Microsoft to cut 18,000 jobs as part of new restructuring plan

Today, as part of an expected restructuring plan, Microsoft announces that it will cut 18,000 jobs within a year. The company claims this move will "simplify its organization and align the recently acquired Nokia Devices and Services business with the company's overall strategy". Yes, basically, Microsoft wants to get rid of excess employees, and the software giant is doing so following Satya Nadella's last memo to employees.

Of the 18,000 jobs to be cut, 12,500 positions are to be eliminated as a direct result of its deal with Nokia. The job cuts are not expected to be carried out completely until the end of June, 2015, and will cost Microsoft between $1.1 and $1.6 billion, which includes between $750 and $800 million in severance packages. The writing has been on the wall since the Devices and Services purchase was finalized earlier this year.

Microsoft says that the first 13,000 jobs will be eliminated as soon as possible, with the majority of remaining employees to be notified within half a year. All of Microsoft's employees who will be laid off as part of this restructuring plan will receive severance packages and "job transition help in many locations", according to Nadella.

On top of the usual promises of turning Microsoft into a stronger player as well as the expected corporate speak, Nadella also says that this restructuring plan will make way for select Nokia X models to turn into Lumia Windows Phones. So much for supporting Android.

Microsoft CEO Satya Nadella has written a letter to the company's employees, explaining the move in detail and what it entails. You can read it in its entirety below.

From: Satya Nadella

To: All Employees

Date: July 17, 2014 at 5:00 a.m. PT

Subject: Starting to Evolve Our Organization and Culture

Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.

The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year. Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers. We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months. It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.

Later today your Senior Leadership Team member will share more on what to expect in your organization. Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

First, we will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.

Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.

Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.

Satya

Photo Credit: Gang Liu/Shutterstock