The challenge of top-down change and the Microsoft lay-offs

In my talks on engineering culture, I usually like to spend a bit of time talking about how to improve an existing culture or fix one that is truly broken. To create true culture change, I advocate for a bottom-up approach.

I have a few reasons for this:

1. My audience is frequently made up of individual contributors or first level managers. I want to give them tools they can use to affect change in their larger organizations.
2. Bottom-up change takes longer, but it is more likely to be truly transformative. It has a better chance of long term success because the whole organization is invested in it.
3. When cultural change (or any kind of disruptive change) is pushed from senior leadership down, it tends to fail because the middle managers have usually attained their position by being successful in the old culture. This makes them less likely to embrace change and more likely to only go through the motions while actively managing-up to make it seem like they are more active.

Almost every time I advocate this bottom-up approach, I get a question asking if top-down change can also be effective. Sometimes this comes from a senior executive looking to lead change in the organization. Often this question comes because there are two high-profile large companies in the industry trying to change their cultures in very public ways: Yahoo and Microsoft.

When Steve Ballmer was promoting his “One Microsoft” plan, I would make the claim that the chance of that succeeding was nearly zero for reason #3 I mention above. Having worked at Microsoft in the 90s and early 2000s, I know the culture that many of the current Microsoft executives and middle management rose up through. Microsoft spent decades building a highly competitive culture. A restructure and top-down initiatives to encourage collaboration was unlikely to reverse decades of competition.

I pointed to the approach that Marissa Meyer was talking at Yahoo as having a better chance of success. Yahoo was implementing new review policies that seemed harsh to many in the company. This was coupled with “silent layoffs” and a significant effort to eliminate people in the company that were not interested in the new culture that the company was trying to create. While this seemed unreasonably severe, it made a clear point: this was the new culture and the old way of working would no longer be tolerated.

In the memo that Satya Nadella sent to Microsoft outlining the layoffs that he was undertaking today, one section caught my eye:

In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams.

This was a stark difference to Steve Ballmer’s approach to culture change. Coupled with the largest layoff in the companies’ history was a clear message that a central target was the company’s management. This serves to underline the seriousness of the change. Flattening hierarchies and removing managers will also eliminate or weaken those who would be most likely to fight the cultural shift.

I think this has a much better chance for success than the One Microsoft approach, but is still not guaranteed. Changing the way that 100,000 people approach their jobs is an insanely difficult task, after all.

The “house cleaning” approach may be a successful tactic in affecting cultural change in a large organization, but it is also very dangerous. The morale implications are significant. It would be most effective in a “do or die” situation where a drastic action is necessary to save the company itself.

There is an argument that Yahoo was in this position when Marissa Meyer joined the company. The aftermath of the shakeup was a feeling of confidence in the future and hope rather than fear or concern from the folks I know there.

Microsoft is not in a dire situation. While many in the industry and the press look at the company as sliding into irrelevancy; it is still amazingly profitable. This radical restructuring combined with layoffs may be greeted with significantly less enthusiasm from the employees. Satya Nadella may be taking advantage of his honeymoon period here, and that may be the thing that saves this.

I’m going to continue to follow the progress of both of these leaders and companies as they try to evolve. It will be fascinating and instructive.

I hope for the Microsoft and Yahoo employees’ sake that they are successful.