Microsoft is slashing thousands of jobs to try to increase what it calls “span of control,” or the number of employees who report to each manager.
The software giant on Tuesday confirmed the cuts, which Business Insider first reported in April. Microsoft said about 3% of its global workforce, roughly 6,000 employees, will be affected.
Microsoft’s attempt to flatten management layers follows similar announcements from big tech peers. Amazon has been trying to increase the ratio of individual contributors to managers. Google CEO Sundar Pichai in December told staff that the company cut vice president and manager roles by 10% as part of an efficiency drive.
Microsoft started notifying affected US employees on Tuesday. A spokesperson confirmed impacted US staff will stay on the payroll for 60 days, but that will vary globally based on local regulations.
‘Too many levels and layers’
A half-dozen Microsoft insiders who spoke to BI about the changes generally consider the effort to flatten management layers as a good thing. One executive told BI there are a lot of managers who just aren’t that great, while another Microsoft staffer said the company has too many levels and layers. These people asked not to be identified discussing sensitive matters.
The company ended up with many layers, the people explained, because it often tried to reward good engineers by promoting them to become managers, sometimes with as few as one or two reports. Often those engineers-turned-managers still spent most of their time in the codebase and weren’t very effective as managers. Having so many layers of management also proved to be inefficient, these people said.
Microsoft doesn’t have any centralized goals for span of control, or number of reports per manager, but some leaders have their own targets, according to people with direct knowledge of the situation.
Cloud + AI boss Scott Guthrie, for example, wants to increase the span of control in his organization to eight engineers per engineering manager, and seven project managers per manager, according to the people.
Microsoft Security chief Charlie Bell is going for nine reports per manager, though he hasn’t separated goals for span of control of engineers and PMs, the people said. Bell has, however, set goals for the ratio of PMs to engineers, similar to the “builder ratio” at his previous company, Amazon, BI previously reported.
In response to a request about Bell’s and Guthrie’s span of control goals, Microsoft’s spokesperson said there are no blanket ratio numbers.
Tuesday’s job cuts also target non-coders, aiming to increase the number of coders on projects, which Microsoft internally calls its “PM ratio” BI previously reported.
Microsoft has no stated maximum for the number of reports per manager, the people familiar said, though it’s generally believed that larger groups of direct reports work better with senior employees, who need less one-on-one time and can do more things in a group setting.
While some kind of flattening is generally regarded as necessary, there’s uncertainty related to how Microsoft will collapse all of its management layers and make it work, the people added. One staffer told BI that managers are particularly concerned.
Why Microsoft is making cuts
The changes come as Microsoft tries to reduce costs amid significant investment in artificial intelligence.
Barclays analysts on Tuesday said the cuts are “a commitment to profitable growth and optimizing the company’s workforce, particularly with AI becoming a more prominent and efficient tool within the organization.”
Microsoft’s culling of management layers comes after earlier performance-based cuts to its workforce this year. Microsoft beginning in January ousted 2,000 employees it deemed to be “low performers” and started a new performance improvement plan.
A recent internal email sent to Microsoft managers, viewed by BI, said this new plan was “globally consistent” with “clear expectations and a timeline for improvement.”
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