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Rotman Insights Hub | University of Toronto - Rotman School of Management

How to lead with empathy

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Satya Nadella

When some people hear the word empathy being used in a business context, they think, what does that have to do with business? How do you respond to that mindset?

I would argue that empathy has everything to do with business. If you accept that innovation is about meeting the unmet (and often unarticulated) needs of your customers, you have to ask, “how can we get in touch with those unarticulated needs?” Only through our ability to listen to people, observe them, read between the lines and extrapolate. That requires a deep sense of empathy — making it a necessary ingredient for succeeding with any innovation agenda.

At Microsoft, we are rising to this challenge by putting the necessary conditions in place for our people to develop empathy. One word we use a lot is respect. If you don’t start from a place of respect for the other person’s viewpoint — their history and their mindset — it will be very difficult to develop empathy for them. Way before you think of any of the high-level things, like the new products or services you will eventually introduce, you have to address these basic elements.

Before you became the CEO of Microsoft, you headed up its Cloud business. Did you realize that role was putting you on a path to become CEO?

Not at all! I don’t think I had even thought about a Microsoft where Bill [Gates] and Steve [Ballmer] were not actively engaged. Business school graduates are an ambitious lot, and many of them ask, When can I become a CEO? My advice is as follows: Don’t wait for your next job to do your best work. If you think about every job you have as the most important job you will ever have, good things will happen.

The true currency of a great culture is inclusiveness. Achieving that is the core job for today’s leaders.

When you took on the role of CEO, you faced very high expectations. You were following two legendary leaders in the role, and many people felt the next CEO should come from outside. How did you handle all of that?

I was a consummate insider. I have literally grown up at Microsoft over the past 28 years. Even though Steve was not a founder, he had founder status. Together, he and Bill built this company. As a non-founder CEO, I recognized that I needed to make explicit some of the things that founder CEOs take for granted, just by virtue of what they mean to the organization. I had to rekindle and reinforce our original purpose. Two pillars — our sense of purpose and the corporate culture — had to be made explicit.

When I joined Microsoft in 1992, our mission was bold but simple: To put a PC in every home and on every desk. That was pretty inspiring. Except by the late 1990s, we had more or less achieved that in the developed world. Since then, we struggled for some time with, what’s next for us? I believe everything that needs to be known about Microsoft today can be traced back to our origin, which was based on the idea that we are building technology so that others can build more technology. We needed to get back to that core identify. Of course, we had to express it differently, and that led to us describing our mission going forward as empowering people and organizations.

We also had to work on our culture. I think it was 1998 when we found out we had become the largest market cap company in the world. I clearly remember that day: When you walked around the campus, you could see that people thought, wow, we must be God’s gift to mankind! We are all so smart! Look at us! Except that was not the case. The market cap victory was only a temporal thing. What actually matters is your ability to learn, to grow and to be grounded in the realities of your customers. As CEO, that is what I wanted: A culture that stood for being a learning organization above all else.

How have you led by example on this front?

I try to set an example, every day. Take diversity and inclusion. Just saying We have to make progress on that front is not enough. You need to recognize that progress on such challenging issues can only come from widespread behaviour change. Take an everyday experience like a senior leadership meeting. We have some amazing women on our team, and I need to always be cognizant of whether they are fully participating in the discussions. Are we listening to them and ensuring they provide input? It’s important to start with that type of sensibility.

We even changed the compensation of our senior leaders — including mine — to ensure that gender equality is a major priority. Compensation isn’t everything, but having real metrics in place around goals, and then compensating people based on that, is a great start.

It’s not only about the senior levels. We also recognized at one point that every intern class that joins Microsoft each year is more diverse than the last. But when we looked around we said, where is that diversity in the company? The true currency of a great culture is inclusiveness, and achieving that, I think, is the core job for today’s leaders.

You made the bold bet that cemented Microsoft’s strategy with respect to the Cloud business. How did you rally others around your vision when many were convinced it wouldn’t work?

The challenge was that we had a very successful business in the client server area. When your senior team is studying the numbers and you say, here’s a new business idea. The gross margins will only be a quarter of our current business, but... Rationality tells people to avoid that as much as possible. But in tech and many other businesses, such transitions are inevitable. So the question is, how do you make this transition?

Steve was actually the one who gave me permission to move ahead with it. Many leaders are going to have to make similar bold decisions over their careers. He basically removed the constraint of gross margin and said, get out there and win this market for us! That’s what made it possible.

We can’t abdicate our responsibility to create a future that we all want to live in.

You are a big proponent of AI. How do you see it augmenting humanity rather than detracting from it?

One of the areas I am deeply involved with is accessibility. Just think about what AI has already done for the people who need the most help. If someone has a debilitating disease like ALS, using Eyegaze, they can type and communicate. And if you have a visual impairment of any sort, you can interpret words by using the latest in computer vision. Already, AI capabilities are helping more of us participate fully in our societies.

That doesn’t mean we shouldn’t be clear-eyed about AI’s potential consequences. As creators of these platforms and tools, even before we get to the important topic of ethics, we need to improve software engineering so that things like bias are dealt with. We are creating AI, so we get to shape what it looks like and carefully design the systems where humans are removed. We get to decide, as a society, what we are comfortable with — and not comfortable with.

On the employment side, I do believe that overall, there will be more jobs created than lost. The question is, how do we use all the levers at our disposal — both economic and social — to skill people up for the jobs that will be created? Many of those skills will likely be different from the ones that we value today. We can’t abdicate our responsibility to create a future that we all want to live in.

What is your advice for aspiring leaders seeking to balance the pressure to grow as a company with a responsibility to society?

Greater scrutiny of large organizations is absolutely something that is going to happen, and I believe large organizations should welcome it. We can learn from it. As a company, we need to both recognize the opportunities afforded by technology and the responsibilities they come with, whether it be security, privacy, or ethics.

Let’s circle back to your personal leadership style and values. How do you stay true to your own style while knowing when and how to grow in a different direction?

It’s a journey of a lifetime to really unpack who you are and what you are good at, what makes you tick, what are your passions. And then, to learn how to understand and empathize with others. I believe a lot of that satisfaction we get in life is because of our ability to empathize. Back in my mid-30s my colleague said something that had a profound impact. He said, you’re going to spend more time at Microsoft than you will spend with your family. I realized he was right. His point was, work needs to have a deeper meaning rather than just being transactional.

The only way work is not going to be transactional is if you relate to the people you work with and with your customers. Technologies will all be passé in time, but people and their achievements can have a very long life in terms of value. Personally, I take great pride in the people I’ve mentored who have gone on to do great things.

You once said, “when everyone is celebrating you, that is when you should be most scared.” I think it’s safe to say that people are celebrating Microsoft’s renewal. How do you keep yourself and your teams grounded amid the success?

I recently read a book by David Brooks called The Second Mountain. The first mountain is where we seek excellence and success in our individual career. But eventually, once you achieve that, you get to that second mountain, where success is about relating to your community and the world at large. That’s why we celebrate that small business in Kenya that is benefiting from our products, and that public sector company in Indonesia or Vietnam. Invoking an everyday sense of purpose — for yourself and for your people — is incredibly important.

This article originally appeared in the Fall 2020 issue of Rotman Management magazine.

Satya Nadella is the chief executive officer of Microsoft. Before becoming CEO, he was executive vice president of Microsoft’s Cloud and Enterprise group, responsible for building and running the company’s computing platforms. This interview took place at the Stanford Graduate School of Business in January 2020.