For fans of Microsoft (NASDAQ:MSFT), CEO Satya Nadella's ongoing transition to transforming the software king into a "mobile-first, cloud-first" leader is well documented. Of course, last quarter's $8 billion-plus combined impairment and restructuring charge related to Microsoft's acquisition of Nokia's device unit has put a damper on its mobile-first pillar in many investor's minds, but its cloud-related results are undeniably successful.
The notion that Microsoft's 88% improvement in cloud sales last quarter -- and more than $8 billion annual run-rate -- was somehow disappointing is a testament to just how successful its cloud transition efforts have been. But cloud and hardware sales results tell only part of the "new" Microsoft story. Nadella recognizes the necessity of building a more dynamic, nimble culture that not only positions Microsoft to rapidly adapt to an ever-changing tech landscape, but attracts and retains top-tier talent.
One look at Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and its seemingly unorthodox but obviously successful emphasis on culture is a testament to its importance. Not to be outdone, Microsoft is taking steps to remedy any perceived short-comings and change its work environment for the better.
Welcome to the 21st century
The culture Google has cultivated goes well beyond its "adult playground-like" corporate headquarters. Google utilizes reams of data to determine what will work and what won't to keep its industry-leading talent productive and happy. Free food for employees, dry cleaning and free haircuts -- along with the aforementioned arcade-like atmosphere -- all play parts in building the culture that sets Google apart from its tech brethren.
All those free perks serve a purpose: each demonstrates that Google execs put their people first. So, where does data come in? A good example is Google's decision to extend its paid leave for new moms to 20 weeks from its already generous 12 weeks. The change was made after Google realized it was losing too many women employees, particularly new moms, who left at twice the rate as other folks.
By extending its paid leave for new moms, Google not only addressed its retention problem, it was able to once again demonstrate it understands where its bread is buttered: people. That's why Google wins the "best place to work" crown seemingly every year. It's clear from Microsoft's recent announcement that Nadella is actively working to enhance Microsoft's culture, too.
Welcome to the club
As Nadella said in his lengthy mission statement email to employees at the end of June, "I believe that culture is not static. It evolves every day based on the behaviors of everyone in the organization." Following in the footsteps of Google, and even more recently Netflix, Microsoft announced it has also enhanced its paid leave time in the U.S for both new moms and dads. Moms will now enjoy 20 weeks of paid time off, and dads 12 weeks.
Microsoft said it will kick in a larger portion to employee's 401K accounts too. The paid leave extension and retirement savings boost may not compare to Netflix's plans to provide a full year of paid leave to new parents, or Google's playground-like corporate atmosphere, but it does indicate that Nadella recognizes the value that Microsoft employees bring to the table. And it's never been more important to develop the right culture in today's fast-moving world of technology.
Becoming an employer of choice for the world's leading developers and engineers is the by-product of creating the right culture. It's no wonder Google attracts top talent: it is able to cherry-pick from the over 2.5 million resumes it receives every year. And you can bet Google's culture is behind its popularity among the tech crowd. Securing and retaining the services of the world's best tech gurus is why Netflix enhanced its benefits, too.
Building a culture of creativity, flexibility and a people-first mentality doesn't happen overnight. But every indication is that Nadella is changing Microsoft's culture for the better.