Microsoft promises culture change at Activision Blizzard. Here’s how

Over the past couple years, employees’ public accounts of toxic work environments have led to reckonings around Silicon Valley and promises from management to be better. On Tuesday, Microsoft made a similar pledge, though not for itself. The tech giant pointed to the litany of abuse and harassment allegations at its latest acquisition target, game maker Activision Blizzard, and promised it would no longer be tolerated.

Amid Microsoft’s announced plans to buy Activision Blizzard for the eye popping amount of nearly $69 billion in cash, the tech giant’s leaders spoke the usual pomp about how important the deal was. Microsoft was bolstering its already enormous Xbox video game division with the teams behind some of the most popular franchises in the world, including the online battle games Overwatch and Call of Duty, as well as the fantasy behemoth World of Warcraft and mobile mainstay Candy Crush.

But Microsoft CEO Satya Nadella also quickly pivoted to acknowledge that he wasn’t just buying a company and its brands. Microsoft was also taking over a sprawling organization under intense scrutiny for public claims of harassment, discrimination and more, all tolerated for years in an alleged “bro culture” atmosphere. On a conference call with investors shortly after announcing the purchase, Nadella discussed how he’s changed Microsoft’s cutthroat ways and how his lieutenant Phil Spencer would do the same with Activision Blizzard.

“The culture of our organization is my No. 1 priority,” Nadella said during his introductory remarks. “This means we must continuously improve the lived experience of our employees and create an environment that allows us to constantly drive everyday improvement in our culture.”

In doing so, he effectively promised to turn around a company that, while successful, is engulfed in scandal. “We are supportive of the goals and the work Activision Blizzard is doing and we also recognize that after the close, we will have significant work to do in order to continue to build a culture where everyone can do their best work,” he said in a thinly veiled criticism of past leadership. “It requires consistency, commitment, and leadership that not only talks the talk but walks the walk.”

It’s a tall order for Microsoft and Nadella to take on. But those who’ve watched his work say he and his lieutenants may be among the best to pull it off. And that’s in part because of how much Microsoft itself has changed.

Just a decade ago, Microsoft was seen largely as a monopolistic force in the computer world, reinforced through its toxic work culture. The company’s ruthlessness both inside and out were so widely documented over the years that a cartoonist once drew an organizational chart depicting Microsoft’s divisions as warring gangs pointing guns at one another. And when Google went public in 2004, it established a corporate ethos that became as much mantra as it was a referendum on Microsoft: “Don’t be evil.“

Shortly after Nadella was appointed as Microsoft’s third CEO in 2014, he set about for a fix. In his book Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone, Nadella described how he’d inherited a senior leadership team that was “more like a group of individuals” operating in silos. He asked each to read Marshall Rosenberg’s Nonviolent Communication, a guide to building compassion in organizations. Over time, he said, executives grilled and sniped at each other less, and supported one another more.

Nadella still stumbled, famously giving an “inarticulate” answer in 2014 when asked for advice for women seeking a raise while he was being interviewed on stage at the Grace Hopper Celebration for women in tech. Four years later, when CNET Editor-in-Chief Connie Guglielmo asked him to try again, Nadella said people need to advocate for themselves and find allies who won’t accept the status quo. He also said it’s on leaders, like him, to listen to those advocates.

With Activision Blizzard, Nadella said he’ll rely on Spencer, head of Microsoft Gaming and the Xbox division. Nadella described Spencer as having “demonstrated leadership driving both gaming business success as well as cultural change.” Activision Blizzard CEO Bobby Kotick, who was accused in a blockbuster Wall Street Journal investigation of having at times ignored, covered up and even participated in bad behavior at the company, told employees in a conference call published by the Washington Post Thursday that he will remain in his job until the deal closes in June 2023 and any longer Microsoft wishes him to stay. 

The Activision Blizzard King Workers Alliance, which helped organize walkouts and protests over the past six months, tweeted a statement saying its efforts wouldn’t end with Microsoft’s acquisition.

“We remain committed to fighting for workplace improvements and the rights of our employees regardless of who is financially in control of the company,” the group tweeted Tuesday. “Whatever the leadership structure of the company, we will continue our push to #EndAbuseInGaming.”

Microsoft and Activision declined to make executives available for comment.

Under pressure

In an odd way, Activision Blizzard’s cultural issues appear to have driven the company into Microsoft’s hands. Activision Blizzard’s stock was floating near all-time highs last year until July, when it was sued by the California Department of Fair Employment and Housing, accusing the gaming giant of discriminating against its female workforce and fomenting a toxic work culture. The suit quickly triggered public letters from employees that criticized the company’s leadership, followed by online activism and in-person employee walkouts.

Kotick, according to the Journal’s reporting, was aware of many of the issues outlined in the suit but reportedly failed to inform the company’s board of directors of “everything he knew,” including a 2018 settlement with a former employee at one of Activision’s studios who was allegedly raped by a supervisor. Kotick at the time said the Journal’s article “paints an inaccurate and misleading view of our company, of me personally, and my leadership,” a sentiment repeated by the company’s spokespeople.

Still, investors were unconvinced, pushing the company’s stock down as much as 40% before Microsoft’s purchase was made public, for the same $95 per share the stock was worth just a year ago.

Carolina Milanesi, an analyst at Creative Strategies who’s watched Microsoft’s moves closely over the years, noted how often Microsoft discussed culture throughout its announcements on Tuesday, both by Nadella and Spencer, the latter of whom said, “We believe firmly that the great teams at Activision Blizzard have their best work in front of them, and we’re looking forward to making sure they feel supported, safe and engaged in every aspect of their work going forward.”

The focus on culture was “spot on,” Milanesi said. “The problem was with management, not the employees,” she added. “You get rid of management and put the employees in a good environment.”

Microsoft also published headshots of its gaming division’s leadership alongside the announcement, of which Milanesi noted half the roles were filled with women and reflected racial diversity as well, an unusual sight in tech land. “I don’t think it would have been a possibility for them to keep the old management on” at Activision, she said. “Especially how employees responded, clearly it wasn’t good for the company.”

Though Kotick may not become a Microsoft employee, he will be paid a generous sum. His stock holdings alone will be worth nearly $400 million.

New game

Whether Microsoft can right Activision’s ship is still an open question, even if its executives so far have “talked the talk,” as Nadella noted. It may help that Microsoft has faced its own reckonings over the years as well, both in a 2015 class action discrimination suit and again in 2019 when employees protested its own “boys club” culture.

Microsoft’s HR head, Kathleen Hogan, wrote to employees following the 2019 revelations that she was “appalled and sad to hear” about their experiences and agreed that these problems must be resolved as a company. Microsoft shared the email publicly, in which Hogan said, “We must do better.”

So far, it appears Microsoft’s made headway. Nine out of 10 employees who left reviews on Glassdoor said they’d recommend working at Microsoft to a friend, and 97% approved of Nadella’s work as CEO.

“The deal and a renewed commitment to culture should enable Activision Blizzard to eventually move beyond the in-house issues that have surfaced,” Wedbush Securities analyst Michael Pachter wrote in a message to investors after Microsoft’s announcement. “We think that Microsoft’s intolerance of workforce discrimination and harassment will overwhelm any issues that remain at Activision.”

One other thing that may help is Microsoft’s corporate mission. The tech giant’s taken clear stands on not just harassment but also human rights and other global and political issues that many game companies have either avoided or outright mishandled. Activision Blizzard itself was harshly criticized for its reaction against a competitive gamer who expressed support for democratic protests in Hong Kong in 2019.

“Many executives from the games industry have always been on the fringes and haven’t had to think much about these things,” said Joost van Dreunen, a professor at NYU Stern School of Business and author of the book One Up: Creativity, Competition, and the Global Business of Video Games. “Microsoft has these questions answered. They know their place, and they have it thought through.”

To him, Microsoft also appears to be walking the walk of its Xbox division’s “for everyone” mantra, from its efforts to take on harassment in the gaming community to initiatives like its Xbox Adaptive Controller for disabled players.

“You don’t see that as much at Activision,” he said. At least not yet.