How we got here. Some inside scoops from Microsoft on handling early days of pandemic to cutting over 20K folks in 2023

Warning: This will be a long post. I have significantly edited down this story based on inputs from friends to preserve anonymity. Sadly it means leaving out some juicy bits about how your favorite Senior Leadership Team (SLT) member or org leader showed their leadership and empathy or lack thereof. 20K number is estimate and includes vendors. I’ve got many requests to talk about how did we end up with a situation requiring mass layoffs in 2023. I will share some info here on discussions that were going on inside the company and among SLT and the board. I know many of you will say you already knew this. This post is for folks who didn’t. After all a huge chunk of the current employees are relatively recent. I want to break this story into 3 parts. 1. Early pandemic and discussions going on at the company. 2. What led to hiring boom in 2021 and early 2022. 3. When we knew thousands of employees will have to be laid-off and discussions that followed after. 1. Early pandemic. Everyone remembers the early shock in March 2020 and the 2-week work from home to flatten the curve. SLT and org leaders were in panic mode because nobody knew how this will impact productivity, release schedules, and morale. The company was assigned a liaison with direct access to WA state governor Jay Inslee’s office and WA dept of health. They dictated most of our early response. Countries around the world were putting together their own task force to provide local policy guidance for the situation. Microsoft appointed Kurt DelBene to drive the coordination and response for Microsoft globally. Kurt’s early understanding of the whole situation and help and guidance we got from the state liaison were exceptional. Microsoft became the first major company to extend WFH. (Kurt did an exceptional job unlike the next person who took up his mantle. He who shall not be named.) WA sept of health made it clear this in not a 2 week WFH deal. This will stretch for months at the minimum but we couldn’t communicate this to the employees or talk about it because of the mental health implications. There were 3 major issues on leadership’s mind. How will this impact productivity? How can we quickly scramble resources to address the sudden surge in demand for our software and services including huge demand for PCs and Teams? How do we keep the morale of employees high? Mental health implications of WFH, no social contact, not being able to interact with coworkers in person were a huge concern. We quickly came up with a strategy to provide furniture and resources to enable employees be productive at home. Org leaders were encouraged to have frequent all hands with heavy focus on morale and mental health. (Remember the constant ‘How are you handling things?’ questions?) Logistics of handling remote internship was a disaster the first remote year. Fast forward a few weeks and we had the data to show productivity actually went up by a full 8 hours/week. We allocated huge budget to ramp up hiring in orgs seeing a big increase in demand for services. We had great pandemic response team and good communication with health departments worldwide. Everything was in place to help the company navigate through this challenging time. We were also seeing huge savings from facilities and operations costs and discussed passing some of these to employees in the form of one time bonuses. 2. Hiring boom of 2021 and early 2022. Sales of our products and services skyrocketed during the pandemic just like it did for the industry as a whole. Org leaders and finance departments were making rosy projections for growth. It quickly turned into a monkey see monkey do business in entire software industry. Everyone was making rosy projections for growth. Insane numbers like 30%-40% growth for certain businesses and orgs for years to come. This was a critical moment. There were some leaders who had the foresight to see these growth numbers are not sustainable. There was also a slow but steadily growing belief that the demand was only brought forward and will quickly revert on the other end of the curve. Sadly the voices expressing skepticism were few and drowned out in the loud noise of empire building org leaders and SLT members drooling over the implications for their stock awards. Everyone in the industry (except apple) was doing it so nobody wanted to go against the wisdom of the collective. Raising debt to finance things was really cheap (especially for Microsoft given our bond rating) so everyone in the industry began hiring and collecting employees like Pokémon cards. SLT and the board did discuss the possibility of these forecasts not coming true. The overwhelming consensus was that there is a lot to be lost if it did come true and we were not prepared and resourced well to capture the opportunity. They thought the demand will last much longer and the tapering will be gradual. Similar discussions were taking place in corporate board rooms across large tech. The scene was set. The dream castles of rosy projections for revenues were built on faulty assumptions. The dissenting voices were lost in the collective chorus of greedy leaders dreaming about lofty future stock valuations. 3. The downfall. There were 3 major developments taking place in parallel which would all act as a catalyst for layoffs. - Rising hiring and retention costs. - AI and ChatGPT developments. - Sudden drop in revenue for some businesses and forecasts falling short. Hiring market was booming late 2021 and early 2022. The RSU and signing bonuses were rising at an alarming rate irking wall st. The pace of stock grants for hiring talent was not sustainable. Wall st fund managers were especially critical about the dilution of the stock to sustain the hiring and retention. Major wall st fund managers and stock holders started putting together a plan to put pressure on the wage and RSU growth. There were multiple leaks on Reddit (which is where I got the early wind of these planned industry wide layoffs) where hedge fund employees and staff were talking about dumping as high as 300-500K tech employees over year to put serious pressure on wage growth. If the CEOs and CFOs were not receptive to the idea they would pressure the board. A lot of major share holders have their person on the boards of their major holding companies. Our overlords had made up their mind and nothing could stop them. I heard much later from someone who was present at Jackson Hole Economic Symposium in Aug 2022 that these low-key discussions started taking place between CEOs, board members, large tech investors and large fund managers at Jackson hole. AI demo. OpenAI had been using a lot of Azure cloud resources. They were contemplating switching to GCP to save costs. Their computing needs were growing at an exponential rate so Azure didn’t want to lose their business. Satya sent Kevin Scott to go over to OpenAI and see if it makes sense for us to take a stake in the company in order to keep their usage on Azure. What Kevin Scott saw in their demo shocked him. He told Satya he really needs to go see it in action. After all Microsoft was building up our own AI team for years. Satya made no secret of his two big ambitions - AI and Quantum computing. OpenAI would have huge implications on our own AI investments. Satya gets a demo of the ability of OpenAI technology. It quickly became clear to Satya and Kevin that developer productivity can get a huge boost even with GPT 4. Late 2022 Satya started taking about overall employment at Tech companies dropping due to AI. He said something like ‘Tech employment overall will grow but employment at tech companies will shrink’. One major area our AI ambitions would differ from major investments in the past is this would not be in-house. Microsoft will invest in the infrastructure and let OpenAI build the product. Ramping up AI infra investment meant cutting allocations from other areas. Squeezing efficiencies is what Satya likes to say. Drop in PC sales and revenue forecasts not living up to expectations. The final nail in the coffin. PC and Xbox sales were falling at an alarming rate. Revenue forecasts for other businesses turned out to be wrong. A clear pattern started appearing by Aug 2022. By late Sept SLT had already green lit layoffs and we started hiring HR support staff and the plans were being put in place for mass layoffs. It had become abundantly clear we were heavily over staffed for the new tech reality. Budget freezes were put in place and numbers were being crunched on the magnitude of cuts needed. The behavior of SLT and a lot of org leaders was completely in contrast to the tone of empathy and ‘we are a family’ messages earlier. Some were so cold that it was surprising. It seemed like horse trading business. They just wanted to know the numbers and logistics and get it done with. By October 2022 senior leaders in most orgs knew about the scope and depth of the layoffs. Some orgs even relaxed the budget freeze to open up holiday morale budgets to have one last chance to get everyone together. Worrying about the message it would send some org leaders even did limited invite holiday parties. I happened to be at one of these parties and the sheer lack of empathy for the number of lives they are about to negatively impact really shocked me. Oct 2022 also happened to be the month I first started warning about layoffs on Microsoft channel. It kept getting flagged. I tried again in Nov but got flagged again. I moved it to tech channel in December in hopes of countering the HR flagging operation. Was mostly met with skepticism and hateful messages. Google employees were the worst. I warned about Amazon, Google, Microsoft because this is where I had very reliable sources and data. This last part is where I have heavily retracted my story. I wish I could tell you how little some senior leaders care about their employees. I wish I could show you the pictures of the partying. To this day it still makes me sick to my stomach when I think about it and have those images play in my mind. This was the third time I lost respect for Satya Nadella as our leader. The first time was how he handled the constant stream of sexual harassment complaints coming from women across the company. The evidence was overwhelming but the company slow walked it. They sheltered and protected multiple execs and even paid for their legal fees. (I had decided my kids will never work for MS after this). People who complained about harassment and hostile work environments (including Satya’s office and support staff) are systematically targeted and eliminated. Second was how he handled multiple complaints (with clear evidence) of systematic corruption and bribing for contracts by Microsoft around the world. This still happens today. Third was how he chose to handle these layoffs. Being an immigrant and father I thought he would have a little more empathy about uprooting people’s lives at this scale. Let alone taking some accountability for the actions, he asked the board for a raise while all of the above issues I mention are still ongoing. We just have a polished PR and HR machinery to handle this now. I see it as a huge moral failure. It’s all a numbers game folks and remember this when the market improves soon. There is no empathy here. Sorry about the long post. Thank you for reading. Hope it was worth your time. 🫡 Please like the post if you enjoyed it. Also keeps it from getting taken down. HR army will arrive Monday, if not earlier. Yes, Microsoft has a contracted team that 24/7 monitors social media including Blind. #microsoft #tech