The structure of an organization dictates the hierarchy and allocates responsibilities to personnel within the hierarchy. It also creates the levels of communication within the organization. Organizational structure, therefore, can affect various aspects of an organization positively or negatively, hence leading to the success or failure of the organization. Latifi and Shooshtarian define an organizational structure as “how job tasks are formally divided, grouped and coordinated” (73) or “the anatomy of the organization, providing a foundation within which organizations function” (73). These two definitions are both relevant to the context of this analysis.
Numerous researchers and scholars have conducted research and written literature on the various ways organizational structure can affect various aspects of organizations. For instance, according to Shabbir, “the nature of hierarchical layers has a significant positive effect on the employee’s performance,” (1). The author, therefore, recommends that companies should design appropriate organizational structures that will match the units and components of the organization to facilitate employee performance. Kiggundu partially supports this argument by concluding in their research that there is a significant relationship between organizational structures and the performance of employees (2). However, in this case, the author fails to indicate if the relationship is a positive or negative.
Similarly, in their investigation of the impact of organizational structures on the management of knowledge, Haan and Kloub found that there are “benefits to relying on the organizational structure in strengthening the application of knowledge management,” (82). Knowledge management, in this case, involves the acquisition, storage, dissemination, and use of knowledge and information, a fundamental aspect of the technology industry such as the one Microsoft operates in. Additionally, Maduenyi et al. conducted a separate study that revealed that organizational structures impact the performance of organizations (354). They, therefore, recommended that organizations should develop well-defined organizational structures to promote the achievement of set objectives. However, the study by Maduernyi et al. is limited by the fact that it used only secondary sources to collect data. Finally, Latifi and Shooshtarian conducted a study that proved the existence of a relationship between organizational structures and trust and effectiveness (73). However, the nature of this relationship varied from one industry to another.
Microsoft revamped its organizational structure in 2015 to align the company with its strategic direction such as productivity. The reorganization of the organization structure led to the elimination of over 7000 positions. The new structure featured a product type divisional organizational structure. The company was divided into product type divisions, global corporate group, and geographic segments. Product type divisions are determined on the basis of products and output hence enhancing the capacity of the organization to improve product innovation. Business functions such as marketing, finance, and business development were moved out of their separate divisions into company-wide groups where each of them is headed by its own senior executive.
In essence, the reorganization at Microsoft shifted the focus of the organization from a structure that concentrated on products to a structure meant to increase focus on how the devices perform. The change in organizational structure of Microsoft, therefore, led to several benefits as well as limitations for the company. For instance, the reorganization of the company’s organizational structure has given the organization the ability to focus more on its product development. The introduction of the Intelligent Cloud Division has allowed the company to come up with innovative cloud computing services that have increased the competitiveness of its products. On the other hand, the new organizational structure at Microsoft has come at a disadvantage for its regional markets. The new structure fails to take into account the regional preferences of Microsoft’s products with regards to both software and hardware.
An analysis of the organizational structure change at Microsoft brings up more benefits than limitations. For instance, Microsoft has been able to concentrate on its products and produce more cutting-edge technology in both software and hardware. This has resulted in improvements of cloud storage services of Microsoft, an improvement on devices such as Surface, and the introduction of Cortana to rival Siri and Google voice. It also led to the modification of Microsoft Office 2016 for MAC, leading to the subsequent loss of sales of Apple’s own office suite. The simplification of the hierarchy at Microsoft eliminated bureaucracy in business processes and procedures hence faster decision-making. It also made the company more flexible to changes in the technology industry and the overall marketplace.
Similarly, the elimination of over 7000 positions in the restructuring process saved the company considerable amounts of financial resources. These resources were channelled towards the development of new products and the improvement of existent products as mentioned earlier. It can be argued that Microsoft’s increased competitiveness in recent years is a consequence of its new products and improvement of existing products. The share price of Microsoft has also risen steadily since the reorganization of its structure representing steady growth. Therefore, it can be concluded that the change in organizational structure has been effective in improving the performance of the company hence its consequent growth.
The literature review on the impact of organizational structures on organizations suggested that the major areas of impact are employee performance, knowledge management, organizational performance, and trust. The strong organizational performance of Microsoft since the reorganization of its structure means that its structure has been effective. The effectiveness of Microsoft’s organizational structure means it has impacted employee performance, knowledge management, organizational performance, and trust within the company positively.
The sources used for the literature review have been extracted from various databases to increase the diversity of the source material. Most of the studies in the literature reviewed consist of data collected from primary sources. However, some consist of purely secondary data which might be already outdated and, therefore, potentially unreliable. Also, the sources are limited by the fact that the subjects of their studies were other organizations and not Microsoft.
Leadership is one of the most important aspects of organizations. It drives organizations towards the achievements of their goals and sets examples to be emulated for those seeking to be leaders in the future. Consequently, various leadership styles have developed over time. The most significant types are transactional and transformational leadership. Transactional leadership is a leadership style where more focus is placed on supervision, organization, and performance while maintaining compliance with subordinates through punishments and rewards. On the other hand, transformational leadership involves the cooperation between leaders and the subordinates to identify required changes, create a vision to guide the change and to enable the execution of the change.
Different literature defines different leadership styles and how they affect organizations such as Microsoft. Rukmani et al. studied the effect of leadership styles on the organizational effectiveness and came up with two conclusions. The first conclusion was that both transactional and transformational leadership styles were important for the organization, especially in the public sector. The second conclusion was that “transformational leadership is considered slightly more important in organizational effectiveness,” (Rukmani et al. 365). Zehir et al. conclude that leadership styles are important components of organizational performance, but not without the influence of organizational culture. Hence, they recommend that organizations that want “to achieve positive firm performance in the competitive business environment have to give importance to both organizational culture and leadership” (Zehir et al. 1471). It is important to note that the authors do not specify the type of leadership that is more important to organizational performance.
A similar study conducted by Iscan et al. revealed that there was a positive effect of transformational leadership style on innovation and organization style. The same study also revealed that transactional leadership did not have any meaningful effect on organizational innovation and performance (Iscan et al. 886), in contrast with transformational leadership. Similarly, Hurduzeu found the existence of a positive correlation between organizational performance and transformational performance (292). However, the study did not analyze the nature of this relationship. It also failed to include findings of how transactional leadership relates to the performance of the organization.
In a different study, Koech and Namusonge found high ratings of correlations between transformational leadership factors and organizational performance. On the other hand, there were relatively low correlations between transactional leadership factors and organizational performance. The author also investigated the effect of laissez-faire leadership and concluded that it had no significant relationship with the performance of organizations (Koech and Namusonge 1). It was, therefore, recommended that leaders should abandon laissez-faire leadership and concentrate on characteristics of both transformational and transactional leadership. These characteristics include the formulation and implementation of effective reward and recognition systems, and striving to become role models to the subordinates. It also included the inspiration of subordinates by providing meaningful challenges and the stimulation of subordinates to be more creative and innovative.
In February 2014, Microsoft appointed Satya Nadella as its new Chief Executive Officer, only the company’s third CEO in its four decades of existence. The new CEO signified a change in leadership styles since leaders are often different. Satya Nadella took over from Steve Ballmer, the former CEO, who is largely believed to be more of a transactional leader due to his aggressive competitiveness and intensity. For instance, Ballmer instituted the employee stack ranking at Microsoft which required managers to rank the performance of the employees. This led to excessive competition between workers and stifled innovation at Microsoft. The stack ranking is also attributed to Microsoft’s drop in performance in the first decade of the millennium that saw it overtaken by Apple and Google.
Satya Nadella revolutionized the company’s culture, values, norms, goals, and structure through new strategies. He reorganized the structure of Microsoft to a more agile structure that would promote innovation and creativity among subordinates. In his belief that change is constant, Nadella encouraged and stimulated the company to continuously change in order to adapt to competitors’ behaviours, economic dynamics, and new disruptive technologies. His transformative leadership can be attributed to the improvement of performance of Microsoft in recent years which saw its share price reach unprecedented heights. Through the successful delivery of artificially intelligent cloud computing, Nadella has driven Microsoft to challenge cloud computing giants such as the Amazon Web Services (Smith). This puts him on the way to restoring Microsoft’s former glory as the largest technology company in the world.
An analysis of the effects of the leadership style under Nadella shows that Nadella’s leadership style had led to the improvement of the performance of Microsoft. Nadella’s transformational leadership style at Microsoft has led to changes supported by both the management and the employees. The changes have included a restructuring of the organization’s structure to improve flexibility, save financial resources, and focus more on the development and improvement of products. The environment within the company has also improved from a backstabbing environment, as it was during Ballmer’s reign, to a teamwork environment. In general, Microsoft’s is now functioning as a unit and not as individuals, each fighting for recognition, as it was in the case of when the employee stack ranking was in place.
These changes can be credited with the upturn in organizational performance at Microsoft. It is, therefore, fair to conclude that the change of the style of leadership at Microsoft contributed to the improvement in its organizational performance. This conclusion is in line with the conclusion of findings from the literature review. The success of Nadella compared to the previous CEO, Steve Ballmer, also further reinforces the notion that transformational leadership is more instrumental in improving organizational performance than transactional performance.
The sources used for the literature review have been extracted from various databases to increase the diversity of the source material. Most of the studies in the literature reviewed consist of data collected from primary sources thereby reinforcing their reliability. However, most of the sources concentrated on just two types of leadership styles: transformational and transactional leadership. This has, therefore, limited the scope of the analysis to include just leadership types and ignore other styles such as democratic and aristocratic leadership styles. Also, the sources are limited by the fact that the subjects of their studies were other organizations and not Microsoft.
