Microsoft has confirmed that it is reducing its workforce by targeting underperforming employees across various departments, a move reflecting its ongoing strategy to optimize operations.
A spokesperson for the company told Business Insider, “At Microsoft we focus on high-performance talent. We are always working on helping people learn and grow. When people are not performing, we take the appropriate action.”
While Microsoft did not disclose the exact number of affected employees, it often backfills roles vacated due to performance-related departures, ensuring minimal disruption to overall operations.
This latest round of cuts show Microsoft’s strategy to maintaining a high-performance workforce aligned with its long-term priorities while at the same time reducing cost. The adjustments follow months of internal reviews and are part of a broader industry trend, with major tech companies increasingly focusing on workforce efficiency amid evolving economic conditions.
Targeted Evaluations at Senior Levels
Microsoft’s evaluations extended to senior-level employees, including those in level 80 roles. Level 80 represents some of the company’s highest technical and managerial positions, highlighting the comprehensive nature of the performance assessments.
According to sources familiar with the matter, the reviews were conducted over several months and affected multiple divisions, including the security sector. The company’s security division is a vital area, reflecting growing global concerns about cybersecurity risks.
Microsoft and other tech companies have been reintroducing stack ranking, a system where employees are ranked on a bell curve, with the lowest-ranked individuals being laid off. This practice was popularized by Jack Welch, former CEO of GE, and is also known as “Rank and Yank.” The return of such ranking systems marks a shift in tech company culture, transitioning from aggressive talent acquisition to cost discipline.
Historical Context: Layoffs and Strategic Investments
These targeted layoffs are not an isolated event for Microsoft. In January 2023, the company announced its most substantial job cuts in years, eliminating 10,000 roles —approximately 5% of its workforce at the time.
This was followed by additional layoffs in the gaming division, where 1,900 positions were cut after Microsoft’s $69 billion acquisition of Activision Blizzard. These reductions came as the company sought to integrate new teams and streamline its gaming operations while managing redundancy in acquired assets.
Microsoft’s current workforce numbers reveal a decline from a peak of nearly 237,000 employees in 2022 to approximately 228,000 by mid-2024. CFO Amy Hood acknowledged these adjustments during an earnings call, describing them as part of Microsoft’s broader efforts to maintain efficiency and prioritize investments in key areas.
Amy stated that workforce adjustments are part of broader efforts to align with strategic goals and ensure flexibility in meeting market demands.
Strategic Priorities: AI and Cloud Lead the Way
While making these cuts, Microsoft is simultaneously channeling significant resources into growth areas such as artificial intelligence (AI) and cloud services. The company’s Azure cloud platform has become a cornerstone for businesses worldwide, offering scalable infrastructure and computing power.
In addition, Microsoft is leveraging AI tools like Copilot, which integrates machine learning into its productivity applications, transforming how users interact with tools like Word and Excel. These investments reflect the company’s strategic focus on innovation while optimizing its operations to remain competitive in a rapidly changing industry.
Microsoft’s workforce adjustments are also emblematic of a broader trend across the technology sector. Google, for instance, recently implemented a 10% reduction in its management ranks following 2023 layoffs affecting 12,000 employees. Such measures signal a shift among tech giants, emphasizing efficiency and performance while navigating post-pandemic economic uncertainties.
The decision to focus on performance-based reviews aligns with Microsoft’s long-term strategy of ensuring that talent aligns with its strategic objectives.
