“As business leaders, today we find ourselves in a place that’s all too familiar: the unfamiliar. 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 organizations.
A high-performing organization is one that continuously exceeds expectations, including areas ranging from financial performance to employee engagement. And while AI is one important ingredient, achieving high performance requires a fundamental shift in culture, processes, and people management. It’s a journey we’re undertaking within Microsoft, and something that’s top of mind for nearly every one of our customers.
As always, our path forward is driven by data, not dogma. We’re pleased to share some of our latest research from the Microsoft Viva People Science team, which aims to help every leader reframe how they think about performance and offer best practices to support sustainable growth in this new era of work. I hope you find it useful as you guide your organization and your teams into the future.”
—Jared Spataro, Corporate Vice President, Modern Work and Business Applications at Microsoft
The High Performing Organization Survey, conducted by Microsoft Viva’s People Science team, gathered insights from 1,100 business leaders across industries and around the world.
Performance Is about More than Profits
The new performance dashboard shows that financial success isn’t the whole story.
Sweat the Hard Stuff
The most important drivers of high performance are also the hardest to master.
Use AI as an Accelerant
AI can help organizations leapfrog the barriers that slow progress toward HPO goals.
Double Down on Deep Collaboration
Leaders say they frequently work together, but relatively few engage in the difficult work of real partnership.
Introduction: Behind the Research
What enables organizations to succeed, particularly in challenging times?
Organizations today are at an inflection point. As a result of the profound changes driven by the pandemic and the shift to hybrid work, combined with the rapid emergence of AI, business leaders need to fundamentally reevaluate what success means to their organizations.
Microsoft research has found that a key ingredient to that success is an employee experience that motivates people to do their best work. Earlier this year, we researched the relationship between employee engagement and financial performance, using anonymized feedback from more than 3 million employees at 226 publicly listed companies. We identified the organizations with the most- and least-engaged employees, and looked at how their stock performed over the prior year, a time of fierce economic headwinds. The result? The most engaged organizations outperformed the S&P 500, while the least engaged organizations traded well below the market average.2
“Productivity is often seen as the key driver to business performance, but we found that employee engagement is equally important,” says Sunita Khatri, Head of Product Marketing for Microsoft Viva and Employee Experience. “Engagement isn’t just a nice-to-have—it’s a critical driver of better business outcomes.”
We wanted to understand more about factors like engagement, which have a significant, yet often under-leveraged, impact on performance. Microsoft Viva’s People Science team recently conducted a survey of 1,100 leaders at organizations in the US, Asia, Europe, and Latin America to find out how they defined performance and what practices, priorities, and technologies helped them reach their goals.1
Just 15% of the leaders we surveyed reported that their organizations always deliver on at least 6 of 10 performance indicators.
“Our research shows us that a high-performing organization (HPO) is defined as an organization that continuously exceeds expectations,” Khatri says. “That includes outcomes like reaching financial goals, delivering innovative products and services to their customers, and growing their business ahead of competitors.”
We asked leaders to rate their organizations’ performance on these indicators and others that emerged as strengths among the top performers in our earlier research. Those factors include effective team collaboration, innovation, cultural resilience, employee engagement, and positive regard for leadership.
Just 15 percent of the leaders we surveyed reported that their organizations always deliver on more than half of these performance indicators.1 For the study, we considered this top 15 percent to be HPOs—organizations that balance financial performance, productivity, and employee engagement.
These two studies enabled us to look at the commonalities among organizations that are forging a path to success during a time of unprecedented societal and technological change, and we have gathered our learnings from both studies to create this HPO playbook. Our aim is to help all organizations better understand the nuanced factors and dynamics that underlie financial performance, so they can chart their own course toward achieving their full potential.
One note: “High performance” means different things to different organizations, depending on their goals and priorities as well as their size and the markets and industries they serve. We hope this playbook will enable leaders to more clearly define what high performance means for their organizations and what practices and investments they need to prioritize in order to reach their particular goals.
Performance, Redefined
What Microsoft has learned about high-performing organizations
High performance means exceeding expectations consistently over time. Those expectations may not change—delivering financial results, innovation, and growth will always be central to success—but the conditions in which organizations operate are constantly evolving. The factors that enable HPOs to succeed must evolve as well.
Indeed, our survey found that business leaders set the bar for high performance according to a more expansive set of indicators than the financial metrics traditionally used to define HPOs.1 These findings, along with our research showing that employee engagement is inextricably linked to financial performance,2 led us to create a new framework for understanding performance that captures the evolving ways organizations reach their goals, even under adverse conditions.
Looking across our research, we identified common strengths among organizations that outperform their peers. We found that there are three pillars to high performance at these organizations, which are mutually reinforcing:
Engaged employees: How do organizations motivate and energize employees to deliver sustained performance on an individual level?
Productive teams: How do organizations build positive team behaviors and an infrastructure that empowers teams to deliver results?
Resilient business: How do organizations institutionalize high performance across the organization in a way that is flexible and agile in response to change and both internal and external pressures?
Nine key components support
those three pillars.
What Microsoft has learned about high-performing organizations
Engaged Employees
Empowered, energized, and invested to do their best work
Leadership and manager effectiveness
Culture that fosters flexibility and wellbeing
Focus and alignment
Productive Teams
Effective at consistently exceeding objectives
Team collaboration
Efficient processes
Data and tools that empower
Resilient Business
Adaptive to shifting internal and external factors
Agility to change
Upskilling and re-skilling
Support for innovation
Engaged Employees
“Engaged employees are energized, they’re invested, and they care about doing meaningful work,” says Seth Patton, General Manager of Microsoft Customer and Employee Experience Solutions. “Without that, it’s hard to achieve any other indicators of high performance.”
Organizations in our recent study that have the most highly engaged employees report better communication between leaders and employees (+23% compared to peers), a greater sense of belonging across the workforce (+17%), and stronger clarity among employees about what they should be doing and how their work fits into the larger goals of the organization (+12%).2
In the age of hybrid and distributed work, flexibility is central to employee engagement, and a culture that fosters flexibility is an important characteristic of high-performing organizations. “I think the beauty of hybrid work is figuring out the right balance for your culture, your organization, and your team,” Patton says. “Then you can be really thoughtful about creating moments that matter—those high-ROI times when you should be together in person.”
Managers Matter
Leaders in our survey said that having effective managers who empower and develop their teams was the single most important capability for driving high performance, and this held true across most industries. Yet leaders also said this is the most challenging capability to master.1
“During the big shifts we experienced during the COVID-19 pandemic, we saw just how much managers matter,” says Matthew Duncan, Head of Thought Leadership on the Future of Work at Microsoft. “Managers are the people who are really shaping your human asset, your human power. I think managers are more important than leadership at this point in time, because that is where the rubber meets the road in helping organizations scale and truly harness the value of their people.”
Manager effectiveness is important to employee engagement, affecting everything from employee happiness to company resilience. “Manager effectiveness is fundamental to building the trust needed to be successful in a hybrid world,” says Caribay Garcia, Principal People Scientist and Thought Leadership Lead with Microsoft Viva.
Business leaders have long understood the importance of managers, but our research underscores the fact that they haven’t yet figured out how to fully unleash managers’ ability to empower and develop their teams to achieve high performance. Now, as AI brings the promise of making work better for everyone, we have the opportunity
Productive Teams
“In the past, there was a lot of focus on individual productivity,” Patton says. “Now, we see that collaboration, people working together to get things done, is more important for HPOs.”
The High Performing Organization Survey found that leaders of HPOs—the 15 percent who noted that their organizations are consistently achieving more than half of the performance indicators in our survey—were significantly more likely to view “effective team collaboration” as a clear indicator of high performance (52.8%) compared to their peers (42.6%).1 And Microsoft’s earlier research on employee engagement at publicly listed companies found that organizations with the most engaged employees were more likely to say that teams collaborated effectively (+18% compared to peers).2
But productivity also depends on organizational factors that underpin employees’ ability to work well together. Creating efficient processes and providing data and tools that empower people to do their best work are key. The leaders we surveyed ranked inefficient work culture as the number one barrier to achieving high performance.1
Resilient Business
If there is anything we’ve learned from the past few years, it’s that businesses need to adapt quickly and nimbly to the unexpected, whether that’s oscillating economic conditions, evolving employee expectations, or emerging technologies.
“There’s a concept called ‘organizational grit,’” says Jaime Gonzales, Head of Viva People Science Research and Development at Microsoft. “It’s about continual improvement, perseverance, and the ability to overcome setbacks. It comes down to a willingness to learn and evolve.”
We found several key factors associated with organizational resilience. One is agility to change, which encompasses an organization’s ability to reprioritize quickly in response to unexpected challenges or emerging opportunities. Another is effective upskilling and re-skilling of employees, which supports an organization’s agility to change by enabling employees to manage new responsibilities and take advantage of novel technologies. Finally, there is support for innovation, creating a culture and environment that encourages creativity and experimentation.
“It was particularly interesting to find that innovation is associated with resilience, as it highlights the need for new approaches to the onslaught of challenges organizations face today,” Gonzales says. “Organizations that can anticipate and innovate in the face of adversity or change are better situated for high performance.”
Knowledge is Power
Focusing on skill building creates a fundamental path to growth for both organizations and their employees, fueling better dexterity and adaptability. But leaders across industries reported difficulty understanding the existing skill sets of their workers. That hinders their ability to determine what skills they need to build and what opportunities for talent mobility might exist. Similarly, nearly a third of leaders surveyed said that difficulty identifying and addressing gaps in key skills was a barrier to high performance.1
Overall, leaders agree that better understanding workforce needs for skill development is a top-five priority for the coming year, and this is particularly true for HR leaders, who ranked it number 3, and IT leaders, who placed it at number 5.1.
Skill development is also intrinsically linked with employee engagement and retention.
Employees who feel they have good opportunities to “learn and grow” at their current companies are:
4.3x as likely to report being happy at their current company
3.3x as likely to report believing their company can help them meet their career goals
5.4x as likely to report they expect they will still be with the company in two years3
The 15 percent of leaders whose organizations are HPOs by our definition are acutely aware of the importance of identifying and addressing critical skill gaps, and they are 27 times more likely than their peers to say their organization is good or exceptional at upskilling and re-skilling their employees.1
Skill development is especially critical now, Khatri says, as “every organization is on a journey to embrace the biggest tech disruption yet, and that’s next-generation AI. Resilient businesses are addressing this head-on and thinking about how they can future-proof their people by building AI proficiency.”
Key Takeaways from Microsoft’s
High Performing Organization Survey
Performance is about More than Profits
Financial outcomes remain the primary measure of performance, but today’s business leaders have a nuanced view of performance that incorporates factors such as teamwork, collaboration, growth, innovation, and fostering a resilient culture.
Double Down on Deep Collaboration
Leaders today understand the importance of working together. And yet, our analysis of the HPO survey found that when leaders collaborate with other leaders, they’re most often engaging in positive, low-conflict connections, like building strong relationships (80%) and celebrating each other’s wins (77%). It’s likely no coincidence that the most frequent types of collaboration are friendly and congratulatory in nature, the sort of thing everyone likes to share.
Use AI as an Accelerant
The burdens of work have increased significantly in a hybrid world. A recent Microsoft study, which surveyed more than 30,000 people worldwide and analyzed trillions of anonymized and aggregated activity signals gleaned from Microsoft 365 products, found that the amount of time spent in Microsoft Teams meetings and calls has increased threefold since 2020—and respondents said that inefficient meetings were the number one disruptor to their productivity.4 The study also found that 64 percent of people have struggled with finding time and energy to get their work done, and those workers are more than three times as likely to say they struggle with innovation.
Sweat the Hard Stuff
HPOs, by definition, consistently excel at a range of different capabilities. But most organizations need to build toward that goal. “When I look at different companies, I see all of them doing some of the HPO components really well, but it’s hard to do all of them well, all the time,” Patton says. “And that’s okay. HPO is a state to aspire to. The thing that sets leaders apart is that they pay attention to measuring, taking action, and continuously improving.”
Next Steps
Three things organizations can do to
accelerate their journey to high performance
How do you become a high-performance organization?
Assess
Take Action
Measure Impact
1. Assess
Before making any decisions about how to improve performance, you need to understand what is happening at your organization now. “It’s very hard to navigate any kind of a change or transformation without some sort of data to understand where you are and whether you’re making progress,” Patton says. “The first thing to do is get a sense of where you are on this journey. Then, you have a baseline from which to embark and understand the progress you make.”
Assessment includes analyzing both active and passive signals to get a complete and holistic understanding of what employees are experiencing. Active signals include data such as responses to organization-wide surveys that can give insight into employee sentiment around key factors related to culture, wellbeing, flexibility, and growth.
Passive signals include workplace analytics that give insight into how work is actually getting done, such as time spent in meetings, after-hours work, uninterrupted focus time, one-to-one meetings with managers, and network analysis (looking at an individual’s collaboration with different teams).
If a team is consistently reporting lower engagement scores (an active signal), organizations can use passive signals to correlate the behaviors that impact those scores and identify opportunities for improvement, such as lack of clarity on work priorities, depreciation in peer-to-peer networks, or insufficient direct engagement with managers.
2. Take Action
Once you understand what’s happening, you can make data-driven decisions about actions that will drive improvements. “What we see work well is when organizations use data to make change happen, whether it’s setting clarity on company priorities, upskilling and re-skilling the workforce, or rebuilding a sense of community through leadership connection,” Khatri says. “In a world of flexible work, they’re innovating and leveraging technology to enable a culture of action-taking.”
3. Measure Impact
Quantify the impact of data-driven actions on business outcomes to get a clear view of what drives success. Impact measurements include metrics like productivity gains, revenue increases, higher employee engagement scores, enhanced performance, and cost reductions. As organizations incorporate AI in the workplace, they will need new technologies to measure impact—for example, the effect of an AI assistant on workplace productivity metrics such as time saved by meeting recaps and reduction in the time it takes to draft emails and create presentations.
References
1 The High Performing Organization Survey was conducted by the Microsoft Viva People Science team utilizing an Online Panel Vendor, commissioned by Microsoft, with 1,100 full-time employees across nine markets between September 6, 2023 and September 14, 2023. This survey was 10 minutes in length and conducted online. Global results have been aggregated across all responses to provide a total or average. Each sample was representative of business leaders across regions, ages, work environments (in-person, remote vs. non-remote, office settings vs. non-office settings, etc.), and industries (i.e., Banking, Capital Markets, and Insurance; Healthcare; Manufacturing; Professional Services; Retail and Consumer Goods; and Technology, Electronics, and Telecommunications). Each sample included specific parameters on company size (i.e., organizations with 1,000+ employees) and job level (i.e., business leaders/business decision makers, those in mid- to upper job levels such as, C-level executive, VP or Director, Manager). The overall sampling error rate is 2.8 percent at the 95 percent level of confidence. Markets surveyed include: Brazil, China, France, Germany, India, Japan, Mexico, United Kingdom, and the United States.
2 Microsoft WorkLab, The New Performance Equation in the Age of AI. April 2023.
3 Viva People Science Outcomes of Learning & Growth analysis. October 2023. The Outcomes of Learning & Growth analysis of 246 Glint customers examined the proportional difference of all employees responding favorably to both job growth and engagement, career, and retention items compared to the proportion of those responding unfavorable or neutral.
4 Microsoft WorkLab, Work Trend Index Annual Report: Will AI Fix Work? May 2023.
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