Published July 17, 2014
In a letter to employees early Thursday, Microsoft (MSFT) CEO Satya Nadella said the tech giant will slaslh its workforce by as many as 18,000 jobs over the course of the next year, with the first round of 13,000 cuts coming within the next six months.
The move comes after Nadella hinted at changes coming to the blue-chip software company in remarks last week. The workforce elimination is what Nadella calls the first step to “building the right organization for our ambitions.” The first round of cuts will hit the Nokia Devices and Services unit, which will account for a loss of 12,500 jobs for professional and factory workers. He added, though, while the company is reducing the size of its current workforce, it also plans to add roles in certain strategic areas.
“My promise to you is that we will go through this process in the most thoughtful and transparent way possible,” Nadella said in a statement Thursday.
He added these decisions are “difficult, but necessary” for Microsoft, and offered to those whose jobs are eliminated, severance and help with the transition will be available.
A Focus on Innovation
In his letter, the Microsoft chief said the job cuts are primarily driven by a desire to make the work environment simpler, and drive more strategic alignment with the company’s Nokia Devices and Services Unit, which was acquired last year by the tech titan. That unit of the business is where most of the cuts will happen as the company moves to integrate those teams into the broader Microsoft organization.
Nadella briefly outlined the way in which the integration will happen and the goals of the move, stressing a move to win in the higher price points by focusing on innovation that will help rejuvenate Microsoft’s digital work and life experiences. Additionally, he said a plan is in the works to shift some Nokia X product designs to run Windows to build on the success the company has seen in the smartphone space, with a focus on Windows Universal Apps.
In order to make all of these plans happen, Nadella said Microsoft must become a more agile company that has the ability to move faster by reducing the managerial layers throughout the company to help drive more creativity and enhance the decision-making processes. But the changes won’t just affect Microsoft’s employees, but its vendor staff as well.
“This includes flattening organizations and increasing the span of control of people managers,” he said. “In addition, our business process and support models will be more lean and efficient with greater trust between teams.”
What Happens Next
Nadella, who took the reins at Microsoft just four months ago, has been vocal about his desire to implement a strategy for change at the once-all-powerful tech giant, so Thursday’s announcement didn’t come as a total shock to employees or financial markets.
Nadella assumed his c-suite position at Microsoft on February 4, taking over for former CEO Steve Ballmer, who served in that position with the company for 13 years. During Nadella’s short tenure with the company, Microsoft has seen a 22.5% jump in its stock price, which notched a new all-time high of $45.71 Thursday, ending the trading day 0.5% higher at $44.53.
To that point, data from Glassdoor, a jobs and careers online community, shows Nadella is popular among Microsoft employees, holding an 88% approval rating, which is more than 20% higher than the average CEO approval rating, which hovers around 69%. The company itself, meanwhile rates a little higher than “OK” by employees, while 52% of more than 400 Microsoft company employees who participate in the reviews on the site, believe business performance will get better in the next six months.
Last week, Nadella outlined a new strategy for the firm he calls “One Microsoft.” A senior project manager from the company who reviewed Nadella’s performance on Glassdoor said the initiative offers empowerment to employees.
“Culture is one that expects hard work, ability to meet aggressive timeline,” the employee said. Adding “Work/life balance is generally appreciated – but it doesn’t mean the expectations are low.”