Monday, December 29, 2008

No Layoffs at Microsoft, and a Round-up of other Recent Comments

NO LAYOFFS: first, I think it's fair to give some time to comments in the last post that wanted to absolutely dismiss any sort of Microsoft layoff rumor, starting off from one from 12/28/2008 (various comments edited to be condensed a bit):

NO LAYOFFS @microsoft

Yes, Executives are looking for measures to cut cost. And that can be done without any layoffs. Current hiring rate is slow at MS and considering the natural attrition, we will have lesser workforce at the end of FY09.

We are not immune to recession and our bottom line will see a hit for few quarters. We expect a full recovery by FY10 Q3. We are very optimistic that this recession is an opportunity for us and we will play our cards well. Urge all Microsoft employees to stay focus and keep doing the great work. You will hear more from SteveB soon on his plans. Thank you !!

and another from 12/27/2008:

For the last time folks -- THERE ARE NO LAYOFFS HAPPENINGS IN JANUARY..[...] beyond Jan...well we dont have a crystal ball -- but if the economy doesnt improve and the company misses targets -- it would get uglier for everyone -- from no raises/no bonuses to {maybe}cutbacks/layoffs... but then, those are the rules of the game in corporate America..

so for now -- enjoy your holidays, have a new year blast and then get back and work your ass off in the coming months --- for the overwhleming majority of you there -- things would be just fine!!!! PLEASE DONT PANIC!

From 12/23/2008, a more likely scenario that feels like a layoff but gives corporate cover:

MS will not do straight layoff. It will re-org, and cut groups/projects. Say 2000 FTE are given 4 weeks to land a new job within MS, I bet 1500 will find nothing and will be forced to leave. So no layoff, let's call it "reorg-off" and MS can even save layoff package.

In-line with that, from 12/21/2008, bringing up an interesting point about H1Bs:

[T]his company simply could not go through a round of layoff (mind you I did not say a RIF, as we've all seen those) but the H1-B rules would force all of the cheap labor to be shown the door first, regardless of ranking. And Microsoft lives for ranking. Microsoft wakes up in the morning and get an enormous boner over rankings. So don't suggest for a second that there is some dismal, far reaching lay off coming down the river. Microsoft would never give up the chance to use selecting RIF'ing to demote the lowly ranked. If anything there will be selective investments, as has been stated time and time again. But no, Microsoft will not be showing the H1-B employees the door. Never going to happen, in my opinion.

When is a layoff not a layoff: which teams are at risk to re-orgs / cut-backs / RIF'ing? This comment from 12/29/2008 talks about Entertainment and Devices:

We (E&D management) had a meeting with Ballmer around eight-weeks ago. Ballmer discussed the GE approach to laying off the bottom 10% every year. When asked how Wall Street would respond to our layoffs, he said they would be happy.

We will be handing out a list of names to teams within E&D. This list will contain the 20% / Exceeded from the last review period. Teams will cherry pick who they want.

The original plan was to announce the layoff prior to Christmas. When we notified the [governor], we were asked to hold off until after the holidays.

Other things going on (from 12/27/2008):

  1. Several big customers have not renewed SAs. This isn't just Vista, but also Exchange and other major revenue-generating products. Several contracts are going from being in the top-5 to zero. 2009 Q1 and Q2 are going to be horrific.
  2. The whole worldwide economy is in a major slump. Toyota is losing money, for crying out loud. Microsoft leadership is working very hard to avoid mass layoffs -- unlike many other software companies that are cutting even if they don't have to. There's lots of creative thinking going into finding ways to cut costs without harming employees.
  3. One of the more likely solutions to be employed is no bonuses in 2009 reviews. What are you going to do, quit?
  4. Hiring is way, way down. Except for a scattered few positions here and there (SQL Server, Live Services, Search, etc.), Microsoft has almost no openings for external hires.

From 12/24/2008:

One of the "rumors" I've heard around the watercooler is that we are looking at a 10% layoff, and part of those heads will come from the open headcount that is out there.

I'm on one of the teams that are still caught in the middle of a re-org that keeps getting postponed and our Director has told his direct reports to start looking for other positions. Outside of that, nothing has funneled down to the individual teams.

Contractors are being dropped (from 12/22/2008):

I have been asked to let go of two of my contractors end of the month even though they have a month remaining in their contracts. Funny because on Dec 1 we were talking of renewing their contracts. Something big seems to have happened in the past couple of weeks, I suppose. However I still see our Director of Development hanging on in the team despite having no work. He was removed from the team about 6 weeks back and has no one reporting to him or no say in the product.

Regarding what's going on the the Field (12/22/2008):

Thanks to the wonderful mergers in the financial world…Technical Account Managers at Merrill Lynch, Wachovia, and Morgan Stanley were kicked out of those accounts. In central region the automakers basically kicked every Microsoft rep/engineer/consulting out till Mid 2009.

And let’s talk about the rest of the field…ya know the people who support our customers and our products….people in Premier/Consulting/DPE. As our customers are cutting back our PFEs and consulting FTE’s have been forced to fight with each other on getting meager engagements with customers. Services management was talking as recently as August about hiring upwards of 2000 in FY08.

Now with so many people sitting on the bench and not engaged at customers…is it the fault of the services employees or Corp’s fault for over hiring? There have been several internal calls within the last week where RIF planning was discussed.

Comment from 12/22/2008 regarding Microsoft Advertising:

Rumor confirmed from Microsoft Advertising. There are several areas within the organization that I can confirm an upcoming "reorg." Leaders of undisclosed groups have been asked to represent materials around their groups' long term plans and feasibility. I think this one is going to be big, hopefully they just cut the fat. There is plenty of it from my experience.

On cost-cutting:

Groups everywhere are being forced to cut costs - but good thing the Zune guys had a nice holiday party. At least they're profitable so they can cover the costs... oh wait. Probably cost as much as the annual salary of a couple L60-61s

And to the commenter about Robbie's group being on a hiring freeze for awhile - true, but the only reason they got there is because of "crazy hiring"... 800+ people in Zune alone?

Teams not at risk? Office seems to be at the top of that pile. OfficeGuy writes on 12/29/2008:

Layoffs: Office and Windows are unlikely to reorg/lay people off in the near future and are [relatively] safe - we need to ship a high quality product soon (and we will this time, no doubt), so losing even the bottom 10% or whatever could have a negative effect on these two cash cows (and it is too late to replace the fat with new blood this late in the cycle). Having spent a few years in Office I can say that this org is huge but I haven't seen real slackers or dumb useless people (maybe I'm just lucky). By looking at my team that has a lot of junior developers/college hires, I'd hate to lose even the bottom 10% - all these folks do try hard and the team is really respectable in Office.

Office again (from 12/22/2008):

College recruiting (at least in Office) is still firing on all cylinders - managers are being told that there will be a seat ready for every great college candidate we want to hire. The pool of highly qualified grads desperate for a job is as deep as it's ever been in recent years.

So if that is true, I'm skeptical that MSFT will announce anything that even remotely sounds like layoffs. Can you imagine the lawsuits if people are ushered out one door with a pink slip while fresh college grads walk in the other door?

Instead we'll see tightening of performance standards and aggressive managing-out of the low performers. The last thing anyone is going to call it is "layoffs"...

One commenter from 12/22/2008 warns:

Don't assume that firing 10%'ers == 10% cost cutting - it doesn't. To reduce salary costs approx 10% requires cuts into the bottom of the 70% bucket too.

January 15th: so do I think anything is going to happen January 15th? Well, it is after CES (we certainly don't want any bad news before that - though look carefully at the groups there and not there) and before quarterly results (no bad surprises delivered with results - check). But after the rather alarming attention the previous rumor-driven post got, even if something was going to happen January 15th I'd completely expect that's off the table now. Sorry, Oppenheimer & Co.

Gossip Grrrls: did I hear any solid facts during all the snow parties I slushed around at during the Christmas holidays? Nope. Just still a bunch of second hand rumors, probably filtered through people's own agendas and likes and dislikes. Stuff like:

  • Pffft, layoffs, come on! That jerk-ass blogger. Don't-worry-about-it, it's just the loss of open headcount and no backfill for attrition.
  • It's not just the bottom 10% being moved on but also folks in the lower Achieved/70% range (like people who worked themselves up from 10% or are on the way down to 10%). A commenter above had the same observation.
  • Some products and some teams are just gone.
  • Note that we've read a lot of comments about Entertainment and Devices and Server and Tools. All the gossip I hear swirls around them.
  • Prototype, redundant, and pie-in-the-sky teams are going to be re-org'd into everyday meat-and-potato teams. We're going to have a bunch of spare code names soon.
  • It's a layoff masked as rhythm-of-business reorganization plus performance management plus Not To Exceed staffing budgets being strictly enforced.

That last point is interesting around labor laws that I don't begin to know anything about, laws like when a layoff comes that the H1B hires are supposed to be the first to be let go and the Working Adjustment and Retraining Act one commenter brought up. If this is a stealth layoff due to a lot of RIF'ing and those people leave because there are no matching open positions, does Microsoft have legal cover against this being an honest to goodness "layoff?"

I think a requirement like having to shed all the H1B hires absolutely nullifies Microsoft doing a classic layoff. We just wouldn't let go of those people.

Oh, and in closing, the following question came in with a comment from 12/27/2008:

Mini - the entire premise of your blog is that MSFT needs to reduce in size, be more efficient, be more cost-effective. While the reason is not the ideal one (forced upon MSFT by outside economy, rather than developed as part of smart strategy), the end result will be the same. If MSFT is a capable company at its core at all, it will survive, evolve and thrive.

If there truly is a round of layoffs, and MSFT ends up becoming the leaner, meaner, smarter, more innovative company you wanted... shouldn't you be ecstatic?

It's a pretty tempered ecstasy. Yes, I want a smaller Microsoft because I believe that Microsoft has exploded in size for no good reason. Going back to 2004. Even with the continued hiring binge since I started this blog, I had a small glimmer of hope that reason would be seen and discipline enacted to hire a limited set of high caliber contributors - and flush out the employees who are better suited working elsewhere. That never happened. And now we're in a, "golly-gee-wilikers the cash ain't coming in like it was and we've done gone and hired all these people! Yeep! How'd that happen?!?" mode.

In a year, when this all passes, we'll be back to hiring like crazy, learning nothing. Unless the leaders at Microsoft that run tight, well managed organizations can step up during this time and flush out the binge-hirers. There's my little glimmer.

(Edit: put in links to the appropriate sources for the comments I quoted above.)

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