“There is an art to layoffs: You make them early, deep, and get them over with fast,” said Enderle. “Satya gets two out of three on this, and because his effort includes plant shutdowns and has to work through difficult European labor laws, he is likely prevented from making this as crisp as it should be. Doing layoffs early and right gets the pain over quickly and allows the CEO to then focus more on building the company and [getting] people back on their jobs as opposed to worrying about them.”
“When big companies like Microsoft implement large layoffs, the logical thing to do is to blame the CEO,” said Infragistics’ Mendlen. “However, in this case, Satya came late to dinner and got stuck with the bill. He didn’t advocate for the Nokia acquisition that pushed the employee ranks far beyond what the company could support. Independent of whether the acquisition was a good or bad idea, it had a cost. And that cost was a round of big layoffs. It had to happen. Having managed teams through several rounds of layoffs at Microsoft, I can tell you that there is no ‘good way’ to do it. Microsoft just needs to get through it and focus on what’s next.”
On staffing and personnel moves
Nadella has done a fair amount of shuffling of his core executive team, as several prominent figures, such as moving out ex-Skype head Tony Bates, bringing back Stephen Elop, and promoting cloud and enterprise head Scott Guthrie. The sum of all these moves is that Nadella is making the executive hierarchy into a structure he can rely on.
“In staffing, [Nadella] has aggressively surrounded himself with people he can trust,” said Enderle. “While some aren’t the most skilled, it is generally better to have a cohesive team of people who are loyal to you than a group of superstars who either feel they should be running the company or that they are above direction or cooperation. Ballmer was plagued by highly qualified people who were mini-emperors and crippled the company with silos. Nadella appears to have learned from Steve’s mistake and addressed this problem aggressively.”
In both the layoffs and personnel moves, there is a deeper strategy at work beyond Microsoft’s needs on the surface. Merv Adrian, lead Microsoft analyst at Gartner, sees Nadella’s executive decisions as part of a more subtle and concerted effort to reshape Microsoft’s core culture.
“Nadella’s aggressive restructuring of the workforce has two sides: everyone knows about the cuts, but there has already been significant investment in new positions and people to fill them, emerging organization structures that emphasize flatter management hierarchies, and internal events designed to get everyone on the same page,” said Adrian. “He’s been aggressive in driving this forward. The early indications are good, but it takes a long time to shift things like measurement, compensation models and “accountability culture.”
Cloud and mobile: A
Nadella is often credited with the success of Microsoft Azure and the company’s overall enterprise cloud presence, and in the last six months that position has only strengthened. Aligning cloud and mobile together as part of a “Mobile First, Cloud First” software strategy has taken that commitment to another level. While Windows Phone continues to see middling returns even after the absorption of Nokia, moves such as releasing Office for iPad begin to show a more open-minded approach to Microsoft’s mobile offerings.