Technology

Microsoft Declares War on Middle Managers and Khaki Pants


CEO Satya Nadella

Photograph by Andrew Harrer/Bloomberg

CEO Satya Nadella

Welcome to Microsoft, Nokia employees—you’re out of a job.

So came the message on Thursday as Microsoft (MSFT) announced plans to fire as many as 18,000 people over the next year. The bulk of the layoffs, about 12,500 people, will come from the Nokia (NOK) devices and services business that Microsoft officially acquired in April. Most of the rest of the firings will affect people with overlapping jobs, furthering new Chief Executive Officer Satya Nadella’s pledge to create a leaner, meaner, faster-moving organization. Grrr.

It’s not easy firing this many people—especially when you’re Microsoft, which hardly ever fires anyone, and when you’re dealing with Finland, which also has a thing against firing people. The company did it with two memos and a press release. The first memo came from Nadella, who explained how the layoffs fit into the strategy outlined in his memo from last week. The second came from Stephen Elop, the former Nokia CEO and now Microsoft executive, who never really managed to revive Nokia’s business, delivered the pride of Finland into the clutches of Microsoft, and must be feeling some measure of guilt about all this. (Right?) A staggering 40,000 Nokia employees had already lost their jobs over the past few years, as the phonemaker transitioned from global market power to Harvard Business School case study.

The only large group of layoffs in Microsoft’s history occurred in 2009, when about 6,000 employees were let go in something of a face-saving gesture after the Windows Vista debacle and the company’s complete whiff on mobile. That bloodletting got Microsoft into decent shape, although the company could still stand to lose more employees or to get more out of the workers it has. Its profit and revenue per employee, while better than traditional business-software rivals such as IBM (IBM) and Oracle (ORCL), is quite a bit worse than Google (GOOG) and Apple (AAPL). Microsoft certainly did not want to see its metrics slide because of the Nokia deal.

And, while painful, these layoffs do make sense. Nokia had a huge arsenal of phones that represented an onslaught meant to return the company to its former glory. You’d figure Microsoft would trim the product lineup over time and focus on a couple of models—and, indeed, a big chunk of today’s layoffs came from Nokia’s manufacturing operations. Interestingly, Elop noted that Microsoft will center its phone production in Hanoi. As Chinese wages rise, I’m hearing more and more about companies shifting their manufacturing from China to Vietnam.

You have to dress these sorts of moves up with some “we’re on a mission” cheerleading, and that’s what Nadella did. His memo to workers arrived with the subject line “Starting to Evolve Our Organization and Culture.” For years, Microsoft has been painted as the kingdom of the middle manager, where armies of men in blue Oxford shirts and khaki pants roamed the halls looking for a meeting to bog down. No more, says Nadella. “We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making,” he writes. “This includes flattening organizations and increasing the span of control of people managers.” That’s top-down, sideways-span control with a hearty helping of flattening, which is a management overhaul taking place on at least five axes and requiring minor alterations to the space-time continuum.

Is any of this for real? Does Microsoft really plan to end its reliance on middle managers? Can Batman sell smartphones? I guess we’ll see soon enough.

Vance_190
Vance is a technology writer for Bloomberg Businessweek in Palo Alto, Calif. Follow him on Twitter @valleyhack.

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Companies Mentioned

  • MSFT
    (Microsoft Corp)
    • $45.02 USD
    • 0.64
    • 1.42%
  • NOK
    (Nokia OYJ)
    • $8.4 USD
    • 0.47
    • 5.6%
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