On Thursday, CEO Steve Ballmer announced one of Microsoft’s most sweeping reorganization in years, designed to increase collaboration and speed of innovation as the company transitions into a devices-and-services company.
He realigned the company according to function, cutting in half the number of product divisions and centralizing operational services.
In an interview with The Seattle Times after that announcement, Ballmer talked about how he intends to carry out that restructuring, how the company’s stack-ranking job-performance review system fits into his push for broader cooperation, and whether there’s a succession plan.
Here is the interview, edited for length:
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Q: The reorganization is designed to enhance collaboration. I’m wondering how you plan on (executing) that. Is that more in the people who are heading these new units or in the structure with the cross-company teams?
A: I think it starts with the strategy. We’re not working on divisional strategies that we roll out; we’re working on a company strategy that we roll down. That’s No. 1, a single strategy.
No. 2 is goal sets. As we begin our new financial year (which started July 1), we start with a set of shared goals as opposed to a set of divisional goals that we then try to get some layer of harmonization against.
No. 3, we’re being quite explicit with particularly our engineering people that they own engineering areas. (For instance) the network team does networking, and they’re going to be the networking team for Microsoft, not that there’s going to be three or four networking teams…
No. 4, there is some work on the culture, and particularly underscoring the need to focus more. We talked about five key attributes: being nimble, communicative, collaborative, decisive and motivated — and collaborative and communicative are key parts of this.
Q: How do you plan to inculcate that?
A: You role model it from the top, you talk about it a lot, you pinch yourself and remind yourself when you’re not doing better, you measure it in the employee poll.
Q: A lot of people have slammed Microsoft’s stack ranking review system as contributing to a noncollaborative atmosphere. Is the kind of cultural change you want to effect possible with that stacked ranking system still in place?
A: We’re doing our performance reviews now. We’re finishing up our year (and there are) no changes to — no — I’ll say minor changes to our system. I think everybody wants to work in a high-performance culture where we reward people who are doing fantastic work, and we help people who are having a hard time find something else to do.
Now, whether our existing performance-management system needs to change to meet the goal of fostering collaboration is something that Lisa Brummel [head of human resources] would take up.
Q: What makes this reorganization different from other ones in the past in which the company was also trying to be more nimble and agile?
A: We haven’t done a lot of reorganizations. The last big reorganization that I did was in the early 2000s. There have been tweaks, and maybe people would consider them big.
It’s been since 1984 that we were organized by function and discipline. So I don’t think we reorganize very often. Depending on how you look at it, it’s either been 10 years or so, or it’s been almost 30 years.
Q: You said you aren’t planning any layoffs as part of this restructuring but, moving forward, it seems like there will be redundancies. What are you thinking (about) those in terms of how people’s jobs might change, and (what’s the) time frame for when you’d like the changes to be in place?
A: We don’t have any plans to do a layoff. There will be people whose jobs get changed because we’re trying to get more capacity to do more things.
And I’m not saying it’s going to be 90 percent of the workforce — far from it. But there are definitely people who are going to get remapped, and we’ll work through that.
Some of these things will start sooner, some of these things won’t occur until after we’ve shipped some of the key products like Windows, Windows Phone, Xbox One that we need to ship in the next few months.
Q: In terms of (inculcating a) quicker metabolism, is it (a matter of) the message from the top, keep repeating it or are there other things as well?
A: I think it’s a message from all levels of the company.
We had a cadence that was right for software that had to be implemented on customer premises, particularly enterprise customers, and I think we had a good cadence for that. I think there’s a different cadence for devices, which change in some measure probably about once a year.
And then I think services need to have a much more continuous cadence. And each of our teams has kind of figured that out as we’ve gone along.
Q: Is there some thought to a succession plan in this new organizational structure?
A: Our board always has a succession plan.
The specifics of what our board is thinking is confidential. But I can say our board has put a lot of time and energy into the notion of both longer-term succession, as well as what I’d call the “what if the CEO gets hit by the bus” succession.
Q: It’s been about a year since you first mentioned that the company was transforming to a devices and services one. How do you think it has done so far?
A: We have come a long way; we’ve got a lot (farther) to go.
We’ve shipped Windows 8, which, in a sense, pushes us for the first time into the opportunity around tablets, which is phenomenal.
We shipped Windows Phone 8, which I think is a tremendous product. We shipped Surface. And we’re learning a lot about shipping a different kind of piece of hardware.
We’ve announced Xbox One. We’ve taken a significant march forward on the services side with both the new generation of Office 365 and with the addition of infrastructure as a service in Azure.
How did we do? We have our challenges. There are certainly things that I know on investor calls that they’re going to want to push us on and ask us how are we going to do better.
And yet I think we’ve also had a good year and made a lot of progress in many dimensions.
Janet I. Tu: 206-464-2272 or email@example.com.