One Microsoft CEO scenario is looking likely

In recent months, I have been outlining the idea that Microsoft’s board of directors might be too tied to the company’s current business strategy to accept a new CEO who might advocate any serious changes, such as selling off the company’s consumer products. For example, in Microsoft buys Nokia Devices and Services, Elop is EVP of Devices, I wrote

The Microsoft argument is that the company will be much strengthened working together with Nokia. If so, then why not a year ago when he walked away from a rumored deal? Because at that time Ballmer thought he could build his own devices and sell a lot of them. Instead, he wrote off $900 million in Surface tablets at the end of the last quarter (see Microsoft sees worst stock drop since 2000: Welcome to the post-PC era), and the board (and especially Bill Gates) decided it was time for someone new at the helm of Microsoft. But it seems like the board still believes in the services and devices plan, which is to invest hard and win big in the devices marketplace.

I think this is a huge pipe dream. Nokia has leaked new Microsoft RT-based tablet plans based on Nokia Lumia phone designs, and my hunch is that they believe this is a better table that Surface, just like Lumia is a better phone that anything Microsoft has built. The rumors are that this tablet would be launched in late September.

All along, as the Microsoft disaster has been careening down the hill, I have stated that the future will be in enterprise software: that Microsoft has to find a Sam Palmisano type to turn the company around and drop all the money-losing lines of business, like Bing, phones and tablets. But I also have continued to bet that the company wouldn’t do so until a/ Ballmer was gone, and b/ billions more were squandered. Well, they are an additional $7.17 billion down, and counting.

The big question is whether Ballmer is now going to hand the reins to Elop, and if so, will Elop ride the Microsoft trail as Ballmer has laid it out, right over a cliff? It might be that Ballmer and the board (including Bill Gates) are prepared to spend more time and money in capturing a significant share in the handset and tablet world, even though iOS and Android seem to have closed that opportunity. It might be time to start handicapping who will be CEO at Microsoft once Elop takes his shot, and fails with the Ballmer plan, just like Ballmer did.

In that piece, and others, I have been making a two CEO argument: someone is going to be appointed the new CEO, and more-or-less required to continue the current business plan, which is based on the Ballmer theory of fighting everywhere: the ‘devices and services’ plan he hatched last year and reorganized around. However, that CEO will have to be followed by another CEO, the one that will start making the real changes Microsoft needs to make to become a competitor in its growth area: enterprise software. The board is just not willing to accept the change that the ‘second coming’ implies.

In a piece at AllThingsD yesterday, Kara Swisher suggested that a two CEO scenario is becoming the plan at Microsoft, with Ford CEO Mulally being envisioned as a ‘caretaker’ CEO who’d continue the current plan for the short term, and then transitioning to one of the several internal candidates once they’ve one of them has proven himself. Thos internal candidates would include COO Kevin Turner, Stephen Elop (the former CEO of Nokia and soon to be head of devices at Microsoft), Tony Bates (former Skype CEO), and the new frontrunner in waiting, Satya Nadella. Nadella, notably is the head of enterprise software at Microsoft. And enterprise is the ultimate destination for Microsoft.

So, it appears that Mulally might be the person selected to lose those billions over the next few years and to be compensated enormously for doing so. And then one of the insiders will be the one allowed — at long last — to spin off all the non-viable and non-essential bits of Microsoft — Bing, XBox, Windows, phones and tablets — and turn into a leader in enterprise software.

It may be a long — and costly — few years. ahead.

Elisa Steele assumes new role as Jive’s EVP of Strategy and CMO


Elisa Steele

Jive announced today, in widely reported news, that Elisa Steele as the company’s EVP of Strategy and CMO. These are new roles in the company, where until this announcement I could find no one with a marketing role in the senior ranks. I have been informed by a company spokesperson that Chris Morace, Jive’s Chief Strategy Officer, will be reporting to Steele, and that John Rizzo had the title of CMO until leaving the company in July.

Steele is coming from Microsoft, where she recently had assumed the head marketing role for Microsoft’s consumer applications and services, including Bing, Internet Explorer, and MSN, as part of the company’s mammoth restructuring. Steele had joined Microsoft as CMO of Skype, during the acquisition of the messaging company a few years back. Prior to Skype, Steele ran marketing at Yahoo under then-CEO Carol Bartz, and earlier at NetApp.

My sense is that the consumer products group is a strange collection of products that are either failing or not breaking through: not central to Microsoft’s future trajectory, at any rate. And perhaps Steele has inside info that the former Skype CEO, Tony Bates, who is theoretically in the running for Microsoft’s CEO role, is unlikely to get that step. So her chances of ascending to higher things at Microsoft may have declined.

A last comment: an appointment like EVP Strategy and CMO looks like a short term test of a candidate for CEO. Tony Zingale, the current CEO of Jive, may be at work on a succession plan. The company went public in early 2012 and then  subsequently raised over $12 million in post-IPO venture funds. Most critically, Jive has seen a sharp drop in its stock price since August, when analysts soured on the company after disappointing results since the IPO, and where the company blamed ‘sloppy execution’ in the final stages of major deals as the rationale for poor results. It may be the board wants new leadership for Jive.

Microsoft drops stack ranking system: Did the incoming CEO make that happen?

We’ve heard that Microsoft’s board is eager to bring on a new CEO before the end of the year to replace outgoing Steve Ballmer (see Who’s calling the shots?), and there is a short list of people being discussed: Stephen Elop (former Microsoft exec, former CEO of Nokia), Alan Mulally (now CEO Ford), Paul Maritz (former Microsoft exec, now CEO of Pivotal), and Tony Bates (former CEO Skype, now Microsoft’s head of evangelism and business development).

I believe that those that have deep experience at Microsoft may have a correspondingly deep aversion to the company’s stack ranking approach to employee evaluation and compensation. The approach — where managers are required to fit their direct reports against distribution targets, so that a certain proportion must be considered as not meeting expectations for their job, independently of whether or not the manager agrees — has led to wide-spread dissatisfaction among managers and employees. In fact, many attribute the company’s ‘lost decade’ to the internal stresses, outright competition and sabotage that the approach creates, such as Vanity Fair contributing editor Kurt Eichenwald.

Yesterday, Microsoft changed its long-standing policy, as was revealed in a memo from Microsoft Human Resource lead, Lisa Brummel, in which she stressed moving away from ranking on a curve, the need for more feedback to employees on their performance, and a transition to greater levels of teamwork and collaboration.

Ballmer has been CEO for quite a while, and he’s supported stack ranking all along. He could have changed that at any point, but did not. It’s reasonable to support that others in the organization, like Brummel, have been advocating for a change for a long while. Ballmer is a lame duck, so it’s conceivable that Chairman Gates gave Brummel the go ahead on the change.

There are a number of aspects of the reorganization that was started in June 2013 that have not been completely solidified, and the status of Stephen Elop is one aspect of that. As the Nokia deal is finalized, Elop would be taking control of the Microsoft devices group, which will include Nokia devices. But if he comes in as CEO, that would have to be rejiggered.

Leaving aside Elop’s status, is it possible that a CEO has been picked? One that wants stack ranking dropped immediately? My feeling — and it’s just that, a feeling — is this: one of the candidates has been picked, and he’s made it clear that stack ranking is a terrible system, one that is linked to a great deal of the dysfunction going on inside Microsoft. That would argue for someone with deep experience at Microsoft, like Maritz or Elop. And of the two, Maritz has had exposure to more modern software companies’ talent management models, like VMware and Pivotal.

Taken from another angle: it would be bad to make this change prior to a new CEO coming on board who wants to take some other approach to talent management. The board would be tying the hands of a new CEO. So you have to figure that at least all the candidates being considered are opposed to stack ranking, even if they haven’t made a final choice.

This transition will the start of a positive change at the software giant. The next step is to announce the new CEO, and begin the long process of finding a new vision and focus for Microsoft.

An aside: the news of Microsoft’s abandonment of stack ranking comes right on the heels of Marissa Mayer’s newest black eye: a brouhaha arising from the company’s stack ranking system (see Apple Q4, Gates disses Zuckerberg, Mayer’s Cultural Revolution, and Chautauqua) and the griping that it is causing there, for all the same reasons.


At long last, some analyst love for Microsoft

With Microsoft, Wall Street tends to focus on the negative when it should keep an open mind about the many options available to the next CEO, said Nomura analyst Rick Sherlund.