Microsoft culture must change, chairman says

February 27, 2014, 9:20 PM UTC

FORTUNE — John Thompson, a veteran software executive and a board member at Microsoft since 2012, led the committee that chose company insider Satya Nadella to replace Steve Ballmer as CEO. In an interview for the current issue of Fortune about Virtual Instruments, where Thompson is CEO, he also spoke about the importance of culture, similarities between Microsoft today and IBM 25 years ago, and the unusually public nature of the CEO search.

Fortune: How important is corporate culture, reflecting on your tenure at IBM?

Thompson: There are two important issues that every leader in every company grapples with. First, as the company grows, do the management systems of how you think about markets, think about deployment of resources, think about allocation of capital all change to accommodate a bigger and different company? And does the culture along the way change as well?

I think one of the things IBM learned was when their monopoly ran out and they had to compete with a bunch of smaller, more agile companies, they needed to have a different rate and pace of change. And Lou Gerstner coming into IBM certainly brought about a sense of urgency that some would argue the company didn’t really have at that time. And clearly the monopoly was gone, and clearly the market was loaded with a host of new competitors in almost every segment they were in. It required a leader who was willing to say, “Here’s what we’re going to do, and here’s what we’re not going to do. And here are the behaviors that will be rewarded, and here are the ones that will be punished.” Over time, that changed IBM’s culture.

You don’t change a company’s culture overnight. It’s more about the subtle influences and the consistency and predictability of those influences that over time drives that subtle behavior change that we call culture.

Does Microsoft’s culture need to change? 

I think that’s a better question for Satya. But I would argue that there are some attributes to Microsoft today that do look vaguely like IBM circa 1990. The Windows monopoly is in fact under attack, and therefore we’re going to have to change or think differently about the management systems and the associated culture of the company as time goes on.

What do you make of the high-profile situation the Microsoft CEO search became?

First off, it’s one of the largest and most respected companies in the world. And the fact that we chose to do a very public external search was as much for our investors as it was for anyone else to make sure that we had done the best possible job we could of surveying the landscape and picking the leader that we thought would do the most to create real value for shareholders over the long term. And you can’t take a company that’s a leader in an industry, recognized globally, one of the largest market cap companies in the world,  and do something like that in a vacuum or in a test tube. It’s got to be done publicly.

Candidly, I would have to say a very large percentage of the stuff that got written was just stuff. It wasn’t necessarily grounded in truth. But if you could pick up a little germ here and a little germ there and you could string them together, you could write a story. And there were a lot of stories written that just weren’t true. There were people who purported to have been interviewed for the job or who turned the job down that just wasn’t true.

And so as it went on, it became more interesting than anything else. As stories evolved or emerged or ebbed and flowed I never really expected to have — for it to have the public profile that it did — and I certainly never myself expected to have the public profile that I did. I did one Wall Street Journal interview at the request of Microsoft, and that’s it. And we did the blog post in December. That’s it. Those are the only two public things I did.

But somehow the world got this view that I was bigger than life. I was doing my job just like the other directors who were a part of the committee. Yes, I was the chairman of the committee, but the characterization of me as this, you know, person who had this flame being fanned to create this pervasive view of who I was and what I was doing and all that, that’s just not true.

The Wall Street Journal interview was done at the bequest of Microsoft because they were doing a profile on Steve Ballmer. I’ll just leave it at that. And in the blog post was we had all hoped — many of our investors had hoped — that we would be done by year-end 2013. And when it became apparent to us that we weren’t going to achieve that, we felt that the easiest way to communicate with everyone that it was going to be a 2014 transaction was to put this blog post out. Well, all of a sudden it’s like, “There’s Thompson again in the press.” Well, hell. So people made more of it than I thought, quite frankly.

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