Microsoft Layoffs. About Time.

By Glenn Fleishman January 22, 2009

Editor's note: TechNerd is only supposed to post on Monday—today was MusicNerd's day—but the shit hit the fan in Redmond today, and TechNerd had some stuff to get off his chest.  

If you live in the Seattle you know someone, or some dozen people, who work at Microsoft. And one or more of those people may have lost their job. If not today, with 1,500 layoffs, perhaps sometime in the next 18 months as the company dribbles out another 3,500 workers. The company has 94,000--excuse me, 92,500 employees worldwide.

 The layoffs might seem strange given that the company also reported net earnings of over $4 billion, and a tiny increase in revenue over the year-ago quarter at a time when most companies have seen plummeting sales. (Apple yesterday reported a slight gain in sales and profit, too.)

But if you know anyone who works at the 'Soft, you have also likely heard the endless stories about incompetent bosses, bureaucratic processes, horrible decisions, and wasted time. In the last few months, I've heard numerous first-hand tales that have left me howling in laughter--and should have resulted in some people or entire groups being fired.

 And you should have heard the parallel issue: Microsoft doesn't fire people, often no matter how incompetent, unless they've broken the law. If you perform poorly at Microsoft, just as was once true in Japan, you're shunted to uninteresting jobs or put in a position where you want to leave. Layoffs have been practically non-existent, too.

 This is true of many large companies, but it's always been particularly surprising at Microsoft for two competing reasons: First, the company is run by technocrats who like metrics, the wonky term for measuring results. That culture extends into related organizations. The Gates Foundation has pushed metrics, for better or worse, into squishy areas where non-profits used to just throw money, to see whether the money is going into a hole or producing results.

Geeks are apparently great at creating metrics, but perhaps not so good at choosing which to use or taking a hard look at what they show.

The second bit of surprise is how much product Microsoft is able to ship out the door--the number of different pieces of software and hardware--despite their apparent inability to get rid of non-performers and run an efficient ship. There have been many complaints made about Windows Vista, but somewhere short of a billion people run some version of Windows, and hundreds of millions other use Windows Mobile phones, have an Xbox gaming system, or use Mac OS X software, just to cite a few examples.

Those two competing facts about Microsoft, apparent gross incompetence in managing projects while they ship stuff on a regular basis that sells in vast numbers may be one of the biggest causes behind the big layoffs.

Microsoft is in the middle of a transition from desktop to Internet that they are perhaps almost 15 years overdue in getting involved in. While they introduced a Web browser in 1995 (and then spent years trying to squash any competitor to it), the company remained focused squarely on desktop and server computing--applications running on a personal computer or a server in a business--even as fleeter firms like Google and startups were able to talk about the cloud.

The cloud is as amorphous as it sounds. It's the transition of computing functions and data storage from software that runs entirely on your computer and hardware that you posses, to programs and data being distributed among many computers. Google's online word processing and spreadsheet programs accessible through a browser (part of Google Docs) are a good example. Why do you need Microsoft Word when you have Google Documents?

Hiring Ray Ozzie, a legendary business systems designer, to replace Bill Gates as chief software architect was a brilliant move, because Ozzie is taking Microsoft into a world that he's been playing with for many years. Microsoft has made several well-regarded moves lately that disconnect the operating systems from services they provide, and give them more flexibility--and a bigger audience.

With all of these pieces in hand, it's worth looking at a key paragraph in CEO Steve Ballmer's memo sent to Microsoft employees this morning:

"As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D [research and development], marketing, sales, finance, LCA [legal and corporate affairs], HR [human resources], and IT [information technology] over the next 18 months, of which 1,400 will occur today. We'll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs."


While the reporting initially after this announcement was that Microsoft would shed 5,000 jobs, Ballmer is saying the company will actually lose only 2,000 to 3,000 positions.

 Which means that this is part of an excuse to shed dead wood, cut programs they don't think are going anywhere, close down operations that have never turned a profit and should have, and almost certainly thin middle management.

IBM did a purge several years of a large segment of middle management, and the company's performance improved significantly after that. (The last sentence is about jobs in areas that are directly related to customers connected at the other end of the pipe.)

Now I know people whose jobs are at risk--one may have lost a job even as I write these words--so I know that being competent and doing good work won't keep you employed during this layoff cycle. But a cleaning of house is well overdue at Microsoft, too.

Depending on skill sets, the most competent and respected folks being laid off in one are today or soon may find themselves recalled to a new position that Ballmer said will be created during the same time.

Microsoft's real problem heading forward? Sorting through the thousands of job applicants from inside the company and from hundreds of other firms shedding as many or more positions while creating no new ones. Microsoft might rethink reducing its HR department's size.  

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