Ballmer To Step Aside?

News came out today that Steve Ballmer is set to retire with in the next 12 months. Apparently the search is now on for a successor. Is this good news for Microsoft? Is the fact they don’t have a successor in place alarming?

About Time?

Microsoft has not faired well under Ballmer’s leadership the past few years. Sure, the numbers are good, but good numbers can mask problems with the company.  Their presence in mobile technology has been virtually non-existent (Windows Phone placing second in Latin America notwithstanding). Apple, Samsung and Amazon have been cutting into PC sales with their tablets. The company took a major beating to their image with the XBox One debacle. Their foray into making their own tablets has not gone well. Windows 8 has had a very bump ride. Other than Apple selecting Bing as the default search engine for Siri, not much has gone right for the Redmond-based company.

During all of this, we have Steve Ballmer leading the charge, and apparently denying reality. Granted, I wouldn’t expect the CEO of a major company to step up and call a spade a spade in public. I expect them to prevaricate and weasel-word to some degree. But the alarm bells are ringing, the flames are clearly visible, and Ballmer continues to act publicly as if there isn’t really a fire. Perhaps he didn’t learn a lesson from some guys in Waterloo who did the same thing, and now they are at the point where all they can do is sell the company and hope for the best.

The parallels with RIM/Blackberry are rather startling. Like Microsoft, RIM minimized the impact of the iPhone. Like Microsoft, they ignored their declining marketshare, and continued to promote numbers that looked good, but meant nothing. Like Microsoft, RIM had very good financials through most of the decline, and it’s hard to argue there’s a serious problem when a company is still making a lot of money and showing decent profits.

That head-in-the-sand approach is not healthy for the long term viability of the company. Shareholders have spoken about it. Analysts, experts, pundits and bloggers have all spoken about it. But Microsoft continues to behave as if there isn’t a lot wrong looming on the horizon. Everyone else can see it. I’m certain that, inside Microsoft, senior management sees it. But all that happens externally are reorganizations (2 within the last 18 months), neither of which truly addresses the issues, or plays to the strengths that the company has. All of that stems from one place, the top of the org chart.

Was He Forced Out?

The timing of this retirement announcement could be viewed as suspicious. It’s occurred at a time where there is a bit of a lull in news out of Microsoft, and during the early days of the “guess the next iPhone” hype. All that prediction noise is going to drown out all kinds of other stuff, so this isn’t a bad time to try to make the announcement. Further, it isn’t like Ballmer is an older executive on the downhill side of his career. The guy is only 57, which is a time when a lot of executives seem to be at their peak.

I could see many guessing that he was asked to ‘retire’, basically told he had a choice of leaving on his own terms or being fired. I’ll leave that to the conspiracy theorists. The reality is that the means isn’t important. What matters is that Ballmer, for better or worse, is stepping aside, and it isn’t entirely a surprise.

Why No Successor?

What is something of a surprise is that there is no replacement waiting in the wings. The fact that they are going to spend up to a year trying to find a replacement doesn’t bode well for any of the current senior Microsoft executives. Some may view it as a positive, but I believe it is a negative for 2 reasons.

First, it shows just how ill-prepared the company was for Ballmer’s departure. The fact that they don’t have someone ready to step in immediately, even if only temporarily, is worrisome. What if something had happened to Ballmer? Do they seriously think they could run an entire year with a gap at the top of the org chart while a replacement was found? The only consolation is that few companies seem to do a good job a succession planning. This isn’t just a Microsoft thing. This appears to be a global problem. But, given the extensive collection of smart people, you would think that someone would have been groomed and ready to take the helm.

The other negative here is that it casts the existing management team in a poor light. It implies, to me, that none of them were ready to take the top job, and that the company felt that it had to look outside to find someone. If they do select someone from the existing management team, that seems to say “well, we couldn’t find anyone better, so this person will have to do”. Searching outside and not finding someone isn’t a ringing endorsement of the people they have. It doesn’t say “turns out we had the best available right here”, because they would have known that already. What is says is that they will have to settle for what’s available, because they couldn’t find (or convince) someone else to take the job.

Microsoft Needs Shaking Up

All that aside, I believe looking outside is the right thing to do. Why? Because Microsoft needs a cultural kick in the pants. The company has become complacent. The arrogance isn’t surprising, and it isn’t unique. Plenty of big companies are pretty full of themselves (heck, plenty of small companies are full of themselves). But the complacency is the dangerous part. The assumption that “this will always be as it is” is the first warning that things are changing and a company doesn’t get it. IBM fell into that trap. So did DEC, HP, Dell, GM, Ford, Chrysler and others before them. As soon as some senior executive says “product X will always be the best seller”, you know something bad is about to happen to that company. It’s a close second behind “hold my beer and watch this” as a warning sign of impending dumb decisions.

There are now new questions. Who will be the next to lead the company? What will they change, and what will the leave alone? Will they be able to make a massive cultural shift at the company? Microsoft’s culture has been grown and developed over many, many decades. Trying to make a change that big is a tall order. It can be done. One only has to look at IBM in the early 1990’s, or Ford at the turn of the century, to recognize that cultural change is possible. It’s hard. It takes the right kind of executive. But it is possible.

Of course, it is entirely possible that Microsoft is at a point where we may see a succession of CEO’s, for one of two reasons. The first is that the company brings in a change agent to shake things up, with both the board and the newly hired manager knowing their job is to turn things around, and then hand it off to someone else. IBM did this with Gerstner. They knew he really wasn’t the long-term guy. He was like the ER doctor: there to fix the problems at hand, and get them ready for the real long-term care and treatment. That isn’t the wrong approach to take.

The other possible reason, though, is that the board’s selection for CEO turns out to be a dud or mistake. JCPenney found that out that hard way, when they hired Ron Johnson to try to make over the chain. The problem? The makeover wasn’t going to help they way they hoped. Ron Johnson did a tremendous job with the Apple Stores, making them one of the most profitable retailers to ever exist. But Johnson was the wrong guy for what JCPenney is as a retailer. Microsoft could see the same problem, where their new CEO just isn’t the right person for the job, and we see a parade of CEO’s over the next few years. That isn’t good for stability, particularly at a time where Microsoft is facing a precarious future. Instability at the top job during good times is one thing. During a significant sea change in technology is not the time to be continually changing captains. Hopefully for Microsoft, that can be avoided.

Now We Wait

Now it is a waiting game, while we all hang around and see who comes next. I also expect plenty of speculation on potential candidates, and a steady stream of “news” while people watch for notable people arriving at the Redmond campus.

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