After announcing the $69 billion mergers, Microsoft CEO Satya Nadella stated that the success of the company’s biggest deal ever hinges on rebuilding Activision Blizzard’s culture.
According to analysts and management experts, accomplishing this will necessitate Microsoft departing from its usual hands-off approach to acquisitions to deal with what amounts to a “clean up” job of fixing the famed maker of the “Call of Duty” games franchise, which has been accused of sexual harassment and misconduct on multiple occasions.
According to RBC Capital Markets analyst Rishi Jaluria, Microsoft has a history of allowing companies it acquires to operate independently. Microsoft purchased LinkedIn, GitHub, Skype, and Mojang, the Stockholm-based creator of the video game series Minecraft, in recent years, yet none of these companies have witnessed significant changes since their purchases.
The Activision merger, which was revealed on Tuesday, will necessitate a stronger hand. California regulators have been suing Activision since July, alleging that the firm “fostered a misogynistic atmosphere.” Employees have staged walkouts to protest Activision’s approach to the concerns, which has been the focus of investigative pieces exposing charges of sexual harassment within the company. The Securities and Exchange Commission has requested information “regarding personnel matters and associated issues,” according to Activision, which is cooperating with the government.
According to one source, Activision CEO Bobby Kotick, whose handling of the alleged wrongdoing has drawn public scrutiny, is anticipated to leave the company after the sale is complete. “Cultural issues are seldom about a single person,” Jaluria remarked. “Microsoft will have a lot more work on its hands.”
Following its inquiry, Activision recently fired roughly three dozen employees, claiming that it made high-level personnel adjustments and increased its investment in anti-harassment and anti-discrimination training as of last October.
A Workplace Responsibility Committee was formed by the company’s board of directors to oversee the company’s progress in developing culture.
Activision said it has looked into — and would continue to look into — concerns of harassment, discrimination, and retaliation, and that it will offer regular updates. Activision introduced a zero-tolerance harassment policy in October.
“We recognized that we needed to make improvements in our culture and ensure an environment where people feel safe, comfortable, and respected,” Kotick told Reuters.
A Microsoft spokesperson said the company is committed to inclusion and respect in gaming and is “looking forward to extending our culture of proactive inclusion to the great teams across Activision Blizzard.”
Microsoft’s capabilities are constrained until the transaction closes in fiscal 2023, according to Kathryn Harrigan, a Columbia Business School professor who specializes in business growth and turnarounds. Microsoft may ask questions and collect data in addition to proclaiming it a priority, she said, adding that one good place to start is gathering compensation data to discover wage disparities. In September, Activision agreed to pay $18 million to settle a sexual harassment and discrimination case filed by the US Equal Employment Opportunity Commission.
According to Brian Uzzi, a professor at Northwestern’s Kellogg School of Management, Microsoft can take a more active role after the transaction closes by hiring advisers, bringing in law firms, or requiring sensitivity training. Microsoft may potentially conduct its probe into Activision’s culture, he suggested. Microsoft may decide to restructure Activision’s management team in the end, according to Jaluria.
Microsoft will have to work through its challenges with culture. After shareholders approved a resolution in November calling for Microsoft to assess the effectiveness of its rules, the company’s board of directors said in January that it had hired a law firm to conduct a review of its sexual harassment and gender discrimination policies.
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