Microsoft's Core Values: What Was Rebuilt, What Was Retired

Bradley HookFounder of the Values Institute · Author of Start With Values

Everyone Is Already Inside Microsoft

Microsoft is one of those companies everyone knows. Even if you don't like it, you're probably using it somehow. LinkedIn is a Microsoft subsidiary. Your accountant sends you Excel files. There's a fair chance the website you opened this morning was served off an Azure box somewhere.

I first found myself in the world of Microsoft in the mid 1990s. Remember the little paperclip assistant? Clippy was actually rather cute. We had Excel, which I found fascinating because of its multi-dimensional nature, the idea that a grid could hold a whole model of a business. We had Word. We had PowerPoint. Over the years the programs got better, and sometimes worse. Anyone who was there remembers the specific fury of a crash mid-save, or a macro that took the entire workbook with it.

Then they did something remarkable. They ported the whole suite into fully working web apps.

As someone who has built websites for a living, I don't think most people appreciate what that took. Rebuilding Excel's calculation engine in a browser, with drag-and-drop handles, live co-authoring and pivot tables, is a huge job. It wasn't marketing. It was a rebuild.

And Microsoft didn't just stay consistent. It pivoted and grew. Almost every business I work with runs Microsoft 365 or some flavor of Teams, which has pretty much blitzed Zoom in the enterprise. I know several large organizations that moved off Google Workspace and onto Microsoft 365, which now comes with Copilot attached.

That's a genuine turnaround. Whatever you think of Bill Gates, the company he co-founded didn't just stay competitive. It came back and dominated, after a decade when most people had written it off.

So the question worth asking here is simple. What drove that? What actually matters most to a company like Microsoft, and how much of the comeback can honestly be put down to values rather than a well-timed bet on cloud?

The answer is more interesting, and more awkward, than the usual case study lets on.

Part I: Three Eras, Three Sets of Priorities

The founding era: ambition as a value

When Gates and Paul Allen started Microsoft in 1975, the vision was specific and audacious. A computer on every desk and in every home.

That's not a values statement in the modern sense. It's a distribution goal. But it set the tone. Democratize computing through sheer scale. The culture that grew out of it was competitive, engineering led, and organized around taking market share off IBM, Apple, Netscape and eventually Google.

Aggression was the operating value. It worked, until it didn't.

The Ballmer era: when the incentive system became the culture

Under Steve Ballmer, from 2000 to 2014, the mission drifted toward "devices and services." The bigger story was internal.

Microsoft ran a stack ranking system. Managers had to grade their people on a curve, with a fixed percentage landing in the bottom band no matter how well they'd actually performed.

You can guess what happened. People were rewarded for outshining the person next to them, so that's what they did. Teams hoarded knowledge. Politics flourished. Good engineers avoided joining good teams, because being solid on a strong team hurt you more than being average on a weak one. Microsoft missed mobile, arrived late to cloud, and by 2014 its market value had flatlined around $300 billion.

Here's a correction to the popular version of this story. Stack ranking was killed in November 2013, under Ballmer, in a memo from HR chief Lisa Brummel. That was about three months before Satya Nadella became CEO in February 2014.

The reform gets credited to Nadella constantly. It wasn't his.

What Nadella did was arrive just after the worst incentive in the building had been removed, and then build something coherent in the space it left. That's still a serious achievement. But the order matters if you want to learn anything from it. The punishment mechanism went first. The inspiring language came second.

The Nadella era: values as the stated strategy

Nadella decided culture was the problem, not technology. He made two moves that have been studied to death since.

First, he replaced the mission. Out went devices and services. In came "to empower every person and every organization on the planet to achieve more." That shifts Microsoft from product seller to platform enabler, a company measured by what its customers build rather than only by what it ships.

Second, he borrowed Carol Dweck's growth mindset and gave it a slogan staff can still recite. Move from a know-it-all culture to a learn-it-all culture. In his 2025 shareholder letter he was still hammering it: "we must be learn-it-alls, willing to experiment, guided by evaluations, and committed to continuous improvement."

The translation into behavior was specific. Being brilliant on your own was no longer enough. Curiosity counted. Learning from failure counted. Helping other people succeed counted.

The numbers are hard to argue with. Revenue went from $86.8 billion in FY2014 to $331.8 billion in FY2026, with operating income of $155.2 billion. Azure alone passed $100 billion in a single year for the first time. Market cap sits around $3.69 trillion.

Whether the values caused any of that is a question I'll come back to. It deserves more skepticism than it usually gets.

Part II: What Microsoft Says Its Values Are

Microsoft states its values on two levels. Keep them separate, because they do very different jobs.

The three corporate values

Microsoft's Standards of Business Conduct, the Trust Code, names three principles:

Respect. The thoughts, feelings and backgrounds of others matter as much as your own.
Integrity. Be honest, ethical and trustworthy.
Accountability. Take full responsibility for your decisions, actions and results.

These are compliance grade. They govern how people treat each other, they appear in the Candidate Code of Conduct, and there's a process behind them. Nadella restated them in his 2025 letter, saying the company is "guided by our values of respect, integrity, and accountability."

The five cultural attributes

Sitting alongside those are the attributes that describe how the work is meant to get done.

Attribute	What it asks for
Growth mindset	Learn and experiment rather than perform certainty. A failed experiment that taught you something still counts.
Customer obsession	Justify decisions by what they do for the user, not by internal convenience.
One Microsoft	Work across boundaries. Treat silos as a failure, not a fact of life.
Diversity and inclusion	Get different perspectives to the decision table.
Making a difference	Connect the daily work to the mission.

Most write-ups list four and drop "making a difference." Microsoft's own Trust Code lists five.

The gap between the two tiers matters more than it looks. Respect, integrity and accountability are enforced. Break them and something happens. The cultural attributes are aspirational. And aspirational values are the ones that quietly move.

Part III: The Machinery

Values that only live on posters are wallpaper. Microsoft built real mechanisms, and this is the part worth stealing.

Performance reviews that reward helping other people

The system that replaced stack ranking looks at impact, potential and mobility rather than your position relative to your neighbor. It credits two things. What you achieved yourself, and how you contributed to the success of others, including people outside your team.

That's a straight inversion of the old Microsoft, where helping a rival group actively cost you.

This is the most important item on the list, because it changes the math of self-interest instead of appealing to virtue.

Model, Coach, Care

Microsoft's leadership framework redefines the manager's job as three obligations.

Model. Live the values in your own behavior, including naming what you're still bad at. Leaders are expected to be visibly learning.

Coach. Set the outcome, enable work across boundaries, help the team find the answer rather than handing it down.

Care. Know what your people actually want from their working lives. Check on wellbeing. Connect the individual to the mission.

It runs on regular one-on-ones, Talent Talks where senior leaders review people with the CEO and HR leadership, and continuous pulse surveys that ask whether employees actually experience a growth mindset in their own team. Which is the only level where culture is real.

Experimentation with a budget

The Global Hackathon has run since 2014 and has drawn more than 73,000 employees and interns. Microsoft calls it the largest private hackathon in the world. Winning teams pitch senior leaders and projects get funded. The message is structural. A good idea from anyone, anywhere, has a route to money.

The Microsoft Garage gives that a physical home, under the motto "doers, not talkers."

And people get credit for smart failure. As Kathleen Hogan, who built the culture program with Nadella, put it: "If somebody takes risks and gets closer to the goal because they've learned, we want to celebrate that more than celebrating always playing it safe."

Hogan is also blunt about what growth mindset isn't. "Growth mindset does not equal false harmony, but it does mean that everyone is required to model it."

Customer Zero

Microsoft runs its own AI and cloud tools internally first, then publishes the playbooks. Staff experience the products as users, not just builders. It keeps customer obsession from turning into an abstraction.

Part IV: Values in Everyday Culture

What does this look like when nobody's watching?

In your thinking. Be a learn-it-all, not a know-it-all. Saying "I don't know" beats bluffing. Experiment and fail fast, as long as the failure teaches you something. Ask for feedback constantly, and treat it as a tool rather than a weapon.

With other people. Contribute to someone else's win. Listen more than you talk. Don't hoard information, and don't optimize only for your own team's numbers.

In how you operate. Justify decisions by user benefit. Own the outcome instead of deflecting. Act with integrity everywhere, from code commits to financial reporting.

If you lead. Share your own failures. Ask questions rather than issue orders. Know what your people are working toward.

Part V: Where the Framework Strains

A values analysis that stops at the framework is just marketing. Here's the harder part.

Diversity and inclusion has gone from mechanism to sentiment

This is the biggest change in Microsoft's values architecture, and it's missing from almost every case study.

For years Microsoft was the go-to example of a company putting real cost behind a stated value. Inclusion activity fed into performance assessment. Diversity sat inside executive incentive evaluation. That's exactly what separates a real value from a nice one.

Both have since been unwound.

Microsoft removed diversity and inclusion from required employee performance assessment areas, moving staff to a smaller set of outcome-based goals in which security is the only mandatory priority. It also paused its annual diversity report, saying it would share updates in more flexible formats. The 2025 proxy statement doesn't show diversity as a standalone criterion in executive incentive categories.

Microsoft says its commitment to an inclusive workplace hasn't changed. That may well be sincere. But for anyone studying values, the distinction is the whole point.

A value with a measurement and a consequence behaves differently from a value with a statement of intent.

Diversity and inclusion is still listed as a cultural attribute. It's just no longer measured. If you've been citing Microsoft as proof that values must be costly, you need a new example. Here, the cost got removed.

Growth mindset as a management convenience

Some staff have argued the framework can be turned against them. An unreasonable workload becomes "a learning opportunity." A staffing gap becomes "a stretch assignment."

Any culture that celebrates resilience carries this risk. The framework has no built in defense, because the same words cover genuine development and quiet exploitation.

The layoff paradox

Microsoft cut roughly 6,000 roles in May 2025 and about 9,000 in July 2025. Then another 4,800, around 2.1% of the workforce, in July 2026, alongside a restructure of the gaming division. Headcount was approximately 223,000 at June 30, 2026, down from 228,000 a year earlier.

All of that landed in years of record revenue, record profit and enormous AI infrastructure spending.

Nadella named the contradiction himself in a July 2025 memo. "By every objective measure, Microsoft is thriving," he wrote, calling it "the enigma of success in an industry that has no franchise value." He also said the cuts had been weighing heavily on him, and that "it might feel messy at times, but transformation always is."

That honesty is worth something. It doesn't resolve the tension, it just refuses to hide it.

For anyone working on values, this is the sharpest question in the whole Microsoft story. What does care mean at a company that is simultaneously highly profitable, restructuring, and moving capital away from people and into compute?

Scale

Roughly 223,000 people across more than 190 countries. Cultural consistency at that size is an engineering problem, not a communications problem.

Internal politics and slow decisions show up constantly in employee commentary. That's the standard tax on organizational mass. Culture at that scale isn't one thing. It's ten thousand local weather systems, and your experience of Microsoft's values is set almost entirely by your immediate manager.

The attribution problem

The story is usually told as culture caused the numbers.

It's at least as plausible that the culture change and the cloud bet were two results of the same decision, which was to appoint a leader out of the server and tools business who understood where the market was heading. Azure would probably have grown even with a mediocre culture, because the platform shift was that big.

The safer claim is that the culture work made the strategy executable. You cannot build an integrated cloud and AI stack without teams working across boundaries, and the old Microsoft demonstrably couldn't do it. That's a real contribution.

It's not the same as saying values made them $3.7 trillion. Values people don't help their own credibility by making the bigger claim.

Nobody has arrived

Hogan has been consistent that the work isn't finished. Microsoft hasn't arrived, she says, and needs to hit the accelerator on growth mindset in the AI era. Her framing of why culture gets funded at all is worth keeping: "Culture in service to a mission matters, and is key to our ability to attract and retain exceptional talent."

She moved to a new role as EVP of the Office of Strategy and Transformation in March 2025, with Amy Coleman taking over as chief people officer. That's the first change of hands in the culture program in over a decade, and it's a live test of how deep it really went.

Part VI: What This Actually Teaches

Five lessons, adjusted for what the evidence supports.

1. Remove the perverse incentive before you announce the new values. Microsoft's turnaround started by killing stack ranking, not with a slogan. Aspirational language stacked on top of a punitive system produces cynicism, not change. The order is the lesson.

2. Values have to change the math of self-interest. The most durable thing Microsoft did was make helping another team improve your own rating. That isn't an appeal to virtue. It's a redesign. Everything else is downstream of it.

3. A value without a measurement is a preference. The diversity and inclusion story is the clearest natural experiment available anywhere right now. The words didn't change. The measurement disappeared. Watch what happens over the next five years.

4. The CEO can't delegate it, and can't guarantee it either. Nadella made culture his personal brand and modeled it in public, which mattered enormously. He has also presided over three rounds of layoffs during record profits. Leadership commitment is necessary. It isn't sufficient.

5. Culture at scale is local. Pulse surveys that ask whether you experience a growth mindset in your own team are the right instrument, because that's the only place a stated value is ever felt as true or false.

Conclusion

Microsoft's enduring values are respect, integrity and accountability. Underneath them sit growth mindset, customer obsession, one Microsoft, diversity and inclusion, and making a difference. None of it was inherited from 1975. It was built deliberately over a decade, swapping internal competition for collaborative learning, and product-centricity for platform empowerment.

The commercial result isn't in dispute.

But the honest verdict is that Microsoft is running two values systems at two different strengths. A compliance tier that is genuinely enforced, and an aspirational tier where at least one attribute has just lost its enforcement while keeping its wording.

That isn't a scandal. It's the normal condition of every large organization. It's only unusually visible here because Microsoft documented its own machinery more thoroughly than most companies dare to.

And it points at the only test that ever mattered. Not whether the values are on the website, because they always are. Whether a manager under pressure chooses to coach instead of command. Whether an engineer shares a fix with a rival team when nobody is counting. Whether a failed experiment gets treated as knowledge or as a black mark.

At 223,000 people, that's 223,000 separate decisions, made daily, mostly unobserved.

The framework doesn't make them. It just makes the right one slightly more likely.

More corporate values, examined: the most common company values worldwide, how the most successful companies live their values, and the unfolding of Netflix's company culture. Defining your own? The free Company Values Builder turns values into behaviors, interview questions and rituals.

Sources

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