him, Microsoft went from a 300 billion dollar company to a 3 trillion dollar company in under 10 years.
Nadella didn’t have a burning ambition. Nor is he exceptionally smart. In fact, Nadella says his father used to exclaim “how can anyone be this bad” after seeing his report cards. So what does he bring to the table? How did he successfully change the Microsoft culture to that of excellence?
The art of the leader
When Nadella was in high school, he loved playing cricket. And he was decent at it too. But one day, he was bowling rubbish for his team. So his captain took over. Got a big breakthrough wicket. And then returned the ball to Nadella for the next over.
For some reason, Nadella had the best bowling spell after that. It was a pivotal moment in his life. A moment that made him realize what true leadership is.
His bowling went from rubbish to brilliant because his captain took the ball and got a wicket. How to make that make sense?
Leadership is the placebo
No one in the world has studied more about the placebo effect than Ted Kaptchuk. Kaptchuk was an acupuncturist who was gifted a rug by a client. She thought Kaptchuk had cured the problem with her ovaries and saved her from a surgery. Kaptchuk knew that however awesome he was with acupuncture, this was not possible. And so he started to dive deeper into the rabbit hole. He became a researcher at Harvard and has conducted several studies on the placebo effect: why do fake remedies cure people?
In one research he conducted, people who suffered from migraines were divided into groups. One group received a placebo in an envelope titled Maxalt – a FDA approved drug for migraines. Another group received the real Maxalt in an envelope titled Placebo.
Both the pills cured the migraines almost equally well! It just didn’t make sense how this was possible!
Kaptchuk’s research shows us that placebos work. And some placebos work better than others. Four fake pills a day work better than two fake pills. Capsules work better than pills. Injections work better than capsules. Pills given strong brand names worked better than generic names. Pills given by doctors after taking their time talking with their patients did better than pills given by doctors in a hurry.
The one time that placebos don’t work? It’s when patients are given Naloxone: a drug given to heroin addicts. Naloxone blocks the body’s opiate receptors. It also blocks the body’s own natural opiates: our endorphins!
Kaptchuk and his experiments showed that the placebo effect is real. Our body somehow uses our own pleasure and pain receptors to heal us. But only if we believe we will be healed. The stronger this belief, the better the placebos work!
When Nadella’s captain gave the ball back to him after taking a wicket, he showed that he had belief in him. It’s this belief that made Nadella outperform his abilities!
Things change when you believe someone is looking out for you. Someone cares for you. You gain more energy. More motivation.
When Nadella was made the CEO of Microsoft, Microsoft was reeling off the rails. Their 7 billion dollar Nokia acquisition was a failure. The number of personal computers, and as a result, the sale of Windows was decreasing. And Microsoft had one of the worst cultures of any big company – where employees were cut throat. People from different departments fought with one another for more power and resources.
Nadella had to show them that he believed in them.
The first thing Nadella did was get rid of Microsoft’s Naloxene. Got rid of the things that blocked the energy. He removed stack ranking: a process where every manager had to rank the employees under him in equal percentiles.
Stack ranking’s purpose was to identify stars: the top 20% of the performers. And thats why many companies from GE to Microsoft started using it. But in reality, it created a culture of cut throat competition. Where everyone wished for their colleagues to fail so that they could rank up.
This one thing blocked cooperation and innovation. It added bureaucracy and office politics.
So Nadella promptly replaced it. No employee would be ranked against others anymore. Instead, they would be evaluated on 3 things:
- Impact: what individual impact they had on Microsoft
- Helpfulness: how did they contribute to other peoples success
- Leverage: how did they use and leverage other peoples work
This three dimensional grading brought fresh wings to Microsoft. Office politics evaporated. Only the helpful could advance.
A new management framework
All the managers were taught a new framework for imbibing a growth mindset in the company: Model, coach, care.
- Model: be an example for your team
- Coach: help the team learn new things
- Care: put in the attention and effort to help everyone grow personally
Care reinforces belief
Nadella instituted a new ritual. “Research of the amazing.” During their Friday leadership meetings, one member is responsible for searching the Microsoft ecosystem and sharing how an employee is doing something to embody this new framework!
By showing how everyone cared for each other, Nadella made Microsoft stronger.
- Believe in your team. And show them this belief. Because belief energizes the team.
- Teach your team to care for one another.