Microsoft's great debate

Satya Nadella, CEO of Microsoft.

With 22 years under his belt, Satya Nadella is the consummate Microsoft insider. But don’t think that experience made him a shoo-in for the top job.  

One reason Microsoft went nearly six months without a CEO was because executives spent time looking for their new one outside the company. Microsoft is a case study of what so many aging technology companies -- from Intel to Hewlett Packard -- are going through.

The old line businesses still bring in a ton of cash but they’re slow to innovate, said Michael Cusumano, a professor at MIT.  Often times, he says, companies like Microsoft consider bringing in an outsider to provide that spark.

"I think they juggled all these balls in the air and concluded that it would be too difficult for an outsider to come," said Cusumano. "You really need someone that understands the culture and people to really get the  most out of the organization."

Cusumano said that Microsoft seems to have found somebody who can keep the company pumping money, and hopefully, turn it in the right direction.

Bob Sutton, the author of "Scaling Up Excellence", thinks picking an insider was the right decision.

"Although there’s the mystery and the allure of having the outsider ride in on the white horse," said Sutton. "There’s actually a large body of academic research that shows when outsiders come in, they do worse."

Sutton pointed to a study that showed former GE C.E.O.’s who went on to head-up other companies did consistently worse than insiders. And that trend holds across industries.

Sutton said the problem is that outsiders often think there’s a silver bullet. That is, if they lay-off departments and issue mandates, a turnaround is sure to happen. But he said, that approach ignores the human factor.  

"Every organization has its own quirks and history and culture," Sutton said. "And it turns out it takes a very long time to learn where, if you will, the bodies are buried and where the good things are."

But insiders can be tainted by company culture, said Harlan Platt, who teaches turnarounds at Northeastern University.

"I got into the business of turnarounds by asking this silly question, ‘How do you find a good manager at a bad company?’" Platt said.

Platt said Microsoft’s poor culture of innovation suggests that a company man might not be the best bet.

About the author

Queena Kim covers technology for Marketplace. She lives in the Bay Area.

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