Microsoft announces second-biggest job cuts in its history: We continue to …
Microsoft
has announced that it will lay off 3% of its global workforce, affecting thousands of employees across all levels, teams, and geographies, amounting to about 7,000 employees. The cuts at the Redmond giant, which employed 228,000 people as of last June, aim to reduce management layers and streamline operations.
"We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace," a Microsoft spokesperson told CNBC in a statement.
This represents Microsoft's largest reduction since eliminating 10,000 roles in 2023. Unlike January's smaller performance-based cuts, the company indicated these layoffs are structural in nature.
These cuts may particularly impact middle management roles, as the company seeks to create a more streamlined hierarchy by increasing each manager's "span of control." Microsoft, as reported by Business Insider previously, aims to prioritize engineering talent as it continues investing heavily in artificial intelligence initiatives.
Microsoft has introduced new rehire ban and performance management overhaul
The workforce reduction comes amid significant changes to Microsoft's performance management system. According to internal documents viewed by Business Insider, the company has implemented a two-year rehire ban for employees forced out due to performance issues.
Microsoft has also introduced a "good attrition" metric to track desirable employee departures. This approach mirrors Amazon's controversial "unregretted attrition" system and signals Microsoft's intent to more aggressively manage underperforming staff.
Under the new system, employees facing performance issues must either enter a performance improvement plan (PIP) with "clear expectations and a timeline for improvement" or accept a "Global Voluntary Separation Agreement" with 16 weeks of severance pay. Those who choose the PIP path have just five days to decide and will no longer be eligible for the severance package if they opt for the improvement plan.
Tech sector sees industry-wide efficiency push
Microsoft's restructuring reflects a broader trend across the tech industry toward flatter organizational structures and higher engineering efficiency. The company is reportedly focusing on reducing its "PM ratio" — the proportion of managers to engineers — across teams.
Similar strategies have been implemented at other tech giants, including Amazon and Google, where the top layer of the hierarchy were let go. Meta is also expected to let go off several thousand employees this year, as CEO Mark Zuckerberg pushes for a 'year of efficiency.'
The layoffs follow Microsoft's better-than-expected quarterly results reported in April, when CEO Satya Nadella indicated the company would make sales execution changes after lower-than-expected growth in non-AI Azure cloud revenue.
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