Microsoft’s Satya Nadella on Flexible Work, the Metaverse, and the Power of Empathy

Few people have more insight than Satya Nadella into how teams collaborate and innovate successfully.  HBR editor in chief Adi Ignatius interviewed the Microsoft CEO to discuss what team collaboration will look like going forward, the next generation of workplace technology, the new imperatives of leadership — and whether and when our future workplaces will in fact start to look like the “metaverse” fantasies of science fiction.

This interview is the first in a new video series called “The New World of Work,” which will explore how top-tier executives see the future and how their companies are trying to set themselves up for success. Each week, Adi will interview a leader on LinkedIn Live — and then share an inside look at those conversations and solicit questions for future discussions in a newsletter just for HBR subscribers. If you’re a subscriber, you can sign up for the newsletter here.

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Transcript 

ADI IGNATIUS: Satya, thank you very much for joining us. It’s great to see you again. Let’s dive right in. This program is about the new world of work. And there are probably few people who have their finger more on the pulse of what is work and what are the platforms and the approaches that we need to work effectively together than you. I’m really glad you’re here.

So, the concept of work, how we collaborate together, how we innovate, is constantly changing as businesses evolve, as technology changes, as employees have different kind of attitudes and empowerments. Where are we on that journey? What is the near-term future of the workplace look like to you?

SATYA NADELLA: First of all, it is fantastic to be with you again. And you’re absolutely right. We are coming out of this pandemic or living through this pandemic in its various stages. I think there’s real structural change that we are seeing because of what I would describe as two megatrends. One is the trend around hybrid work, which is a result of the changed expectations of everyone around the flexibility that they want to exercise in when, where, and how they work.

And then the second mega trend is what Ryan Roslansky, who is the CEO of LinkedIn, termed, which I like, which is the great reshuffle. Not only are people talking about when, where, and how they work, but also why they work. They really want to recontract, in some sense, the real meaning of work and sort of asking themselves the question of which company do they want to work for and what job function or profession they want to pursue.

So these two, hybrid work and the great reshuffle, are the two major trends that are fundamentally structurally changing I think everything we do.

ADI IGNATIUS: Let me get a sense of how you would define flexibility. Because on the one hand, flexibility sounds great. Let individuals, let teams decide how they want to work together, when, and in what fashion. But then there are sort of larger corporate company concerns about, well we want people to be together. We want to create and sustain a culture. And that maybe means people need to be together, a little less flexibility on that. So how do you how do you balance these imperatives?

SATYA NADELLA: Yeah, I think first of all, I think we should sort of perhaps just get grounded on what are we seeing in the expectations. For example, when we see all of the data, the reality is close to 70% of the people say they want flexibility. At the same time, 70% also want that human connection so that they can collaborate. So therein lies that hybrid paradox.

Interestingly enough, if you look at the other sort of confounding piece of data: 50-odd percent of the people say they want to come into work so that they can have focus time. Fifty-odd percent also want to stay at home so that they can have focus time.

So the real thing I would say is right now, it’s probably best not to be overly dogmatic. Because I don’t think we have settled on the new norms.

These norms have to settle so that then we can have real causal relations that settle. And then we can understand what are even the broad contours of productivity flexibility. But in that context, Adi, to your point, we are taking what I would call a much more organic approach right now. What I would say is what we want to practice and what we want to evangelize is empowering every manager and every individual to start coming up with norms that work for that team, given the context of what that team is trying to get done.

For example, if I manage a team of five people, I better know [if] there are people in my team with young children who have not been vaccinated? Because the considerations of those parents will be different. What is the childcare situation? The considerations for people who have the need for childcare will be different. What are the commute times today? The expectation going forward is, I don’t think anybody wants to get back to 2019 commute times because you can be productive remote.

In some sense, we are really saying, let’s just use an organic process to build up through empowerment new norms that work for the company to be productive. Ultimately, we are in business to be able to produce products and services that our customers love. Ultimately that will define the firm in its performance. But I think to also ignore the fact that there is structural change in the way employees produce those products and services and drive productivity, the expectations have changed. So we have to now find that match.

ADI IGNATIUS: What I’m hearing you say is that you probably don’t think we’re ever going back to the way we worked before the pandemic, number one. And number two, that in the old days, there was a temptation to come up with a policy that was consistent and therefore fair. But you’re talking about a much more complex job for managers, for HR, for everyone in the company to be, as you say, flexible, adapting, not any kind of one-rule-fits-all approach to talent.

SATYA NADELLA: Yeah, I mean, first of all, I also would say this, Adi, which is the economy is a very diverse economy. We are talking about even during the height of the pandemic, all the healthcare workers were coming into the workplace. All the retail workers, all the critical manufacturing workers. So, to some degree, I want to make sure I stay grounded in my comments that the world and the economy and the society today is much more diverse in terms of its workplace expectations, habits, needs. Because we do need our healthcare professionals in the hospitals that we visit and what have you.

So that said, I do think that there is real structural change with the new tools. Take space: so somebody had described this to me, which I love a lot, which is physical space is probably what, since the industrial era, we’ve discovered as the best productivity tool. There’s no substitute. For 200-plus years we have tuned the workplace, whether it’s a manufacturing line, whether it’s a retail outlet or whether it is knowledge workers coming into an office campus, we have tuned space to drive productivity by bringing people together, having a common sense of purpose, mission, connection, and what have you.

I won’t trade that off. But can we use space, such that it maps to the expectations of our employees and the task at hand.

For example, we are redesigning some of our campus spaces. We will still have our campus. We love our campus. Except the way managers and teams will use our campus will change. They may want to bring everyone together for a design session. Or we want to bring everybody for a crunch-time mode in-building, say, some software product. We want to have orientation. We have a whole bunch of new employees. And when we do that, I think we’re going to use space as even a more malleable resource, using some of the digital technologies we have.

I think a combination of space and this remote digital fabric that we have established through the pandemic will come together to give us the tools for flexibility.

ADI IGNATIUS: Now, as all of this thinking is happening, it seems to me employees in the last few years and especially now probably are more empowered than they have been. I mean we talk about the “Great Resignation.” And that’s partly employees feeling like they have opportunities. They have choices. They’re making some choices that are forcing us all to respond as managers. How do you think about the talent equation these days? What does it take to attract and retain talent, given everything you’re saying about the evolution of the workplace, the evolution of the concept of work.

SATYA NADELLA: Somebody had at one point said to me: Nobody quits companies. They quit managers. I felt like that was one of the best epiphanies I had, at least growing up even at Microsoft. That is such an important statement.

Because after all, it’s the people that I work with that keep me going at a given place. And it’s when that equation doesn’t work I look elsewhere or reevaluate. So to me, we have to really deeply look at what is the lived experience and culture for anyone and that connection between the company’s mission and the individual’s mission and philosophy.

I always say, if everybody at Microsoft who works at Microsoft reframed it and said, “I don’t work for Microsoft. Microsoft works for me,” just for a moment, just as a thought experiment, does that equation compose? Am I able to fulfill whether my career aspirations, my approach to having impact in the world? Somehow if Microsoft is acting as a platform for that, then it’s very different. I feel connected with the mission.

So to me, we are very focused on two points. One is helping managers really recruit and retain talent through a framework we call “Model Coach Care.” Everyday practice of great management is super important. That’s on the manager side.

Then on the employee side, we are doing everything we can to help employees feel that connection to the company’s mission and their coworkers– and coworkers both in terms of strong ties and weak ties. Because one of the fantastic things about having, let’s say, a campus like the Microsoft campus in Redmond, Washington, was you come to campus. You work with your immediate team. Those are strong ties.

You also run into people who are interesting, that you meet and form long-term relationships with, which are weak ties. Unfortunately, in this pandemic what we’ve noticed is two data points, which is strong ties have actually gotten stronger. The weak ties have gotten weaker. But our job, through a variety of software tools, is to make those weak ties even stronger. It’s because it’s those human connections that get people to stay in a place. Without that, without the connection to your manager, without the connection to other employees, I don’t think it would work.

ADI IGNATIUS: Talk more about the weak ties. Because I think many of us believe those weak tie connections can actually be very important for triggering innovation, a sense of culture, collaboration, all that. Talk a little bit more about how you use technology to identify and improve those connections.

SATYA NADELLA: Yeah, in fact, just the data point that I was referencing was I think in the data we’ve analyzed across Microsoft 365 is around 26% increase in strong ties. So, this is the connection points, whether it’s email, whether it’s Teams meetings, whether it’s any other type of communication inside the team that you work with. So those are the strong ties.

And then the weak ties are people I run into at the water cooler, the people I run into in the elevator, the people I run into walking to the campus, to the bus, what have you. That’s the set of places where that serendipity is missing. And so one of the fundamental things that we have done is we have a tool called Microsoft Viva. It’s now the new experience cloud platform, which we are really excited about.

For example, today, I’ll tell you one place where I strengthened my weak ties. In any meeting now, I observe in chat people commenting that I’ve never met before. In the previous times, as the CEO of Microsoft, I would be in a large meeting, I would obviously hear from people. But there will be many other people in the meeting who would not speak, whereas chat has allowed them to voice their opinion.

And now, not only do I see their idea, but the interesting thing is I can click on that profile. Guess what? When I click on their profile, I go to this very rich profile in Microsoft 365, which tells me everything from their LinkedIn profile, which is their outside profile, to all of the work artifacts that they are working on, documents and presentations. And one of the things Viva does is it also tells me the projects and expertise they have. So it’s extracted using AI a rich internal profile, which to me is amazing.

To me, based on one comment one person made in a meeting, I’m able to learn so much more about this person. So then I may set up a 15 minute Teams call with this person to follow up. So that is a new type of serendipitous discovery. It’s not just I didn’t run into them in the elevator this time and struck up a conversation. But I met them in an online meeting where they commented in a chat. So that’s what we mean by creating software tools and nudges to help with weak ties.

ADI IGNATIUS: Yeah, interesting. So, Viva is obviously a product that Microsoft offers. Are there any other– or are there any internal platforms that you’re experimenting with now that you use at Microsoft and, if they’re successful, could be future products or platforms that you could talk about?

SATYA NADELLA: Yeah, we’re doing a lot of experimentation. But we are in the business of productivity. So whatever we are using internally is also an external product. I mean that’s the good news, at least at Microsoft for us is we do dogfood our stuff. But we also ultimately launch things.

But the things that I would say like this profile thing internally, like another place which has been super helpful is being at work. For example, internally, I just go to the search well and that’s the place, whether I’m trying to find any person, whether I’m trying to find any document or web. So there’s one universal search well.

And that ability to be able to gather the entire knowledge base of the company through one search interface I think is the massive breakthrough. Because I’ve always felt that the biggest or most strategic database in the company is the knowledge repository of all communications within the enterprise. And to be able to search that has been just fantastic.

Another one that I would say has changed my own experience is meetings now are not just, oh, I go to a meeting. And then I have to basically rely on my memory of what happened in the meeting or my rough notes. Every meeting at Microsoft is recorded, taking permission from all the people who are participants. It’s indexed, and I can search it by topic, by speaker. And so it’s kind of like a document at that point. So therefore, meetings are adding to the knowledge repository of the company. I think that digitization of all communications and work and turning them into first-class artifacts, I think that’s going to be a phenomenal difference going forward.

ADI IGNATIUS: Yeah, interesting. You mentioned AI a while back. I’d love to hear you talk a little bit more about how companies that aren’t necessarily Microsoft will use AI to kind of power effective results within their workplaces. And maybe, I mean, there are probably things you know about AI that we don’t know about yet. I’d love your insights on how AI will change the way we work.

SATYA NADELLA: Yeah, I mean, to me, the fundamental way, in simple terms, to think about the power of AI is really to take all of the data that we have and have more analytical and predictive power without analyzing data in silos or predicting outcomes in silos. That’s the power. AI has the ability to take structured, unstructured, information with especially this emergence of what people describe as large, dense models, which are multi-modal. That means there’s text in them. There’s speech in them. There are images in them. And they’re unsupervised. They are very large. And you can now– you can use it for many things.

I can use it to complete sentences in my email and compose it. I can use it in GitHub, co-pilot to complete code I write. I can use it even to do machine translation. So for example, a meetings artifact I talked about, just imagine, if there was a meeting in France, it was in French, where people were talking. But it can be transcribed and I can see it in live captions or in real-time translated. Or I can go to it and really have the ability to search any meeting in any language. So really breaking down the language barrier.

I think AI is going to show up as that next level of automation, the next level of intelligence/prediction that is going to be there in our everyday experiences. And so we are building it in. So even from a company perspective, they’ll just show up to you as features in products you use. We also are enabling anyone who can build an Excel spreadsheet can also build applications going forward where they can use these AI models as platforms themselves. Just like how you could have a formula that could build on somebody else’s calculation and formula, that’s the same way the composition would work even when it comes to AI.

ADI IGNATIUS: We all want to know about the metaverse and what that’s going to look like. You use the term, others have used the term, and basically it describes kind of a future where we’re combining real world with 3D, AR/VR. Help us really understand. I mean, are we headed toward a metaverse, do you think? And what might that look like?

SATYA NADELLA: Yeah, I mean first of all, I think that this entire idea of metaverse is fundamentally this: increasingly, as we embed computing in the real world, you can even embed the real world in computing. That’s kind of how I think about it. Both because in some sense, one of the metaphors that I always use which is helpful is that as both an outside-in and inside-out. For example, you can have a space in which there are lots of cameras and microphones. And you can digitize the space. You don’t need to wear anything on your head.

But you can have intelligence in a meeting room, for example. We have now, when you go to a Team’s room, it will even segment everybody in a conference room into their own square, put them back in a meeting as if they were joining remotely. That way then the remote participant can find people who are even sitting in a conference room, identify them, get their profile, and what have you. So that’s a great example of what is physical has become digitized. And you have people still meeting in a physical space and people who are remote but it’s all bridged.

In fact, we are now not even wearing anything. And then you can even put on your goggles, like a HoloLens or what have you, and go into an immersive meeting where your embodied self, as a hologram or as an avatar, can, with spatial audio even, relate to others in that space.

In fact, we have had a metaverse for a long time called Altspace. And Accenture is a great example of it. Accenture is basically building what they describe as the Nth floor in Altspace where literally anybody across Accenture globally can any time drop in on the Nth floor and meet other Accenture employees.

So that concept of being able to be in a virtual space again as an avatar ultimately as a hologram, interact with others, have spatial relationships with others because of those things like spatial audio, I think are just other additional forms of what we’ve all gotten used to today with video-based meetings. So video transcending to 2D avatars and 3D immersive meetings is probably a practical way for us to think about how the metaverse really emerges.

ADI IGNATIUS: And that could change everything in terms of it’s imperative to have people physically together for all the benefits that creates. What you’re describing, the types of interactions you would have in this metaverse setting with or without fancy goggles and things, that’s a whole other level. I mean, it makes me wonder if we will rethink how we define the value of being physically together when there are ways to be hologram interacting or whatever. I mean it sounds far-fetched probably to most people. But it actually could be a very rewarding, fulfilling, interaction.

SATYA NADELLA: Yeah, I mean it absolutely is. It’s sort of — it fills that continuum even more. So for example, in one of these immersive sessions, if you’re doing whiteboarding rather as a hologram or as an avatar, you have people around you and your whiteboard. It’s just a completely different experience than perhaps today the 2D whiteboarding that you have with video streams.

And definitely, it’s a step towards that physical presence. But I also feel that we should stay grounded. That physical co-presence, there is no substitute to that. So the bottom line is, I look at the continuum of things from email to simple audio calls to video meetings to these new immersive meetings and co-presence and design sessions or what have you to physical meeting. All will give us, to your earlier question, more optionality and more flexibility for how human connection and connectivity can be maintained.

ADI IGNATIUS: Given all these changes that are happening in the workplace and as we experiment and return to work and figure it all out, I’m interested in the question of leadership. What does good leadership look like at this very complicated transitional moment?

SATYA NADELLA: It’s a great question. It’s the entire ballgame. So one of the things I have been struck by is how important, to your point, good leadership is. And I’ll even say good managerial competence. So one of the things we started stressing maybe a year before even the pandemic was recognizing that ultimately at Microsoft we would only be able to shape and continuously reshape the lived experience for our people by having great managers. After all, I’ve learned through my own career that you have to learn every day something about great management and leadership.

So we came up with this framework called Model Coach Care. And it’s been just fantastic. Model and coach are perhaps sort of more intuitive. Everybody knows that in order to sort of manage or be a leader is a privilege. And you have to model what you want out of your team. And you have to really be a great coach. But this last piece, care, is the real currency, especially when you have people where you don’t have that constant human connection.

What does that care mean? That care means you have to have that empathy and put yourself in the people’s shoes that you lead or people who you are the manager for. And then understand: it’s not just the pandemic that is one tail event that we’re all impacted by. The interesting thing is each of us is impacted by some tail event which is idiosyncratic to us. But managers who are clued in and care can, in fact, sort of get a sense for it and help us through it.

And so to me that, I think, is the greatest lesson learned. And the one thing that we have done is to assist in it. But data can help. Behavioral nudges can help. So one of the other tools in Viva is these insights. Oh, if I have not had a one-on-one with some person who works for me, a little nudge say, hey, you’ve not really had any communications. Or here is where there is a real issue of wellness and burnout because you have someone who’s just not taking breaks. A nudge there would help. Or when I’m about to send an email over a weekend to my team, it tells me maybe you want to send it during working hours.

These are things that I actually think can help us be better managers, be more caring for the people we lead and ultimately, quite frankly, improve performance.

ADI IGNATIUS: Before I let you go: You’re a very thoughtful business leader, and I kind of believe that leaders are not born, they kind of adapt and learn. And the successful ones keep learning. I’d love to hear from you a moment, a crucible moment if you will, in your life and your work life that really changed your trajectory or was very important in your development as leader. If you’re willing to share that, our audience would love to hear that.

SATYA NADELLA: To me, I’d say the biggest moment of change — if I could take the liberty of talking about two moments. The first moment perhaps was when I first became a manager, first-level manager where I had five people working for me who all would ask the question, why is this guy leading me? Or why is he my manager? And then I had a manager who had many high expectations of both me as an individual contributor and as a lead.

It really helped me understand through that hard process of expectations on both ends what it takes to be a leader, what it takes to be a manager. Because it is not like, I was just a good IC, I became a manager. And I had to quickly understand, although I have better language for it today, what does it mean to model? What does it mean to coach? It’s just not going in and saying, let me complete the work for one of the people. Like, how do I really coach them.

But more importantly in coaching them, how do I learn so that I can learn from the diversity of experience on my team to up my game so that I’m then I’m also accepting of all the diverse views. So it’s when I look back at it, that first job I had was life-changing. Before you become a manager, you’re not a manager. And when you get that opportunity, I must say it shaped me.

The one other thing that happened much later on in my sort of mid-career was this one conversation I had with my boss at that time who said Satya, you are going to perhaps work at Microsoft, which he turned out to be right. For I mean, close to 30 years at Microsoft. Younprobably are going to end up working for more time at Microsoft than perhaps even the time you spend with your kids when they’re at home. And so make it more meaningful. Like don’t make it transactional. Invest in the relationships both with the company’s mission and the people.

When he said it, it felt like, oh what is he saying? Do I understand it? And I think it’s in all of us to turn that power from being transactional to where it is much more meaningful. Because you never want to spend most of your life doing something not to have it accrue a deep meaning.

ADI IGNATIUS: Yeah, that’s great. If you have one more minute, we tried to solicit questions from our audience. And this is pre-taped, not live. But we did tell them that I’d be interviewing you. And so if I can ask one question. This is from Lisa from San Francisco who asks, what do you think is the biggest source of innovation and why? Is it diversity, technical skill, humanity, employee equity, something else?

SATYA NADELLA: Empathy. To me, what I have sort of come to realize, what is the most innate in all of us is that ability to be able to put ourselves in other people’s shoes and see the world the way they see it. That’s empathy. That’s at the heart of design thinking. When we say innovation is all about meeting unmet, unarticulated, needs of the marketplace, it’s ultimately the unmet and articulated needs of people, and organizations that are made up of people. And you need to have deep empathy.

So I would say the source of all innovation is what is the most humane quality that we all have, which is empathy.

ADI IGNATIUS: That’s fantastic. So Satya Nadella, I want to thank you for sitting down with us and sharing your thoughts and insights. It was great. Thank you.

SATYA NADELLA: Thank you so much for having me.