Robert Herbold, formerly Microsoft’s COO, came from the highly structured Procter & Gamble in 1994 to join the completely different Microsoft organizational culture. His personal account of how he brought a carefully balanced degree of discipline to the largest software company in the world deserves reading, although a longer, more detailed account would be welcome. Herbold relates how Gates recognized the operational mess resulting from divergent practices and incompatible systems. Some of Microsoft’s loose processes promoted an innovative culture and its ability to rapidly change direction, but more discipline was needed in several areas. Herbold’s challenge was to incorporate some of P&G’s highly structured processes into Microsoft’s free-wheeling culture without undermining Microsoft’s uniquely successful characteristics.
To do this, Herbold created central systems giving managers instant access to standardized data on each business and geographical unit. Counterintuitively, this operational discipline not only powerfully reduced operating costs but made the company more flexible and more responsive to change. From 1995 to 2001 profits grew sevenfold while revenues grew fourfold. He describes how the company created MSMarket and MSInvoice to simplify and standardize the procurement process. New systems were also created to improve human resources management, strengthening two of Microsoft’s core competencies: recruitment and performance assessment. The improved human resources information management systems also enabled upgrading of the important employee evaluation and reward system. Herbold describes similar operational improvements in finance, sales, and strategic planning. From these experiences you can learn how to overcome resistance to centralized initiatives from geographical and unit managers, and how to optimize your central information systems, while balancing centralized discipline and individual innovation.