- The coronavirus crisis forced companies around the world to act fast as they suddenly had to figure out how to operate remotely.
- Microsoft, the $1.4 trillion tech giant, was one of the first to go through this process. The early epicenter of the coronavirus in the US was just 10 miles from its front door in Redmond, Washington.
- A lot was at stake. Millions rely on services like Microsoft Teams, Office 365, and Xbox Live to stay connected, productive, and entertained.
- Experts say the quick decisions the company made wouldn’t have been possible at the company before CEO Satya Nadella took charge.
- That’s because of Nadella’s focus on making Microsoft a cloud-first business, and creating a more empathetic culture, allowing for the possibility of failure.
- Visit Business Insider’s homepage for more stories.
On March 6, Microsoft employees began inexplicably returning to the company’s Redmond, Washington headquarters, just 48 hours after the company enacted a remote work policy in response to the coronavirus.
“Why are they coming back?” Microsoft chief information security officer Brett Arsenault wondered with concern at the time, as related to Business Insider in a recent interview. “What’s going on?”
The employees had left their work computers at their desks as usual — after all, they didn’t know when they left that it was the last time they would be at the office for many months. But Microsoft couldn’t condone letting them back into their offices, which to this day are deemed unsafe.
The company needed to act fast: Without their computers, employees couldn’t get secure access to the network. Without secure access to the network, they couldn’t do their jobs. And if they couldn’t do their jobs, it would hurt not only Microsoft, but also the millions of customers who were already beginning to rely on services like Microsoft Teams, Office 365, and Xbox Live to stay connected, productive, and entertained amid the pandemic.
Arsenault’s team created 34,000 remote desktops that cloned their work computers on their home computers, using the Zero Trust security approach. This allowed the company’s workforce to securely access all their files and programs from home – even without their work laptops.
This initiative had been in the works before the pandemic, but the company had projected that it would take six months to complete. Arsenault and his team did it in two days.
It’s one example of the acceleration forced by the coronavirus crisis, as companies around the world rushed to figure out how to operate remotely. As CEO Satya Nadella recently told Wall Street analysts, “we have seen two years’ worth of digital transformation in two months.”
To be precise, Friday marked 100 days since Microsoft first sent employees home. It’s been a period of rapid decision-making to make sure the company and its customers can operate remotely – and experts say it’s not only Nadella’s compassionate leadership that’s stood out, but also Microsoft’s willingness to act.
Microsoft beat Wall Street expectations in its most recent quarter and its Teams work chat app, grew from 44 million to 75 million daily active users in less than two months. Its stock price dropped with the rest of the stock market as the coronavirus began to spread across the US, but has since rebounded and just this week reached a new record closing price of $189.80. It is now worth more than $1.4 trillion.
It expanded free access to its Microsoft Teams chat app and other key services, and provided free support to overwhelmed healthcare agencies. It was also praised for adopting a strategy of caution in some respects, such as enacting a hiring freeze for most roles early on.
And it’s shown up in unexpected places, with live singing show “The Voice” turning to Microsoft tools to continue production remotely and the NFL using Microsoft Teams for the first-ever-virtual draft. Its ad spending has remained steadier than rivals like Google, according to three insiders with knowledge of the company’s ad spend, spending approximately $160 million on digital ads in May.
“This is not your father’s Microsoft,” 451 Research analyst Jean Atelsek said.
Microsoft and Nadella now face a new challenge, as global protests against police brutality bring to light rifts within the company about what it should be doing to address systemic racism. Microsoft’s workforce, like many technology companies, doesn’t match diversity in society. Microsoft’s overall leadership is 2.7% Black and its workforce, not including portfolio companies like LinkedIn, is 4.5% Black.
A LinkedIn town hall featured a series of racist comments from anonymous staffers. Days later, Microsoft chief marketing officer Chris Capossela apologized to a Black artist for “insensitive” language used by the company’s longtime creative ad agency.
And Microsoft employees have been using an internal company message board to share their personal experiences with the ongoing protests against police brutality and systemic racism, calling for leadership to take action. The company later asked managers to cancel meetings and events on Juneteenth to give employees a “day of listening, learning, and engagement.”
Nadella has spent the last six-plus years forging a more empathetic, compassionate company. That cultural change has paid dividends, giving Microsoft the agility to thrive not only in the pandemic and send its valuation soaring.
That culture will now be put to the test in new ways, as it navigates the dual challenges of continuing to weather the pandemic while also becoming a more diverse and equitable company.
Microsoft’s headquarters was next to the early epicenter of the pandemic in the US, so it had to be one of the first companies to address the crisis
The early epicenter of the coronavirus in the US was just 10 miles from Microsoft’s front door. The first known COVID-19 death in the United States was reported on February 29th at a long-term care facility in Kirkland, Washington.
The senior leadership team at Microsoft worried about making rash decisions that could be replicated elsewhere in the industry. As one of the very few trillion-dollar companies in the world, what Microsoft did would be studied and repeated.
Letty Cherry, Microsoft’s head of global employee, leader and culture communications, said the company didn’t want to take drastic action that could disrupt local or global markets before it had a full grasp of the situation. “When Microsoft goes down, others follow,” Cherry told Business Insider in March.
By March 4, the company asked most employees in and around Seattle and San Francisco to start working from home.
Arsenault’s team — responsible for the internal shift to remote work — had “playbooks,” online emergency plans last it used to address icy streets around its Redmond campus last winter. But there was no playbook for COVID-19.
There would be no cribbing somebody else’s playbook, either: No large American company had addressed the virus firsthand yet. Furthermore, Microsoft had the added burden of making sure that it all went down without disrupting the 200 million users of its cloud services for business, even as they underwent their own shift to remote work.
“It’s never happened before,” Arsenault, a 30-year Microsoft veteran, said. “It’s never even been experimented on at a global level. If you tried to create this scenario, you couldn’t. Everyone working from home. All the kids doing remote school. All non-essential medical staff remote. I’ve been doing this for a long time. I’ve never seen anything like it.”
Nadella has helped Microsoft leadership become more empathetic, and the pandemic provided case studies in how the company has become more compassionate
Microsoft has a historical reputation for being “cutthroat;” an aggressive competitor willing to go to great lengths to win, even if it turned teams against one another. The company infamously famously killed the Courier tablet project, an innovative tablet that would have taken on the iPad, after the Windows team worried that it would undermine the dominance of the operating system.
Nadella set out early on in his tenure as CEO beginning in 2014 to change that and make the company more collaborative, inside and out.
“We are a much more empathetic leadership right now,” Arsenault told Business Insider, before quickly adding: “No, say that better …”
The pandemic has provided several case studies in how, under Nadella’s leadership, the company has become more compassionate.
Microsoft said it would continue to pay hourly workers during the pandemic, and offered 12 weeks of extra parental leave to parents as schools remained closed. Analysts and competitors said the company took another big step away from its past as it rushed to help, with seemingly no ceiling on manpower, and with what appeared to be a blank-check budget.
In ways large and small, Microsoft has given away its secure products and services or offered free security support during the COVID-19 pandemic. It offered live support to hospitals if they are hacked, and announced a new public data stream to help the world identify COVID-themed phishing emails, and issued detailed guidance for fending off the ransomware that is terrorizing businesses.
Microsoft also rolled out free offers to help companies during the pandemic. The company has long offered a free version of Teams, but without many of the features available in the premium version. In early March, it quietly informed customers and partners it would offer free six-month trials of the premium version of Teams.
The Teams expansion and general surge of Microsoft users was not without its challenges. The company ultimately had to scale back some of the free offers, telling customers that it would prioritize “first responders, health and emergency management services, critical government infrastructure organizational use” in redeeming them, as its Azure cloud hit capacity constraints from a rush of customers looking to take advantage.
Microsoft’s new culture has paid off so far by making the company faster to act, and the empathy it has shown during the pandemic has built goodwill
The speed with which Nadella and his team reacted to the crisis could pay off quite nicely down the road, with new users and plenty of goodwill.
“This is Satya Nadella’s Microsoft,” said Daniel Newman, a founding partner and principal analyst at Futurum Research. “The best leaders have understood that solidarity is going to get more long-term viability than being opportunistic. The truth right now is that Microsoft wants to be remembered as a company that contributed a lot at this moment when the world needed the benefit of their vast resources.”
Atelsek, the 451 Research analyst, said expanding free Teams offers was an example of Microsoft’s newfound ability to act quickly. “For a company of that size to do a pretty dramatic move of making an online collaboration platform free to anyone for the foreseeable future,” she said, “that reflects really quick decisions they wouldn’t have been able to do before.”
Microsoft was able to quickly transition its employees to remote work, and expand services for its customers and employees, because of the Nadella-led shift to cloud computing, and programming tools built in the cloud.
“There would be no way under the previous culture Microsoft would have responded this quickly,” Moorhead Insights and Strategy analyst Patrick Moorhead said. “There would still be hand-wringing.”
Microsoft’s ad spending is a window into the company’s health — and it’s remained steadier than rivals such as Google
This ability to react quickly and build goodwill is reflected in the amount of money Microsoft has spent promoting its own products.
Three people with direct knowledge of Microsoft’s advertising business, all of whom are known to Business Insider but spoke on condition of anonymity because they are not authorized to discuss the matter, said that the company’s ad efforts have remained steadier than most, including rivals like Google.
“Microsoft is full-steam ahead,” said one of those people, who told Business Insider that the company’s digital ad budget dropped from around $108 million in March to $44 million in April before a huge jump of nearly 400%, to approximately $160 million, for the month of May.
A person close to the business said one reason for the drop in April was a pause of 30 to 60 days in spending to promote the Azure cloud due to the capacity issues.
According to data from ad-sales intelligence platform Media Radar, Microsoft increased spending to promote Teams as millions of people around the world began working remotely due to the coronavirus and competition intensified in the red-hot space thanks to upstarts like Zoom.
A spokeswoman for Carat, the agency that buys ads for Microsoft, declined to comment.
Microsoft’s annual ad spend, including digital, broadcast TV, social media, print, and outdoor ads, has hovered between $1.5 billion and $2 billion for the past few years, according to the company’s recent earnings reports.
Newman, the future research analyst, said Microsoft is in a “position of luxury” because many of its product lines, such as gaming, remote tools, and security essentials, may see growth increase due to the pandemic.
Now Microsoft has to contend with rifts within the company about how to address system racism
Now Nadella’s leadership is being put to the test in a new way.
Global protests over the death of George Floyd, a Black man killed by police in Minneapolis on May 25, have revealed rifts in corporate America, as debates rage internally and externally on the role of business in tackling systemic racism.
At Microsoft, a LinkedIn town hall intended to be a space for employees to speak openly about racism and police brutality devolved thanks to a series of racist comments from anonymous staffers that Ryan Roslansky, who had only been CEO for a few days, later called “appalling.” In a series of audio files from the same meeting leaked to Business Insider, Roslansky acknowledged that the company had work to do after its latest diversity report found that only 3.5% of its global workforce is Black. “We need to stop faking that we are a diverse company,” an employee said.
Microsoft’s overall leadership is 2.7% Black and its workforce, not including portfolio companies like LinkedIn, is 4.5% Black. The company released its first official “Diversity and Inclusion” report in late 2019, detailing steps its taking to diversify its workforce.
Days after the LinkedIn town hall, Microsoft chief marketing officer Chris Capossela took to Twitter to apologize to Black artist Shantell Martin for “insensitive” language used by the company’s longtime creative ad agency McCann. A McCann employee asked whether Martin could design a Black Lives Matter mural for Microsoft’s Manhattan office “while the protests are still relevant.”
Then, on Tuesday, more than 250 Microsoft employees called on the company to end its contracts with police departments as protesters call for an end to police brutality. Employers later shared more personal experiences with the protests, and called on Microsoft to take action. Microsoft has since said it won’t sell facial recognition to US police departments until there are new nationwide regulations, but has yet to address its other work with law enforcement.
Nadella and his direct reports have also outlined plans to cancel their weekly meeting on Friday, or Juneteenth, the day commemorating the ending of slavery in the US, and have encouraged managers to do the same.
Even before the current conversation about systemic racism, Nadella’s Microsoft had taken steps to address equity in the workplace. For instance, as recently as last year, Microsoft had tied manager compensation to diversity goals. And in November, the company laid out some of the ways the company is attempting to diversify its workforce, including an apprenticeship program and employee resource groups. But the company’s own diversity report, coupled with recent events, shows that it still has a long way to go to achieve its goals.
Microsoft said earlier in June that it had “nothing to share” about whether the company plans to take any new steps as a result of the current national conversation.
Still, Microsoft’s culture of empathy will put it in good stead in navigating the national conversations on racial equity, according to Moorhead. But concrete action is also required, something Nadella acknowledged during a recent companywide town hall when addressing equity in its workforce.
“I know it’s not enough to just have empathy,” he said.
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