Facebook and Microsoft. It will be hard to find a person in a civilized world who has not heard of these two companies. Both are in the tech industry. Both have changed the way their customers interact with computers or communicate with family and friends. Their respective founders are now the wealthiest people on the planet. While it may seem that Facebook and Microsoft are similar, the leaders of these organizations are vastly different. One company is set up for long-term success. For the other, the future is uncertain.

Missing Inflection Points

In the previous blog post, I discussed Rita McGrath's research on inflection points and learning how to spot them on the edges or the periphery of the industry. McGrath used Nokia, a company with a 49.4% market share of the global smartphone market in 2007, as an example of what happens when an organization fails to see negative inflection points gathering force. The leaders at Nokia did not listen to their employees who sent early warnings about the changes in the industry following the introduction of Apple's iPhone. McGrath believes that something similar is now taking place at Facebook.

When leaders isolate themselves from people who can candidly tell them what is going on, especially if the information is contrary to what the leaders want to hear, such organizations risk developing a false sense of reality. That is what seems to be happening at Facebook.

Talent has been leaving Facebook, which is an indication that the inflection point has arrived. One of the former employees has said, "Mark Zuckerberg is surrounded by sycophants and people who think just like him; that he's unaware of the negative impact his company has had on the world." Some former employees have even described Facebook as "cult-like," a place where dissent is discouraged.

Zuckerberg and the rest of the founding team came from remarkably similar backgrounds, which formed their frame of reference. They ignored the reality that not all people live like they do or think as they do. Most of the Facebook users have experienced different cultural norms; they have different motivations and different institutional expectations. Anil Dash, the CEO of Glitch, summarizes it best: "If you are twenty-six years old, you've been a golden child, you've been wealthy all your life, you've been privileged all your life, you've been successful your whole life, of course you don't think anybody would ever have anything to hide."

Imagination and diversity of thought prevent groupthink and generate a range of insights and opinions. In an inclusive culture, organizations are more innovative in how they approach problems. We are not seeing innovative problem-solving at Facebook.

The situation at Facebook is still unfolding. Hopefully, its leaders will engage with the individuals who are more attuned with the emerging changes and will help Facebook pivot before it is too late.

"Human" Leadership

Satya Nadella is Microsoft's third CEO. He has been widely praised for transforming Microsoft and making it relevant again in the world of the cloud and AI. He has shifted the focus of the company from the lagging indicators (ex. revenue and profit) to the leading indicators (ex. employee engagement and management effectiveness) to measure the organization's success. In 2015, Nadella said, "We no longer talk about the lagging indicators of success, right, which is revenue, profit. What are the leading indicators of success? Customer love."

Nadella bases his leadership philosophy on empathy: empathy with customers and with one another. His goal is to create a psychologically safe organization where employees embrace a growth mindset, popularized by Carol Dweck.

In this post, I highlighted the characteristics of what I call a "human" CEO. Nadella checks off all the boxes. In 2014, Nadella expressed his overall goal for Microsoft, "For us to be a 100-year-old company where people find deep meaning at work."

Shared Purpose

A shared culture is aligned with the values of leaders and employees. From the start, Nadella was determined to unite Microsoft in sharing a common point of view about the future. Nadella placed a significant emphasis on culture, later explaining:

"There is something only a CEO uniquely can do, which is set the tone, which can then capture the soul of the collective. And its culture."

Social Support

"Human" CEOs create a safe environment where employees can propose novel ideas without fear of the project failing. When an AI chatbot Tay failed to deliver on its promise, Nadella sent the following note to the team that worked on the bot: "Keep pushing, and know that I am with you." Nadella believes that his role is to provide "air cover" when something goes wrong. Doing so encourages employees to take risks.

Inclusiveness

Inclusiveness means that employees' opinions are valued, and everyone's voice is heard. Nadella has implemented various mechanisms to make sure that is the case and employees' insights are taken seriously. For example, all senior leadership team meetings begin with groups from across the company presenting something interesting that they have been working on recently. This segment is called "researcher of the amazing."

Recognition

It is critical to have an alignment between employees' compensation and the company's interests. Microsoft has shifted its incentives from selling a certain number of units to basing their compensation on how much users consume the products. Their leading indicators are customer satisfaction, measured by "customer love."

Conclusion

Microsoft seems to be set up for long-term success with a CEO who exhibits human-focused qualities based on trust, respect, recognition, and autonomy. He empowers Microsoft’s employees to spot inflection points and act to take advantage of the emerging shifts. In contrast, Facebook seems to inhibit employees from expressing divergent views. Facebook is at a high risk of causing irreparable damage to its culture and the long-term success of the organization.