In-Depth

'Execudus' in Redmond: Top Microsoft Execs Get Out

Microsoft has famously lost -- or ousted -- eight top executives since 2008, including luminaries Ray Ozzie and Jeff Raikes. The change of leadership might have questionable long-term effects, but isn't likely to change much in Redmond for the time being. Here's why.

When Microsoft Chief Software Architect Ray Ozzie left the company, it sent shockwaves through the technology industry and rocked the Richter scale in Redmond. Bill Gates' heir-apparent walked away after just five years with Microsoft.

Ozzie's departure was arguably the most devastating executive exit at Microsoft since Gates himself left full-time duties in 2008. But if one executive leaving a company can cause such a stir, what happens when many leave in fairly short order? How many departures, how much "brain drain," can one company endure in a short period of time? What are the long-term effects of such an executive exodus?

Microsoft is about to find out. No fewer than six major Microsoft executives have taken the last train out of Redmond since November 2009, and many more at slightly lower levels also left the company. Ozzie's name might top the list, but the other figures on it are also significant: Stephen Elop, Microsoft Business Division president; Robbie Bach, Entertainment and Devices Division (EDD) president; J Allard, EDD chief experience officer and chief technology officer; Chris Liddell, chief financial officer; and, most recently, Bob Muglia, president of the Server and Tools Division.

Go back to 2008, and the list gets even longer: Kevin Johnson, Platform and Services Division president, and Jeff Raikes, Office Division president, both left during that year. Raikes in particular was a titan in Redmond; he left to run the Bill and Melinda Gates Foundation. His replacement at Microsoft was Elop, and the company also broke out Server and Tools as a separate division at the time and picked Muglia to lead it. Raikes announced his departure three years ago. All of the executives involved have since left the company.

Yet, in the face of what for many companies would be a major crisis, Ballmer and Microsoft soldier on. In its most recent quarterly earnings report, the company easily beat Wall Street analysts' expectations and touted strong growth in its Entertainment and Services Division -- formerly the domain of Bach and Allard -- as well as in its Business

Robbie Bach (with Slash and Bill Gates)
 
Chris Liddell   Jeff Raikes
 
Stephen Elop   J Allard
 
Kevin Johnson   Bob Muglia
 
Ray Ozzie  

Division, which is essentially the same group that Raikes and Elop ran. And while the stagnant Microsoft stock price still worries investors, its market share in OSes and productivity suites -- to name only two areas -- remains massive.

So, what does the Microsoft "Execudus" mean for the company's ecosystem? For Microsoft itself, it could lead to a vision deficit in years to come. However, any short-term effects are likely to be minimal and barely noticeable. That's good news for IT -- for now. The future for Microsoft, its leadership, its products and the people who invest in them is a much more open question.

Ballmer Seizes Power
Perhaps it was inevitable that Ozzie would never fully fill Gates' shoes. That's partly because Gates is so unique -- but it's also because Microsoft is Steve Ballmer's company now, and observers say that he wants to run things his way.

Redmond magazine columnist and longtime Microsoft observer Mary Jo Foley has noted for years the cultural differences within Microsoft between followers of Gates and fans of Ballmer. With Ballmer's ascendancy to the CEO post more than a decade ago, his faction began to take more power inside the company. When Gates left for good in 2008, Ballmer began to make Microsoft more and more his domain.

"In the past year, the Steve Ballmer guys have gotten a lot more power," Foley says.

And Ballmer has wielded his own power. Not all of the recent executive departures were voluntary. Observers agree that the CEO forced Bach and Muglia -- and possibly Allard -- to leave Microsoft. Ballmer said as much in an internal company e-mail announcing Muglia's departure: "I have decided that now is the time to put new leadership in place for [the Server and Tools business]."

Ballmer has also used executive departures to consolidate his power and have more direct control over particular divisions in the company, says Michael Cherry, analyst at Directions on Microsoft. It's that type of leadership style that might have driven the influential Johnson, former head of the Platform and Services Division, out of Redmond.

"[Microsoft] is [Ballmer's] baby," Cherry says. "If you're an executive and you want to run your own thing at some point, it's very frustrating to you because it's probably not going to happen soon. This is probably the case with people like Kevin Johnson. Switching visions doesn't interest them."

Experts can speculate over which of the Microsoft executive exits were surprises and which had Ballmer's hand in them -- directly or indirectly -- but observers agree that some of the results aren't all negative. Part of Ballmer's executive paring has led to a focus on moneymaking products and a de-emphasis on more experimental projects.

The CEO has also made up for a few of his own mistakes, says Rob Enderle, principal analyst at the Enderle Group. "Over the last five years, [Ballmer] has gotten rid of a lot of the dead wood, but a lot of [those employees] were there because he co-hired them," Enderle says. "The end result is he has made it his company."

Kevin Turner Overdrive
Ballmer hasn't orchestrated his power grab without help. He has a right-hand man in the boisterous and effective -- if not necessarily well liked -- Kevin Turner. COO at Microsoft since 2005, Turner is something of an anomaly in Redmond.

Turner came to Microsoft from Walmart Stores Inc., the infamously hard-driving retailer that transformed American shopping habits over the last three decades. At Microsoft, Turner is something of a fish out of water -- but he's a big fish, and Microsoft employees have little choice but to swim wherever he leads. It's unlikely that Turner's vision pleases many current Microsoft executives, particularly those who have a long tenure with the company. He is, by some accounts, a divisive figure in Redmond. (Turner and Ballmer declined to be interviewed for this article.)

The energetic COO brought a penny-pinching, efficiency-driven ethos to a company that, in earlier years, wasn't afraid to spend big money on experimental products and projects -- or on its employees. Ballmer and Turner have cut costs and closed unprofitable projects at Microsoft, observers say. Their fingerprints are all over the company that exists today.

"They've closed a lot of the projects that aren't making money," Foley says. "They closed Live Labs because nothing that was coming out of there was going to make money. That's definitely Ballmer and Turner's influence there."

Gates, Foley explains, was much more willing to let unprofitable projects go for the sake of innovation and experimentation, even if that meant losing money. Ballmer and Turner don't work that way, she says, and the results are noticeable: "It really felt like [in 2010] it became even clearer that they were tightening the belt around things that aren't making money."

Turner's name is often the first to surface when pundits speculate about who might take over for Ballmer as CEO. Foley's not so sure that plan would work, though. Internally, she says, Turner is unpopular. Turner makes decisions as to which employees Microsoft will lay off, she explains, and he recently told employees the company would cut their health care benefits.

"I get the feeling if they ever made Kevin Turner the CEO of Microsoft, they'd lose a lot of the company," Foley says.

Other observers, however, say Microsoft could use some discipline after years of hiring executives from other companies who didn't understand the culture in Redmond. One Redmond reader and former Microsoft employee, who asked not to be named, says that the company became softer with an influx of people from IBM Corp. and the former Great Plains Software, based in Fargo, N.D., which Microsoft bought in 2000.

"One of my complaints at Microsoft in recent years is that Ballmer and his lieutenants have hired way too many ex-IBMers," the reader says. "They seemed much softer and slicker and more bureaucratic than the old Microsoft execs. Sometimes it almost seemed like Steve [Ballmer] wanted us to become more IBM-like. [It] gives me shivers.

"We had a similar, smaller-scale influx of softer 'Softies when we bought [Great Plains]," he adds. "They came into the Redmond mother ship sans assimilation, and it was a huge cultural change for us old timers. The Great Plains folks were polite. They didn't curse and throw fits in meetings. And they really changed the internal operating culture in Redmond."

The Biggest Loss
Throughout much of Ballmer's tenure as CEO -- and particularly since Gates' departure -- certain pundits have argued that the Microsoft chief is in over his head and should step down. That's not likely to happen. Not only is Ballmer strengthening his position by consolidating power with Turner, he's also quite possibly the only person who could run Microsoft right now.

Only Ballmer, Enderle says, can run the nearly 90,000-employee operation, which has its tentacles in an array of markets in the technology industry. "If you got rid of Steve, whoever came in would have to cut that company dramatically to run it," Enderle says. "He grew up with that breadth, so he has better control of it than even somebody inside the company might have. He's still the best-trained guy for the job."

Foley agrees: "I don't get the sense that he's thinking about leaving or that the board is thinking about kicking him out," she says of the CEO. "He's a known quantity. If he's out, who's in? Who's the new CEO, and is he really going to be better? [Microsoft is] terrible with outsiders coming in. Outsiders never survive there. Ozzie is a great example."

Indeed, Ozzie never seemed to quite fit in with the Microsoft corporate culture. But he did leave a legacy that will endure -- the Windows Azure cloud-computing platform. Microsoft, now famously "all in" with the cloud, will likely be using and building on technology designed and spearheaded by Ozzie for years to come. His departure is the most significant of Redmond's recent executive exits, says Enderle, and his failure to succeed Gates long-term as chief software architect might not have been his fault.

Cherry agrees: "Nothing against Ray, but who could have stepped in?" he questions. "You're replacing a mythical fixture within the company. It doesn't go well in a lot of technology companies. It's like when [CEO Steve] Jobs left Apple the first time. Ray had this Herculean task of mythical proportions. Gates was an anomaly. Gates was knowledgeable from a business perspective and from a technology perspective."

Ozzie's departure might have been the most high-profile and garnered the most headlines, but IDC analyst Al Gillen says that Muglia's departure was also a shocker and might end up being the most detrimental of all.

"It's pretty hard for Microsoft to find somebody to fill Bob Muglia's shoes if they're looking for technical knowledge, familiarity with the products and the ability to interact with customers," Gillen says. "If you're looking for that, you don't get rid of Bob. I'm interpreting that to mean that Steve Ballmer thinks he needs a different type of manager, not a technically adept manager. Losing Bob Muglia is probably a much more serious thing than losing Ray Ozzie. Ray wasn't as important in execution [as Muglia was]. I'm a little surprised that Bob is gone."

Jeff Raikes is arguably just as big a loss. Microsoft employees miss Raikes dearly, Foley points out. He played a major role in moving Microsoft Office to the cloud, even before "cloud" became a buzzword in Redmond, Foley says. "Raikes was laying the groundwork for things that didn't materialize for years," she explains. "A lot of people felt he had a good capability for where things were going to go in the future. Before Microsoft started thinking about the cloud, he was saying to the Office team, 'We've got to get ready for the cloud.' That's the kind of leadership they need."

Business as Usual
What's most interesting about the Microsoft execudus is IT professionals won't likely notice any changes, at least in the next few years. Microsoft is a huge entity, in which most of the departments run themselves, experts say. Even with turnover in middle management, which is also taking place, the Microsoft product roadmap is likely to remain unchanged. And the departures of major executives will affect it even less than the exits of their minions.

"People at [the executive] level aren't individual contributors -- they're the ones that carry the vision and the strategy," Enderle says. "You get plenty of time to anticipate the change. [Executives] have got to figure out where the bodies are buried. Then they have to figure out where they want to take the ship. It can take a year to a year and half to find out what the change will be. Even if [the departed Microsoft executives] had stayed in place, they undoubtedly would've been making course corrections. You bring in different people, [and] you're going to get different directions -- but nothing immediate."

IT pros have less to worry about in terms of change than do consumers, as IT products have much longer development cycles and slower acceptance speeds than do consumer products, Enderle adds. Microsoft isn't going to mess with IT products that have been successful and continue to be, and Ballmer's strong presence adds stability.

Ozzie's departure shouldn't be too alarming for IT, experts agree: "I don't think Ray Ozzie leaving is going to affect Microsoft that much," Foley says. "He had already handed off everything he was doing to the Server and Tools team. He was involved with Windows Azure in the beginning, and his involvement was putting together the right team to build it. He didn't have anything to do with crafting the OS. I don't think that, on the day he decided he was leaving, anybody said, 'What about "X" product?'"

Adds Cherry: "You can take a technology like Windows Azure and say, 'Will Ray Ozzie leaving hurt that?' My gut reaction is no. It was defined. Now it has to be implemented. [Microsoft has] some great implementers."

The same goes for others who have left Redmond. At Microsoft, the executives who have made positive contributions have already put their visions in place, experts say. With a vision set, execution becomes critical. And the company doesn't necessarily need big names around in order to accomplish that.

Still, IT professionals will need to choose their products diligently, as they do now. But they shouldn't expect quick or major deviations from the current Microsoft product plans. "Some technologies will change. Some technologies will be deprecated, and others will move forward. You still want to carefully pick your way through," Cherry says.

Stability for the Long Term
So, if top executives don't have much of an impact on day-to-day execution, and if their presence isn't necessary for product development to continue apace, why do they earn six- and seven-figure salaries? Why do they create so many headlines? Vision and driving the execution from a high level, apparently, are worth the cost of bringing them on board.

Consider Ozzie. Nearly lost in the head-shaking and hand-wringing about his inability to be the next Bill Gates is the fact that he led the creation of Windows Azure, a platform that could eventually become as important to Microsoft as Windows is today. Raikes built the Microsoft Office franchise -- a business that Cherry says as a standalone company would have cracked the Fortune 500. Muglia, who had been with Microsoft since 1988, oversaw strong growth in the Server and Tools Division.

Microsoft will miss its former leaders, even those Ballmer chose to oust. The question is when, and how much? At a company where turnover has been relatively light until recently, especially at the executive level, that's a question no one can currently answer. What might soften the blow, though, is the fact that some of the departed executives had worked to avoid a leadership vacuum upon their departure.

"The good ones had already put succession in place," Cherry says. "They built organizations that had everything they needed to keep going without them."

But short-term executives might be a future trend at Microsoft. Experts say that the company, once a desired final destination for big names, now looks better in the middle of a résumé than at the top.

Microsoft "stopped being the place to go to work and started being a place to have on your résumé," Enderle says. "For right now, people looking for a job are likely to look at something like Facebook. Even Google is looking long in the tooth at the moment, at least for top stars. There are people who want to get rich and make names for themselves. It's very hard to do in an aging company."

Still, that doesn't mean that Microsoft won't be able to attract the talent it needs to keep its vision strong -- even if that talent doesn't hang around for decades: "At the executive level, I'd say they're still a pretty good draw," Foley says. "It never hurts to have Microsoft on your résumé."

Lee says:

Celebrity culture is a funny thing. It has moved from movies, TV and pop music into the corporate realm. Names like Ozzie, Raikes and Muglia are household words for people who work for or with Microsoft. And like mainstream celebrities, industry celebrities carry a mythical aura of importance and influence. Are they brilliant? Yes, generally. Are they important? Yes. Will the world, or Microsoft, end if they decide to leave Redmond? No. If Microsoft could survive the departure of Bill Gates -- and it has -- then it's strong enough to recover from the loss of some top executives, no matter how bright and influential they are.

Everybody Needs to Relax
Ultimately, despite the words of the doomsayers who love to predict the demise of Microsoft every time a big name departs, the company's future seems strong. Some observers note that not all executives leave Microsoft because of dissatisfaction or an ouster from Ballmer. Some just want their lives back.

"You wouldn't have believed the hours that people like Jeff Raikes put in," Cherry says.

Gillen echoes his sentiment: "You've got to look at the age of these guys. At some point, when do you stop working so hard?"

The message to Microsoft customers is, despite the changes in leadership, the company is not necessarily getting weaker. In fact, it's as strong as ever, particularly in the enterprise.

"Microsoft faces an interesting challenge going forward," Cherry says. "They have to balance how they move young, talented people up within the organization and give them the feeling that there's a place for them to go, [and also] address the challenges of giving them both interesting work and appropriate monetary compensation.

"My bottom line on this is that too much is made of all the [executive] changes," Cherry adds. "I think the company will go on. It's the last thing people should worry about."

Scott Bekker, editor in chief of Redmond Channel Partner magazine, contributed to this story.

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