Nadella: Culture Change and a Smaller Microsoft

Microsoft's CEO calls the company a "platforms and productivity" company, and calls for reducing workforce by 18,000, mainly from Nokia acquisition.

Microsoft CEO Satya Nadella emphasized the company's "platforms and productivity" and "leaner Microsoft" message in a memo to employees a few weeks ago. And in his keynote address earlier this week at the Microsoft Worldwide Partner Conference in Washington, D.C., he said the company intends to change its culture.

"We change the core of who we are in terms of our organization and how we work and our value to our customers," Nadella said. "That's the hardest part, really. The technology stuff is the simpler thing. We all know that, but we need to move forward with the boldness that we can change our culture. It's not even this onetime change, it's this process of continuous renewal that [will] succeed with our customers."

The other shoe dropped this morning.

Microsoft just announced the largest round of layoffs in the company's history: 18,000 employees. More than two-thirds of them will affect workers in its Nokia factories, with the rest impacting other parts of the company. The layoffs are aimed at creating a flatter and more responsive organization.

The larger-than-expected reductions from Nokia is the result of a plan to integrate the company's operations into Microsoft, Nadella said in an e-mail to employees announcing the job cuts, 13,000 of which will take place over the next six months. "We will realize the synergies to which we committed when we announced the acquisition last September," Nadella said. "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."

Nadella also said that Microsoft is looking to simplify the way employees work by creating a more agile structure that can move faster than it has and make workers more accountable "As part of modernizing our engineering processes the expectations we have from each of our disciplines will change," he said, noting there will be fewer layers of management to accelerate decision making.

"This includes flattening organizations and increasing the span of control of people managers," he added. "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."

The layoffs don't mean Microsoft won't continue to hire in areas where the company needs further investment. Nadella said he would share more specific information on the technology investments Microsoft will make during its earnings call scheduled for July 22.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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