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Microsoft study: Small and medium-sized businesses growing fast by embracing digital technologies

Sep 8, 2022 | Kevin Peesker, Worldwide President for Small, Medium and Corporate and Digital

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Eighty percent of businesses expect to be hybrid – four tips for data security and compliance .

Sustainability is the #1 ESG priority for Small and Medium Businesses – how to reduce your carbon footprint .

Early adopters of technology grow faster – practical steps to accelerate your digital journey .

Small and medium-sized businesses (SMBs) are the cornerstone of every community. With an estimated 400 million SMBs operating worldwide, they account for 99% of global organizations. SMBs are the main source of job creation, making up between 60%-85% of employment. [1] [2]   And according to the International Labor Organization, by some estimates, SMBs contribute up to 70% of GDP. [3]

With that kind of scale and impact, SMBs need the ability to innovate to be successful and thrive in a digitally enabled economy.

During the pandemic, we saw that businesses able to accelerate their digital transformation fared better than those that did not. Many reported growth through their focus on tech intensity.

Under such unprecedented circumstances, Microsoft was curious to learn how SMBs view the current realities of their businesses, to understand their goals and priorities, and to assess whether technology is seen as a catalyst to future success.

Analysys Mason was commissioned to conduct research with over 3,000 SMBs from 10 different areas of the world, representing the global footprint of SMBs.

Today, we are releasing our findings with the Microsoft SMB Voice and Attitudes to Technology Study 2022.

Top insights

Digital technology adoption contributes to faster growth

Security and reliability form the foundation

Eighty percent of businesses expect to have a hybrid workforce for at least the next two years and require the technology to support their business goals in a reliable and secure way.

Partners help drive strategy and SMB growth

While the majority of SMBs recognize the importance of technology in reaching business goals, 16% see it as essential. However, many SMBs need partners to map the right technology to their business strategy.  Almost half choose technology partners, with 33% favoring Managed Service Providers or Cloud Solution Providers whom they expect to proactively recommend technology solutions to accelerate companies’ business goals.

The millennial factor

Millennials hold 41% of technology decision-making roles. They tend to work for newer companies and 13% are more likely to see technology as important or essential to business success. Nearly one-third of millennials identify as technophiles in their personal lives, carrying some of their consumer traits into how they research and purchase technology, placing high value on peer ratings and reviews when making purchasing decisions. In 2016, Gallup flagged that millennials favor purpose over paycheck in their How Millennials Work and Live report. Millennials as business owners apply those values to their business and technology priorities.

Environmental, Social, and Governance (ESG) goals – no longer just for the enterprise

Two-thirds of SMBs in the study report having ESG assessment and monitoring frameworks in place. Millennials are leading the way, being the most likely to have an annual report dedicated to their ESG progress. In terms of focus areas, 37% cited lowering their environmental impact, 30% wanted to improve their diversity and inclusion, while 30% were focused on job creation.  The study points to a link between an ESG focus and attainment of business objectives – with both these traits being most prevalent among early adopters.

Ninety-nine percent of the world’s businesses are actively seeking solutions to address current challenges and generate new opportunities. This community impacts economies worldwide and the livelihoods of billions. They do this not to just be resilient and survive, but to thrive and bring innovation to their industries and value to their customers. Microsoft continues to listen to and learn from our SMB customers, aligning to what is their top of mind.

Together, the possibilities are endless, and opportunity abounds for all.

Download the full Microsoft SMB Voice and Attitudes to Technology Study 2022 . 

For more resources to help with your digital journey , visit the Microsoft Small Business Resource Center

[1]   Small & medium-sized enterprises | National Action Plans on Business and Human Rights (globalnaps.org)

[2]   SMEs (europa.eu)

[3]   The power of small: Unlocking the potential of SMEs – InfoStories (ilo.org)

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Microsoft unveils new research and technology to bridge the disconnect between leaders and employees so companies can thrive amid economic uncertainty

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Microsoft expands Microsoft Viva platform to connect employees to company culture, business goals and one another

REDMOND, Wash. — Sept. 22, 2022 — On Thursday, Microsoft Corp. released a Work Trend Index Pulse report, “Hybrid Work Is Just Work. Are We Doing It Wrong?” The company also announced new capabilities in Microsoft Viva, its employee experience platform, designed to help empower and energize employees in a time of economic uncertainty.

The data makes clear that hybrid work has created a growing disconnect between employees and leaders. They’re at odds about what constitutes productivity, how to maintain autonomy while ensuring accountability, the benefits of flexibility and the role of the office. To bridge this gap, a new approach is needed that recognizes work is no longer just a place but an experience that needs to transcend time and space so employees can stay engaged and connected no matter where they are working.

“Thriving employees are what will give organizations a competitive advantage in today’s dynamic economic environment,” said Satya Nadella, chairman and CEO, Microsoft. “Today, we’re announcing new innovations across our employee experience platform Microsoft Viva to help leaders end productivity paranoia, rebuild social capital, and re-recruit and re-energize their employees.”

To help leaders navigate the new realities of work, the Work Trend Index Pulse report [1] points to three urgent pivots every leader should make:

• End productivity paranoia: 87% of employees report they are productive at work, but 85% of leaders say the shift to hybrid work has made it challenging to have confidence their employees are being productive. Leaders need to create clarity and alignment around company goals, eliminate busywork that doesn’t support those goals and listen to their people — 57% of companies are rarely, if ever, collecting employee feedback.
• Embrace that people come in for each other: 73% of employees say they need a better reason to go into the office besides company expectations — but they would be motivated to go in if they could socialize with co-workers (84%) or rebuild team bonds (85%). Digital communication will be crucial to keep people connected inside and out the office — both employees and leaders rank communication as the No. 1 most critical skill needed to be successful in their roles this year.
• Re-skill to re-recruit your employees: 55% of employees say the best way to develop their skills is to change companies. However, they also say they would stay longer at their company if it was easier to change jobs internally (68%) or if they could benefit more from learning and development support (76%).

To address these challenges, Microsoft is expanding its employee experience platform Microsoft Viva to help companies deliver an employee experience optimized for the way people now work. Today, Microsoft is announcing several new and enhanced capabilities coming to Viva:

• Viva Pulse is a new app that will enable managers and team leads to seek regular and confidential feedback on their team’s experience. Viva Pulse uses smart templates and research-backed questions to help managers pinpoint what’s working well and where to focus, and also provides suggested learning and actions to address team needs.
• Viva Amplify is a new app that will empower leaders and communicators to elevate their message and reach employees where they are with consistency and impact. The app centralizes communications campaigns, offers writing guidance to improve message resonance, enables publishing across multiple channels and distribution groups in Microsoft 365, and provides metrics for improvement.
• Answers in Viva is a new capability that will use AI to match employee questions to answers and experts across the organization to help put collective knowledge to work for all employees.
• People in Viva is a new capability that will use AI to create rich profile cards with details on an employee’s interests, knowledge and team goals to help colleagues easily discover connections, experts and insights across the organization. These insights will be available through Microsoft 365 profile cards and as a new app.
• Microsoft recently launched Viva Engage, which fosters digital community building through conversations and self-expression tools with stories and storylines. Leadership Corner is coming to Viva Engage as a space to invite employees to interact directly with leadership, share ideas and perspectives, participate in organization initiatives, and more.
• Viva Goals helps organizations align employee work to business outcomes. New integrations in Viva Goals will bring goals into the flow of work including a richer integration with Microsoft Teams to check in on OKRs, an extension in Azure DevOps to complete work items, a connection to Power BI datasets to track KPIs and Key Results, and integrations with Microsoft Planner and Microsoft Project for automatic project management updates.
• Enhanced integrations between Viva Learning and LinkedIn Learning will make it even easier for people to access content from LinkedIn Learning Hub right in the flow of work in Teams. Learners will see all their LinkedIn Learning Hub content synced, including custom content, curated learning paths and the courses they have already completed, all reflected directly within Viva. And administrators will be able to set the integration up directly within their settings on LinkedIn Learning Hub — no APIs needed.
• Viva Sales, the first role-based experience app in the platform, will be generally available Oct. 3. Viva Sales brings together a seller’s CRM with Microsoft 365 and Teams to provide a more streamlined and AI-powered selling experience — right in the tools they’re using every day to connect with customers and close deals. Microsoft is announcing a partnership with Seismic to personalize and scale customer engagements through AI-generated content recommendations.
• To streamline access to Viva and help employees start their day on track, a new home experience in Viva Connections will bring all the Viva apps together in one place, and updates to the Viva briefing email will provide more personalized productivity recommendations to help employees catch up on work, meetings and learning.

The new Viva capabilities will begin rolling out to customers in early 2023.

To learn more, visit the Official Microsoft Blog , Microsoft 365 Blog and the new Work Trend Index Pulse report .

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

[1] The Work Trend Index Pulse report is based on an external study of 20,000 people in 11 countries, along with analysis of trillions of Microsoft 365 productivity signals, LinkedIn labor trends and Glint People Science insights.

For more information, press only:

Microsoft Media Relations, WE Communications, (425) 638-7777,  [email protected]

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at  http://news.microsoft.com . Web links, telephone numbers and titles were correct at time of publication but may have changed. For additional assistance, journalists and analysts may contact Microsoft’s Rapid Response Team or other appropriate contacts listed at  https://news.microsoft.com/microsoft-public-relations-contacts .

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• Neuroscience

You Now Have a Shorter Attention Span Than a Goldfish

T he average attention span for the notoriously ill-focused goldfish is nine seconds, but according to a new study from Microsoft Corp., people now generally lose concentration after eight seconds, highlighting the affects of an increasingly digitalized lifestyle on the brain.

Researchers in Canada surveyed 2,000 participants and studied the brain activity of 112 others using electroencephalograms (EEGs). Microsoft found that since the year 2000 (or about when the mobile revolution began) the average attention span dropped from 12 seconds to eight seconds.

“Heavy multi-screeners find it difficult to filter out irrelevant stimuli — they’re more easily distracted by multiple streams of media,” the report read.

On the positive side, the report says our ability to multitask has drastically improved in the mobile age.

Microsoft theorized that the changes were a result of the brain’s ability to adapt and change itself over time and a weaker attention span may be a side effect of evolving to a mobile Internet.

The survey also confirmed generational differences for mobile use; for example, 77% of people aged 18 to 24 responded “yes” when asked, “When nothing is occupying my attention, the first thing I do is reach for my phone,” compared with only 10% of those over the age of 65.

And now congratulate yourself for concentrating long enough to make it through this article.

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Microsoft: Redefining High Performance in New Era of Work

The world of work has undergone a seismic shift in recent years. Remote and hybrid work models have become the norm rather than the exception, and emerging technologies like artificial intelligence are reshaping how we approach productivity and collaboration . In this rapidly evolving landscape, organisations are being forced to reevaluate what success means and how to achieve it.

A recent Microsoft study has shed light on the key factors that define high-performing organisations (HPOs), revealing that traditional metrics of success are no longer sufficient. Instead, a more holistic approach is required – one that balances financial performance with employee engagement and team productivity.

“As business leaders, today we find ourselves in a place that’s all too familiar: the unfamiliar,” says Jared Spataro, Corporate Vice President, Modern Work and Business Applications at Microsoft. “Just as we steered our teams through the shift to remote and flexible work, we’re now on the verge of another seismic shift at work, generative AI.

“The power of AI is real. It’s poised to tackle many of the pain points employees feel on a day-to-day basis: a swell of data, always-on communication, and information overload. It’s what we call the drudgery of work. But the true promise of AI lies in transforming work entirely, augmenting human ingenuity and unlocking high-performing organisations.”

The engagement-performance link

One of the most striking findings from Microsoft's research is the strong correlation between employee engagement and financial performance. By analysing data from over three million employees across 226 publicly listed companies, researchers found that organisations with the most engaged employees significantly outperformed the S&P 500, while those with the least engaged employees traded well below the market average.

“The power of AI is real. It’s poised to tackle many of the pain points employees feel on a day-to-day basis: a swell of data, always-on communication, and information overload. It’s what we call the drudgery of work. But the true promise of AI lies in transforming work entirely, augmenting human ingenuity and unlocking high-performing organisations.”

One of the most striking findings from Microsoft's research is the strong correlation between employee engagement and financial performance. By analysing data from over three million employees across 226 publicly listed companies, researchers found that organisations with the most engaged employees significantly outperformed the S&P 500, while those with the least engaged employees traded well below the market average.

• 3 million+ employees surveyed
• 226 publicly listed companies analysed
• Most engaged organisations outperformed S&P 500
• Least engaged organisations traded below market average

This revelation underscores the importance of creating an employee experience that motivates and energises individuals to do their best work. In the post-pandemic world, where talent retention has become increasingly challenging, fostering engagement is more crucial than ever.

Microsoft report: The three pillars of high performance

Microsoft's study identified three interconnected pillars that characterise high-performing organisations (HPOs): engaged employees, productive teams and resilient business practices. HPOs excel at motivating their workforce, building positive team behaviours, and institutionalising high performance across the organisation while maintaining flexibility and agility.

As artificial intelligence continues to advance, it's playing an increasingly important role in shaping the future of work. HPOs are leveraging AI and other cutting-edge technologies to enhance collaboration in hybrid work environments, automate routine tasks, provide personalised learning opportunities, and analyse data to drive better decision-making. The challenge for organisations lies in integrating these technologies in a way that augments human capabilities rather than replacing them.

The Microsoft study highlights that many companies are still struggling to adapt to the new realities of work. To thrive in this new era, organisations must adopt a more expansive view of what constitutes high performance. This includes looking beyond traditional financial metrics to consider factors such as effective team collaboration, innovation capabilities, cultural resilience, employee engagement levels, and positive regard for leadership.

• Only 15% of surveyed leaders reported consistent high performance
• HPOs excel in 3 key areas: engaged employees, productive teams, resilient business
• Top performers balance financial results, productivity and employee engagement
• Employee engagement directly linked to financial outperformance

As we navigate this new landscape, organisations must be willing to evolve their practices, priorities, and technologies. This may involve investing in tools that facilitate seamless collaboration in hybrid work environments, prioritising employee well-being and work-life balance, fostering a culture of continuous learning, and leveraging AI and data analytics to gain insights into employee engagement and team productivity.

By embracing these changes and focusing on the three pillars of high performance – engaged employees, productive teams, and resilient business practices – organisations can position themselves for success in the ever-changing world of work.

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If you're pursuing a PhD and want to explore what it's like to work at Microsoft, look no further. We host PhD interns in both our product teams and in Microsoft Research (MSR). Our PhD interns are active, contributing members to our product and research community regardless if you are conducting cutting-edge research or engineering a new product. No matter what route you take—come work on meaningful, innovative projects that add to our company's success.

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Register for the Imagine Cup. Make an impact through coding, collaboration, and competition. Innovate with passion to tackle global issues and bring your tech solutions to live in the Imagine Cup.

We are looking for student leaders with a passion for making a difference and sharing technology with their peers.

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Created for first- and second-year college students, Explore Microsoft is a 12-week summer internship that lets you try out different software engineering roles.

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Microsoft Academic Partnership Grant is intended at fostering academia and industry collaborations and result in breakthrough innovations in search, cloud computing, and data-driven content creation.

More info to come when submissions for next year open.

A program to nurture cybersecurity enthusiasts via a specially curated learning journey.

Through this initiative, MBA students across B-schools in India interested in program management get a chance to be mentored by Microsoft and be a part of AMA sessions, webinars, and leader talks delivered by Microsoft employees.

Microsoft invites students enrolled in 2-year MBA program and currently in their 1st year MBA to apply for internship opportunities. During the 8-10 weeks internship, you'll work on projects that matter – and your team will rely on your skills and insights to help deliver those projects to the market. You’ll get the opportunity to work on real projects and have fun along the way. This is your chance to show off your skills and work on cutting edge technology.

More info to come when applications for next year open.

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Empowering our employees to be through more than the work they do each day. At Microsoft, we work to ensure essential benefits are available globally.  

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Microsoft: A Case Study in Strategy Transformation

If you’re leading your team through big changes, this episode is for you.

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In early 2015, Microsoft’s senior leaders were facing a set of difficult decisions. The firm had been struggling to innovate and grow as fast as its competitors. Now they were considering new opportunities that would yield higher growth but lower margins — like shifting away from perpetual licensing to focus on subscription sales.

Harvard Business School professor Fritz Foley studied this period of transformative change at Microsoft for a business case study he wrote. In this episode, he shares how Microsoft’s leaders analyzed different options and worked to get both investors and employees on board with new ideas about growth. He also explains how the company’s risk-averse culture evolved in order to execute such a huge transformation.

Key episode topics include: strategy, growth strategy, business models, corporate governance.  

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

• Listen to the original Cold Call episode: The Transformation of Microsoft (2018)
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HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand selected to help you unlock new ways of doing business.

In early 2015, Microsoft’s senior leadership team was facing a set of difficult decisions. The firm had been struggling to innovate and grow as fast as its competitors. Now, they were considering new opportunities that would yield higher growth, but lower margins like shifting away from perpetual licensing to focus on subscription sales.

Today, we bring you a conversation with Harvard Business School professor Fritz Foley, who studied this period of transformative change at Microsoft for a business case study he wrote. In this episode, you’ll get a window into how Microsoft’s leaders analyzed different options and got both investors and employees on board with a different idea of growth. You’ll also learn how the company’s risk-averse culture had to evolve in order to execute such a huge transformation.

This episode originally aired on Cold Call in July 2018. Here it is.

BRIAN KENNY: Electronics enthusiasts in the 1970s looked forward to it every year: the January issue of Popular Electronics . That is because that issue was known for featuring the coolest up-and-coming products in the world of electronics. And when the January 1975 issue hit newsstands, it did not disappoint. The cover was adorned with the first available image of the Altair 8,800, the world’s first mini-computer kit. It may not have been the shot heard around the world, but many say that it was the spark that ignited the home computer revolution. That very magazine inspired a young Paul Allen and Bill Gates to turn their passion for computers into a business that subsequently became an empire.

Today, Microsoft Corporation is the third most valuable company in the world and the world’s largest software company. But after four decades of buffeting the headwinds of the very industry it helped to create, Microsoft is at a turning point and the way forward is not entirely clear. Today we’ll hear from Professor Fritz Foley about his case entitled “The Transformation of Microsoft.” I’m your host, Brian Kenny, and you’re listening to Cold Call .

SPEAKER 1: So, we’re all sitting there in the classroom.

SPEAKER 2: Professor walks in.

SPEAKER 3: And they look up and you know it’s coming. The dreaded cold call.

BRIAN KENNY: Professor Fritz Foley’s Research focuses on corporate finance. He’s an expert on investment capital structure, working capital management, and a range of related topics, all of which probably factor into the case today. Fritz, thanks for joining us.

FRITZ FOLEY: Thanks so much for having me.

BRIAN KENNY: So, everybody pretty much knows who Microsoft is, and I think people will be really interested in getting a glimpse into where they were at this turning point in the company’s history. Still a very, very important company in the landscape of the technology industry and beyond. So, I think people will relate right away to this, but let me ask you, if you could start just by setting the stage for us. How does the case begin? Who’s the protagonist and what’s on her mind?

FRITZ FOLEY: Yeah, so the protagonist is Amy Hood, who is Microsoft’s CFO. She also was a student here at HBS at the time that I was in the PhD program. So, I’ve known her for some time and she’s facing a set of choices that really revolve around whether or not Microsoft should try to pursue increased margin or increased growth.

BRIAN KENNY: Okay. What prompted you to write the case? Your connection with Amy obviously is part of that, but why Microsoft and why now?

FRITZ FOLEY: I think I have been struck by the transformation that they are in the midst of. This is a company that… I mean, it’s hard to remember this. In the early two thousands, the stock price was stuck in the 20 to $30 a share range. And there was a group of people who were calling for the firm to be managed essentially for cash distributions and for increased margins. And then there were some growth opportunities that the company faced simultaneously. So, there was a real choice as to what direction to head. And I think this is a compelling choice that many other companies face. So, it’s a powerful example for me to highlight in course I teach about chief financial officers.

BRIAN KENNY: Microsoft was the first player on this stage really, but then Apple came along and I think many people look at these two as fierce competitors. But can you just talk about the difference between these two companies in terms of how they manage their financial strategy?

FRITZ FOLEY: Yeah, I can say a bit about that. So, at one level, they certainly are similar. They’re in tech space and in fact, many things that Microsoft was attracted to phones in particular, is something that Apple has excelled at. And I think that at the time of the case, they were quite different in the eyes of investors, I would say. I would say that investors still viewed Apple as having a lot of a growth emphasis of a commitment to innovating new products and solving problems that people weren’t even sure they had. Whereas Microsoft was the older, more established tech firm that I think, in the eyes of some, had become not a relic of the past, but less relevant when thinking about future innovations. And in some sense, the cases about how Microsoft tried to shed that view and become a relevant growth-oriented entity again.

BRIAN KENNY: And they’d certainly been criticized over the decades for not moving quickly enough to innovate and getting caught up in their own. And you think about IBM maybe as a company that faced similar criticisms getting caught up in just their size and the bureaucracy of the place. What did Microsoft’s business look like in 2012? Because that seemed to be the beginning of the turning point?

FRITZ FOLEY: Yeah. I mean, it was one where there was varying performance across divisions. There was interest by value activist investors given the large cash holdings that the firm had. Obviously, their market share when it came to the office suite of products and windows, those were quite high. And they were obviously very successful in continuing to provide versions of that to a whole variety of users. They had emerging cloud business, but it wasn’t clear that they would win in that space and had really struggled in other spaces.

In search, Bing never got traction relative to Google. In phones, they were really struggling in 2012 right before they tried to make more headway in phones by buying Nokia, which also subsequently didn’t work out as well as they had hoped. So, I think along a series of dimensions, they were really trying to get some traction, trying to get footing in new spaces. And there were a group of investors that actually felt like that wasn’t what they should do. That they should just focus on Office, focus on Windows, enjoy the high margins that came with their on-premises server and tool business offerings. So, they faced some really hard choices.

BRIAN KENNY: And they were also, in terms of just the organization itself up against some issues, what were some of the things they were encountering culturally at the time?

FRITZ FOLEY: Yeah. I mean, it’s a fascinating story from a cultural standpoint. It was an environment where there were high returns to showing that you were the smartest person in the room. Some of the stories that I have heard are a little jarring. I am not sure I would’ve survived in this environment. There were these very long mid-year reviews that took place and were incredibly demanding. It was an environment that was beginning to really emphasize the desire to be efficient, to be right, and in fairness to them, and Microsoft was coming from a culture or their culture came from a place where they were selling a product that couldn’t really fail. People had very high expectations for the performance of everything Microsoft provided them. And unlike today where there’s more room to update things through online updates, a lot of the software, it shipped and it had to be close to perfect when it shipped.

BRIAN KENNY: Actually, I can remember a time when the launch of a new Windows system was similar to the launch of a new iPhone. People were really excited to get the new system, but inevitably there were bugs and those were highly publicized, and so they fell under a lot of criticism. They were really operating under a microscope for a long time.

FRITZ FOLEY: For sure. And we’re keenly aware that time to fail in their products, which is a measure of how long it took for some product or process to break down, had to be very long. Otherwise, they would meet with a lot of customer dissatisfaction.

BRIAN KENNY: Yeah. Okay. So, let’s move into the transformation phase for them. What was the fundamental shift they made in terms of changing or restructuring the organization?

FRITZ FOLEY: In my view, I think that they did a variety of things to adopt more of a growth orientation. And some of this dealt with their metrics. Some of it dealt with very explicit changes to the culture, and I think some of it also dealt with a realization that pursuing growth would enhance value much more than trying to increase margins and have large dividend payouts or larger dividend payouts to shareholders. So this was, I would say in the 2012, 2013 timeframe, we began to see pieces of this. And they also faced significant managerial changes at that time. That’s when Steve Ballmer retired and they needed to pick a new CEO and could have gone a variety of directions there. And by picking Satya Nadella, effectively we’re committing to more of a growth path.

BRIAN KENNY: Can you think of an example of a company that chose the margins path? And I mean, these are both potentially successful choices, but I would guess.

FRITZ FOLEY: For sure. And it’s a very hard trade-off to make. In teaching my MBA students and executive education students I’m always struck, when I ask them, “Would you sacrifice some margin for growth,” how hard that question can be and how many people don’t have much intuition for it. So, other companies did go the margin route.

BRIAN KENNY: Yeah. Is it a situation where the margin choice is one that’s probably more comfortable and the returns are going to come sooner and the growth choice is a little riskier, and for a risk-averse culture probably harder to implement and you’re betting on the future? Is that fundamentally what the choice is?

FRITZ FOLEY: Yeah. I think that’s a really good way of putting it. Many people find it easier to see the benefits that come with cutting costs and looking for efficiencies and worry that what may come with growth could be elusive. And in some regards, I have heard senior finance managers say that they had to earn the permission to go after growth. They have to get the buy-in from a group of investors who feel as if the senior leadership team has credibility in pursuing growth.

BRIAN KENNY: So, here we have Microsoft, an enormous company, 130,000 or so employees, something like that, large by any measure about to pursue an option that is in many ways counter to the culture of the organization. How do you do that? How do you cascade this kind of a change through an organization of that size?

FRITZ FOLEY: On the cultural side, one thing that they did was very explicitly dropped a growth mindset culture. And Satya Nadella writes about this in his recent book, Refresh. The story is, for me, very compelling. It’s incredibly hard to get any organization to change its culture. Whenever I’ve been a part of an organization that tried to engage in a cultural shift, whatever the tagline was, quickly became the punchline for a set of office jokes.

BRIAN KENNY: I’ve been on the other side of that. I’m the guy who writes the punchlines most often.

FRITZ FOLEY: Yeah. So, you know how hard this is. And I think that they were very wise in picking Kathleen Hogan who had led one of the divisions of Microsoft to head up the charge to describe and roll out this cultural change. They brought senior leaders on board, and ultimately, I think there was a lot of demand for it that many people who were working at Microsoft were innovative engineers and a very creative set of employees who wanted to pursue growth. And when given the choice to move away from review processes and given the opportunity to go to meetings where they didn’t feel like they had to be exactly right in making a point, but could stimulate the beginning of a discussion set of ideas that could lead to something that was new, people embraced that.

BRIAN KENNY: And here we are in the age of the millennial worker. Millennials don’t want to work for the old Microsoft for sure. And Microsoft is competing with the likes of Google and Apple and other firms that are definitely perceived as open and innovative, and they want people with energy and ideas. So, they have to adopt that same personality, I guess.

FRITZ FOLEY: Yeah, I agree with that. I think there’s a new buzz about Microsoft, at least among my students, they’re much more intrigued by what it would mean to work there and what opportunities exist to do some things that would be truly novel and have a big impact on how people get work done.

BRIAN KENNY: So, let’s go back to our protagonists. Amy Hood in the case actually delves into her mindset a little bit. She’s getting ready to communicate these changes to the financial community. What are the kinds of things a CFO would have to think about? Because I can imagine the financial probably is more comfortable with the margin choice than the growth choice

FRITZ FOLEY: Yeah, for sure. It’s fun for me to imagine her faced with this choice really of, okay, I can go this path of growth, but if I do this, I am going to have to go to my investors and say, our margins are going to go down for some period of time, and you’re not going to like that. But there’s going to be some upside and it will take some time for that upside to show up. So, I think she needed to find ways to communicate or signal what that upside would be and how big it might be to the investors so that she wouldn’t lose credibility with them and would have the permission essentially to pursue growth.

BRIAN KENNY: Yeah. Now we hear it all the time about the emphasis on the short-term, short-termism in the financial community, and people want returns and they want them right away. In your experience, are you seeing a shift in the financial community, or are the analysts getting a little more comfortable with this notion of you can’t always go for the margins, you’ve got to find some sustainable growth in the long term?

FRITZ FOLEY: Yeah. It’s a great question. It’s one that troubles me or is something I think about our financial system generally. I happen to be probably more optimistic relative to many when it comes to how short-term-oriented, or really how financial markets aren’t as, as some might worry, or that concern about short-termism doesn’t resonate as much with me. I do think there is a big burden on senior finance teams to explain how value is created by thinking long-term and embracing growth opportunities. And in some sense, when I look at what Amy has been doing at Microsoft, I applaud her and her team for taking on that challenge. They quite explicitly set a target of a $20 billion run rate for their commercial cloud business, and once analysts had that number, they could begin to build off of it and get a feel for how much value could be created if Microsoft succeeded at pulling this off.

So, by having the courage to commit to that path and help analysts understand what the path meant, I think that they have been effective in pursuing it. More generally, I do worry that there are some analysts that simply take an earnings-per-share number and apply some current multiple and don’t think much about what the future will look like. I am hopeful that finance teams and organizations will play a role in educating analysts as to how they should think about the future, when growth opportunities do exist and are attractive.

BRIAN KENNY: Yeah. You mentioned earlier that you’ve talked about this in class, and I’m just curious, do the MBA students come at this differently than the executive education students who have been in fiduciary roles and organizations already?

FRITZ FOLEY: Yeah. That’s an interesting question. Let me reflect on that for a moment. I think the approach is fairly similar. I would say that some MBA students are probably less aware of the constraints that capital markets may put on senior management teams to pursue growth. They’re less aware of what an activist who wants cash now might push management to do, whereas executive education students tend to be keenly aware of those pressures. If anything, I find that MBA students, it’s a little bit harder for them to articulate what is the case for pursuing margin for Microsoft in 2012, 2013. Many executive education students are quick to come up with lists of things that could be done strategically financially in picking leadership.

BRIAN KENNY: Yeah, it’s interesting. And anybody who’s worked in an organization for any period of time, going back to that whole notion of how hard it is to change a culture, it’s pretty easy to think of reasons why not to pursue that path. So, I thought maybe some of the exec ed students might come at with those constraints already wrapped around themselves.

FRITZ FOLEY: Yeah, I agree.

BRIAN KENNY: Yeah. Fritz, thanks for joining us today.

FRITZ FOLEY: Thanks very much for having me.

HANNAH BATES: That was Harvard Business School Professor Fritz Foley in conversation with Brian Kenny on Cold Call . We’ll be back next Wednesday with another handpicked conversation about business strategy from Harvard Business Review.

If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. And when you’re ready for more podcasts, articles, case studies, books, and videos with the world’s top business and management experts, find it all at HBR.org.

This episode was produced by Ann Saini and me, Hannah Bates. Ian Fox is our editor. Special thanks to Maureen Hoch, Adi Ignatius, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you, our listener. See you next week.

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Research behind Reading Progress and Reading Coach, two reading fluency apps from Microsoft

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Fluency develops from reading practice

The National Reading Panel (NRP) is a panel of reading instruction experts formed to compile all of the best evidence on how to teach reading to children. Chapter 3 states, “there is common agreement that fluency develops from reading practice . . . The NRP found that a range of well-described instructional approaches to encouraging repeated oral reading result in increased reading proficiency.”

• National Reading Panel. (2000). Report of the National Reading Panel: Teaching children to read. Washington, DC: U.S. Department of Health and Human Services, National Institutes of Health.

Oral reading fluency strongly correlates with the reading comprehension

The US National Assessment of Educational Progress (NAEP) is often called the national report card. It measures how well US students perform at basic reading skills. Oral reading fluency strongly correlates with the reading comprehension scores on this test.

• Sabatini, J., Wang, Z., & O’Reilly, T. (2019). Relating Reading Comprehension to Oral Reading Performance in the NAEP Fourth‐Grade Special Study of Oral Reading. Reading Research Quarterly, 54:2, 253-271.

Oral reading fluency practice continues to be important in middle school:

Oral reading fluency practice should begin in the early grades, but continues to be important in middle school.

• Rasinski, T., Rikli, A., & Johnston, S. (2009). Reading Fluency: More than Automaticity? More than a Concern for the Primary Grades? Literacy Research and Instruction, 48:4, 350-361.

Oral reading fluency instruction helps struggling readers

Oral reading fluency instruction also helps struggling readers.

• Wexler, J., Vaughn, S., Edmonds, M., & Reutebuch, C.K. (2008). A synthesis of fluency interventions for secondary struggling readers. Reading and Writing, 21:4, 317-347.

Oral reading fluency in middle school helps predict reading comprehension scores into high school

Oral reading fluency is important in middle school, but continues to predict reading comprehension scores into high school.

• Paige, D.D., Rasinski, T.V., & Magpuri-Lavell, T. (2012). Is fluent, expressive reading important for high school readers? Journal of Adolescent and Adult Literacy, 56:1, 67-76.

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In-Person Time

In the Changing Role of the Office, It’s All about Moments That Matter

New research highlights three key times when bringing employees and teams together in person creates lasting connection

Illustration by Zara Picken

T Three years into flexible work, we’re entering a new phase: structured flexible work. While every organization approaches flexibility differently, leaders are looking to establish norms and best practices with their employees, particularly around when—and how much—to come into the office. At Microsoft, our structured flexible work model empowers individuals and teams to intentionally decide what works for them, within company and team guidelines. “We enable managers and employees to do what they believe is best for each individual’s unique needs, as well as each team’s success,” says Karen Kocher, global general manager, Future of Work, Workforce of the Future, and talent & learning experiences at Microsoft. Study after study shows that employees want the best of both worlds—flexible work and in-person connection. Back in 2021, the Work Trend Index uncovered what we call the hybrid paradox: over 70% of workers wanted flexible work to stay, and over 65% were craving more in-person time with their teams. While the amount of flexibility might differ by role—data center employees or hardware engineers might spend more time on-site, for example—we’ve seen this trend persist in both our external research and in our Microsoft employee surveys. How can leaders bring structure to flexible work and help employees get the in-person connection they crave? New research shows it’s not about the number of days people are in the office, it’s about creating moments that matter. hree years into flexible work, we’re entering a new phase: structured flexible work. While every organization approaches flexibility differently, leaders are looking to establish norms and best practices with their employees, particularly around when—and how much—to come into the office. At Microsoft, our structured flexible work model empowers individuals and teams to intentionally decide what works for them, within company and team guidelines. “We enable managers and employees to do what they believe is best for each individual’s unique needs, as well as each team’s success,” says Karen Kocher, global general manager, Future of Work, Workforce of the Future, and talent & learning experiences at Microsoft. Study after study shows that employees want the best of both worlds—flexible work and in-person connection. Back in 2021, the Work Trend Index uncovered what we call the hybrid paradox: over 70% of workers wanted flexible work to stay, and over 65% were craving more in-person time with their teams. While the amount of flexibility might differ by role—data center employees or hardware engineers might spend more time on-site, for example—we’ve seen this trend persist in both our external research and in our Microsoft employee surveys. How can leaders bring structure to flexible work and help employees get the in-person connection they crave? New research shows it’s not about the number of days people are in the office, it’s about creating moments that matter.

Our internal data points to three specific moments when in-person time is most beneficial:

Strengthening team cohesion

Onboarding to a new role, team, or company

Kicking off a project

1. Strengthening team cohesion

There’s no going back to 2019. Over the past four years, organizations have become increasingly distributed, and for many of them, a large-scale return to the office is no longer a feasible way to create meaningful connections between individuals and teams. This is certainly true of Microsoft. “We’re not the same company that we were prior to the pandemic,” says Dawn Klinghoffer, head of people analytics at Microsoft. Back then, 61% of teams at the company were all in the same location; today that number is 27%. And research shows that 70% of managers at Fortune 100 companies have at least one remote team member.

Fewer Teams Are Fully Co-Located Than in 2020

New research shows that teams are more geographically dispersed than before the pandemic, and fewer teammates all live within the same city.*

And employees say that flexibility is going well: In our latest Microsoft employee engagement survey, 92% of our employees say they believe the company values flexibility and allows them to work in a way that works best for them. An even higher 93% are confident in their ability to work together as a team, regardless of location. At the same time, the survey shows people are craving more connection. When we looked at the comments from employees who did not rate their quality of connection with co-workers as favorable (only neutral or unfavorable), 29% of those comments said that remote work has made it difficult to create meaningful connections and relationships. We know that people come into an office for each other—whether it’s once a week or once a year—and in the same engagement survey, employees made it clear they’re looking for time together spent connecting, not just co-working. When asked what in-person activities Microsoft should offer to support teams’ success, 37% of comments were about social and team-building activities—the number one theme overall.

Just ask Maryleen Emeric, who organized a recent team week for the Microsoft Modern Work and Business Applications group. (Team week brings together far-flung colleagues who would otherwise rarely see each other.) And after a long day of meetings and workshops during team week, she brought down the house with a karaoke cover of Bonnie Tyler’s “Total Eclipse of the Heart.” “Those sorts of social connections are not something that you can create over a screen,” she says. “Allowing people to get to know each other and find those common interests outside of work—I don’t think that can happen if you don’t bring people together once in a while.”

We see this sentiment in our external surveys too. According to the September 2022 Work Trend Index report , about 85% of people were motivated to go into the office for socializing with co-workers; just as many also said they’d be motivated by a desire to rebuild team bonds.

“You have to think of your social capital like a battery,” Emeric says. “The longer you go without having in-person interaction, the lower the charge gets on your battery. These moments that matter—like a team week—allow us to recharge the battery.” In fact, Microsoft employees who spent six days or more a month in the office with their team had a slightly higher thriving score than those who did not spend any time in the office. (Thriving is our outcome for engagement at Microsoft, defined by a combination of three tenets: being “ empowered and energized to do meaningful work .”) While even more days together raises scores for feeling energized and for alignment on goals, it also starts to push down scores for flexibility and satisfaction.

In-person time can also remind the individual employee of the role they play in the success of the broader team and the organization. Team week culminated in an “ask me anything” style conversation with organization leader Jared Spataro, CVP of Modern Work & Business Applications, during which he spoke openly about the company’s vigorous focus on AI. “It made people feel very connected to our mission, very connected to our goals, and very connected to our culture,” Emeric says. “It got people very energized. And it felt like people were recommitting to the cause. Like, ‘Yeah, we’re all in.’” We know from the Work Trend Index report that high-quality connections pay off for both people and businesses: Employees who have positive relationships with their immediate team members report better wellbeing than those with poor relationships. They also report higher productivity, and are less likely to change employers in the year ahead. Strengthening networks outside of the immediate team matters, too, according to the Work Trend Index. Employees with positive relationships beyond their immediate team members say they’re more satisfied with their employer, more fulfilled by work, and have a more positive outlook on workplace stress than those with weak organizational networks. Or, in the immortal words of Ms. Bonnie Tyler: “ Together we can take it to the end of the line …”

2. Onboarding to a new role, team, or company

Our research showed that when starting a new role—whether at a new company or in an internal switch—meeting your manager or onboarding buddy in person makes certain things easier. Compared with employees who didn’t meet their managers in person within the first 90 days, employees who did were more likely to seek feedback, be asked for input by their team, build strong relationships with colleagues, feel supported when discussing tough issues with their manager, and get effective coaching and feedback. (However, there are no differences in how these new hires feel about other outcomes in the survey, including driving impact, finding the support they need, being supported by their colleagues and feeling included, knowing their stakeholders, and getting to know the culture.) Meeting your onboarding “buddy”—a teammate assigned to support your transition to the new team—in person within 90 days makes a difference too. Those who did were more likely to seek feedback, feel included, feel trusted by their team, and report they had clarity about how to drive impact—and have the necessary tools to do so. (But meeting their onboarding buddy in person did not meaningfully affect new hires’ scores in other areas, such as finding the support they need, understanding their organization’s vision, or knowing their stakeholders.) The quicker that new hires develop trust with their managers and teammates, the quicker they can become productive contributors and collaborators with the team and the company. “Understanding the priorities and feeling a sense of belonging is just really a goodness for both the organization and the individual,” Kocher says.

Meeting In Person Has Clear Benefits for New Hires

For new employees, connecting with their manager or onboarding “buddy“ in person has a measurable short-term effect on how well they integrate with their new teams.

Source: Onboarding Research Survey at 90 Days, Microsoft, Sept. 7 to Dec. 31, 2022

Stretches of in-person training also help new hires understand their tasks and priorities with less friction. They can receive close guidance and immediate feedback, with easy access to assistance, clarification, and tacit knowledge. “It helps you get more quickly up to speed,” Kocher says. “And when you can deliver at your maximum capacity much more quickly, it helps you become more intrinsically motivated and energized.” Another internal survey showed that early-in-career employees felt slightly more energized when they worked regularly in the same building with their team members. In-person time also gives employees the opportunity to observe company norms and team dynamics—subtleties that are difficult to pick up on virtually and that can be especially important for early-in-career employees. All that said, as Klinghoffer notes, once you’ve onboarded, in-person one-on-one meetings are not necessarily mission critical, which is good news for distributed teams. It’s a balance: “Meeting one’s manager early on is a moment that matters and has some great outcomes, but down the road, you don’t necessarily have to be in person regularly.”

3. Kicking off a project

In-person time is useful in the earliest stages of a project life cycle for the same reason it’s useful during the onboarding process: getting people on the same page. When respondents of our employee engagement survey shared specific examples of moments that matter to be in person for, they included initial customer engagements and planning sessions—one respondent even said it “would be a significant boost to team collaboration, culture, and execution.” The Microsoft 365 Copilot project kickoff , which assembled teams from diverse departments for the company’s most ambitious project in a decade, happened in person, for example. Physical proximity simply helps people feel like their colleagues understand them. “Everyone likes to feel heard by others,” Kocher says. “And it’s easier to feel heard when you’re right next to somebody having a conversation.” With mutual trust and alignment in place, the creative juices can start flowing. In-person time helps spark innovation and outside-the-box thinking. In fact, studies show that while it’s easiest to choose the best idea virtually, in-person pairs generated 18% more creative ideas and 14% more ideas overall compared with virtual pairs in the same hour—so you can have better choices to pick from. “If you want the best and most ideas, you do it in person,” Kocher says. “When you’re in a big room with a lot of people, your mind perceives an expansion. Compare that to when you’re at a computer and you’re talking to people online: your mind goes very narrow very quickly.” Aside from boosting brainstorming power, being together in person at the beginning of a project allows a team to more efficiently share tacit knowledge, get clarity, establish individual roles, and coordinate their efforts. “Get to know people, build the trust, have some initial brainstorming sessions,” Klinghoffer says. “Then, once you’ve built that social capital, go back to your home offices or separate locations and keep on moving the project forward.”

Key Takeaway

While flexible work looks different for every organization, it’s clear that it’s here to stay. As organizations embrace this transformative model, they unlock their capacity to increase productivity, enhance employee satisfaction, and create a more inclusive workforce. Remote work has benefits, and in-person time does too. Every team is different, but one thing is clear: finding this balance must be approached with intentionality. Rather than considering the office as a one-size-fits-all solution, teams should consider the type of work they do and determine key points in time or reasons to gather in person. What’s more, the benefits of in-person time—whether it’s for a weeklong on-site or a day here and there—should be weighed against things like travel and expenses, commuting, and creating space for deep work. As Klinghoffer says, “Ask yourself and your team: What are the moments that matter for us?”

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