Correct, Microsoft.
Microsoft has gone through a massive leadership style change in February 2014 from Steve Balmer to Satya Nadella.
Under Ballmer’s tenure as CEO, Microsoft’s share price stagnated despite Microsoft’s financial success at that time. His management style was rather harsh.
He insisted for example on a system called “stack rating,” whereby every member of the company was judged relative to his peers. “Every current & former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft,” journalist Kurt Eichenwald wrote back in 2012. Not very empathic.
Enter Satya Nadella presently widely regarded as the tech worlds best leader & voted the best CEO in the US by employees on Comparably.com.
His management style is characterized by a strong emphasis on empathy.
Now have a close look at this stock chart.
Coincidence?
Could it be that this fluffy soft-stuff of managing people like humans indeed has an impact on the hard stuff – those financial KPIs managers and investors like to focus on?
Let me ask you when you evaluate a company based on its fundamentals are you taking leadership, leadership style, and company culture into account?
Financials are looking at a company through the rear-view mirror. Those published figures are lagging indicators.
Leadership, leadership style, and company culture are leading indicators.
Certainly not easy to assess as an outsider. But certainly worth your efforts to analyze that side of the business. Your deep assessment could give you that edge over other retail investors that you were looking for.
May I suggest to take that emphatic people-first management style out of the “soft skills” box & enshrine it as the management discipline it should be.
Thoughts? Comments?
Hi Andy,
Empathy or what I termed “put yourself into other people’s shoes” is of paramount importance especially in today’s society as people are more and more self-centred and selfish.
Aside from the tangibles, the intangible strengths of the leaders are so important for me to choose a company to invest. Frankly, since young, I always have good sixth sense to be able to tell if a person upholds integrity/care about others.
Those leaders who only care about themselves, even if their company is doing very well in the short term, I will not spend a single cents investing in the company, if my 6th sense tells me so.
By the way, I thought Amazon is larger? Saudi Aramco is most profitable?
Hi Rolf,
That’s a great approach you are sharing there. The challenge for us retail investors is to find out enough about the leadership style of the guys heading a company we might want to invest in. Takes a bit of work. But should be worth it. Maybe more worth our time than doing a “rear-view mirror” deep dive analysis of the last few years’ financial numbers.
Both Amazon and Apple reached the 1 trillion market cap milestone before Microsoft did. But both have fallen behind and have not reached their previous highs yet. Apple is at 960 B and Amazon at 950 B. And yes, Saudi Aramco is the most profitable. I get reminded of that fact whenever I fill up my car. Grrrr.
Ironically GE is the opposite — share price went into the drain as it transitioned from a draconian CEO to less draconian ones. Although people are now saying it was due to questionable financial engineering & unsavoury top mgmt culture dating all the way back to Welch.
Maybe Ballmer was taking a leaf from old GE style which I remember was still considered “elite” approach in the early-2000s. I.E. annual sacking of bottom 10% ranked workers.
Interesting observation. Well looking at GE’s development under the two leaders Jack Welch’s tenure was characterized by his push into new markets, new products, and growth. Under Jeff Immelt GE was seeing divestitures to “correct” some of the aggressive portfolio expansion of his predecessor. The funds were unfortunately not put into new growth areas. GE missed the entire movement into the Internet of Things. Rather than develop new products building on new technologies in wifi, portability, mobility and social Mr. Immelt’s GE sold businesses and spent the proceeds on stock buybacks.
Well in hindsight we all have 20/20 vision, right?