2011

Leadership Style: Bill Gates

Kartikeya Kasera MBA Tech (I.T) 8/22/2011

Introduction
Microsoft Corporation (NASDAQ: MSFT) is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions.

Bill Gates
Chairman of the Board Microsoft Corporation Redmond , WA Sector: TECHNOLOGY / Application Software Officer since January 1981

Director , Berkshire Hathaway Inc. Omaha , NE Sector: FINANCIAL / Property & Casualty Insurance Age: 54 William Gates, a cofounder of Microsoft, has served as Chairman since the incorporation in 1981. Bill Gates retired as an employee effective July 1, 2008, but continues to serve as an advisor on key development projects. He served as Chief Software Architect from January 2000 until June 2006, when he announced his two-year plan for transition out of a day-to-day full-time employee role. He served as the Chief Executive Officer from 1981 until January 2000, when he resigned as Chief Executive Officer and assumed the position of Chief Software Architect. As Chairman and Chief Executive Officer of the Company from its incorporation in 1981 to 2000, he grew Microsoft from a fledgling business into the worlds leading software company, in the process creating one of the worlds most prolific sources of innovation and powerful brands. He set in motion many of the technological and strategic programs that animate the Company today. His work overseeing the Bill and Melinda Gates Foundation provides ongoing global insights relevant to the Companys current and future business opportunities.

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Midlife Crisis
Microsoft is a vestige of the past. Microsoft still wishes the Internet hadnt been invented." says Marc Benioff, chief of rival Salesforce.com in 2004. Microsoft went through a serious Midlife crisis in the years 2004 and 2005. The crisis has been detailed below. Here is a screenshot of the headline carried out by one of the major business newspaper in the world - Businessweek.

Source: www.businessweek.com Date: April 19, 2004

Microsoft, one of the most widely held stocks on the planet. And sure, for all its challenges, this icon of American capitalism still has a lot going for it. With a market cap of $279 billion, its valuation is the second highest in the world after General Electric Co. And it remains the most profitable company in the $1 trillion tech industry, pumping out $1 billion a month in cash.

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But Microsoft just isn't the phenom it used to be. After 29 years, the software giant is starting to look like a star athlete who's past his prime. Growth is tepid. Expansion is stymied. Bureaucracy is a concern. And a company that used to be so intimidating it attracted antitrust suits on two continents seems, well, vulnerable. The threats it faces are among the most serious in Microsoft's history. For starters, there's Linux, the software dubbed "open source" because the code is shared freely by developers around the world. With grass-roots and government support from Finland to China, Linux has become so popular that it's challenging Microsoft's core business as no rival ever has. Europe's trustbusters are coming down hard, too. On Mar. 24, they smacked the company with a ruling aimed at preventing Microsoft from leveraging Windows to gain ground in new markets, which could keep the giant tied up in court for years. Microsoft is slowing down. It is bigger, more lumbering and less profitable than it was five years ago. Its sales are up 73% in five years, but profits are up only 30%. Payroll has doubled in the last six years. In the fiscal year just ended, sales rose only 8%, the first time the company has ever reported less than double-digit growth. In the dog years of Silicon Valley, Microsoft, at 30, is in advanced middle age. The company relies on Windows and a suite of desktop applications--products released a decade ago--for 80% of sales and 140% of profits. Newer products--the Xbox videogame machine, the MSN online service, the wireless and small-business software--collectively have racked up $7 billion in losses in four years. In Web-server software, Microsoft has 20% of the fast-growing market, while the free Apache program, a Linux variant, has 70%--worth $6 billion in revenue had Microsoft gotten the sales. In search, Google and Yahoo get 70% of queries while MSN gets only 13%. Google now gives away features (desktop search, photo archiving) that Microsoft promises in its next upgrade of Windows--which is running two years late. What has gone wrong? Microsoft, with $40 billion in sales and 60,000 employees, has grown musclebound and bureaucratic. Some current and former employees describe a stultifying world of 14-hour strategy sessions, endless business reviews and a preoccupation with PowerPoint slides; of laborious job evaluations, hundreds of e-mails a day and infighting among divisions so fierce that it hobbles design and delays product releases. Jeff B. Erwin, who quit in December after five years there, adds, "Microsoft has some of the smartest people in the world, but they are just crushing them. You have a largely unhappy population." "Instead of promoting the product to customers, I'd get stuck in the office until midnight preparing slides for my monthly product review," says David Ryan, 33, a marketer for Windows XP.

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A news article that throws a better light on the seriousness of the crisis to the company:

Source: www.businessweek.com

Does Microsoft's midlife struggle signal that the glory days are over for tech? While industry revenue growth is slowing, there's still plenty of innovating to do. Microsoft just has to figure out a better way of going about it.

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Qn1. Leadership Style

Bill Gates was great at setting direction for the company. He had a vision of the world and successfully moved Microsoft in that direction. That vision was a computer on every desk and in every home. Gates started the first major software company at a time when personal computing hardly existed a radical change that has helped lead us into the Information Era. Gates believes, it will affect the world seismically, rocking us in the same way the discovery of the scientific method, the invention of printing did. This is the first mark of a transformational leader. Transformational Leadership starts with the development of a vision, a view of the future that will excite and convert potential followers. He had a major commitment to a huge goal and backed it with his own values and beliefs. In his book, Business the Bill Gates Way, Des Dearlove writes, Bill Gates is a modern business phenomenon: the greatest of the cyber-tycoons. His is not simply a story of technical brilliance and enormous wealth; it is one of remarkable business vision and an obsessive desire to win. It is also about a leadership style that is radically different to anything the business world has seen before. He not only wanted his company to make an impact on the world, but he wanted to be driving the bus that did it. He did this with a combination of leadership styles. Gates is directive in terms of what he wants and the strategy of the company. He has accepted that his major role is to be the visionary. He likes confrontation in a sense that he wants things out in the open so they can be dealt with and resolved. He had the ability to respond to market changes by quickly reinventing the company. A leaders ability to maintain focus on the big picture while, in some sense, the entire world tries to prove the leader wrong is what transactional leadership all about. He is also, however, participative and consultative. He does seek advice from subordinates but makes his own decisions. During his reign he considered the input of all employees and in most cases even responded to their emails within 24 hours. Gates also participated in what Microsoft calls Think Week. Think Week is where Gates is the sole reader of over 100 documents written by employees pertaining to company issues and future technology. Decentralizing the process of gathering information led to a stronger company and helped stay away from the bureaucracy that Gates did not want. This also helps him gain the trust of his employees. It shows them that Gates cares about their opinions and wants their advice in running the business. Being a programmer himself also enables him to interact with employees on a common ground. He isnt just another MBA or manager, hes one of them. This makes him a border-line craftsmen in terms of leadership, however he did a good job over the years in becoming interested and on top of other aspects of the business. It was this ability to handle both the business and technical sides of the company that made Microsoft so successful. Being a transformational leader also makes him charismatic yet humble. He is hard working and motivates people. After all, he did get Steve Ballmer to drop out of Stanford to come and work with Microsoft. Successful ventures are defended heartily keeping employees inspired to do more. He Microsoft Page 6

also gives credit to competition when they have a great product. In the video, Bill Gates Praising Apple Computers, Gates praises Apple for their standard setting products. He really cares about the evolution of technology and not just his own personal development. Bill Gates is an inspiration for millions of people across the globe. Nearly 1,00,000 I.T. startups take place every year, all of them being dedicated to work hard.

What effect did Bill Gates have on Microsoft?

James Collins, co-author of the book Built to Last: Successful Habits of Visionary Companies, said, To my mind, Microsoft has never been a company. It's a single remarkable individual, Gates, with thousands of the smartest, best-paid people anywhere helping that individual. It's basically like a big wheel, with Gates at the hub. (Leadership the Bill Gates Way) Bill Gates is a very smart, hardworking, goal driven individual who had the ability to inspire people to follow him. That was his biggest contribution to the company as a leader. Once the vision was clear, the company could speak for itself. He reinvented and refocused it frequently, always with a great degree of confidence. Although he enjoyed beating the competition he typically did not cast an arrogant or vindictive vibe and praised competitors for products he felt were superior. When asked about competition by Peter Jennings in an ABC interview, Gates said, Well, competition is always a fantastic thing, and the computer industry is intensely competitive. Whether it's Google or Apple or free software, we've got some fantastic competitors and it keeps us on our toes. Gates also had the greatest talents hand selected for him. He liked to work closely with his employees as much as he could and greatly considered their feedback. A great deal of effort was put into retaining these employees that Gates considered invaluable to Microsofts success. The culture reflected the importance of these employees and Microsoft set a high standard for how technology companies should treat their employees. There was a big focus on career development and healthcare. Early on, all employees could email him directly with comments, suggestions, or complaints. He also created a campus that employees never had to leave. They were offered free drinks and health club memberships, laundry and grocery services, and even counseling. Bill Gates understood the value in paying well, giving great perks, and investing in his employees future. He has probably made more people wealthy than any other CEO alive. He also understands what it takes to motivate his employees so they were engaged and excited about their work. (7 Awesome Lessons from Bill Gates Love Him or Hate Him, He is a Genius)

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It also was a culture that nurtured employees in conjunction with the innovations and products they were working on. Gates put a great emphasis on innovation and believes, In fact, the way software works -- so long as you are using your existing software -- you don't pay us anything at all. So we're only paid for breakthroughs. We have to make a new version of Windows or Office that you think is worth going out and buying. As a result, Gates tried to meet with every product team for a Bill Review. As described by Chris Caposela, a senior Vice President in the Business Division, Bill Reviews were famous for the intense barrage of questions Gates would fire at product teams. Those are sort of legendary for teams to get a big morale boost from how that product review went. [They] got a lot of mileage out of the feedback that he would provide. (Ballmer focusing on next big thing for Microsoft). This kept him in direct contact with all of the companys offerings, as well provided as a visible, involved, and enthusiastic leader to employees.

Qn2. Authentic Leadership

Does it feel lonely at the top? Do you feel you take responsibility for everything? Do you wish your team would step up and take more ownership of challenges? Authentic Leadership helps to engage your whole team passionately in the responsibilities of running the organization. The most inspiring and influential leaders are rarely appointed or elected, they emerge when their passion and their abilities coincide with an issue that creates enough energy (usually in the form of anger) to step up and make a difference. Mohandas Gandhi, Lech Walesa, Nelson Mandela (only later elected), Martin Luther King Jr. for example. The ethics of leadership rests upon three pillars: (1) the moral character of the leader, (2) the ethical values embedded in the leaders vision, articulation, and program which followers either embrace or reject, and (3) the morality of the processes of social ethical choice and action that leaders and followers engage in and collectively pursue. Such ethical dimensions of leadership have been widely acknowledged. Andrew Cohen, a spiritual leader believes If we aspire to be an authentic leader, we must always be willing to: Stand alone Live fearlessly Act heroically Want to be free and true more than anything else Take unconditional responsibility for oneself Face everything and avoid nothing

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At all times see things impersonally Live for a higher purpose.

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