Microsoft has confirmed plans to reduce its workforce by 3 percent, affecting nearly 6000 employees worldwide. The layoffs span departments and geographies and come as part of the company’s drive to simplify operations and respond to evolving market conditions.
Structural Overhaul Targets Middle Management
Unlike previous performance-based cuts, the current layoffs are structural, aiming to flatten the organizational hierarchy. Microsoft is specifically targeting middle management to improve manager-to-engineer ratios and increase operational agility. Coders and engineering talent involved in AI development are expected to be less impacted as the company prioritizes innovation in that space.
AI-Focused Strategy and New Performance Metrics
The restructuring reflects Microsoft’s commitment to accelerating its artificial intelligence initiatives. As part of this shift, the company has introduced a revamped performance management system. Employees dismissed for underperformance now face a two-year rehire ban. A new “good attrition” metric, similar to Amazon’s “unregretted attrition,” tracks voluntary departures deemed beneficial to the company.
Employees with performance issues will be offered a choice between a Performance Improvement Plan (PIP) or a Global Voluntary Separation Agreement, which includes 16 weeks of severance pay. However, choosing the PIP forfeits eligibility for severance, and employees have just five days to decide.
Tech Industry Embracing Efficiency
Microsoft’s move aligns with a broader trend across the tech sector. Industry peers such as Amazon, Google, and Meta are similarly eliminating layers of management in a push toward efficiency. Meta, for instance, is also expected to announce more layoffs this year as part of its “year of efficiency” campaign.
Layoffs Despite Strong Financial Performance
Interestingly, Microsoft’s decision to trim its workforce follows better-than-expected quarterly results reported in April. CEO Satya Nadella acknowledged that while the company is performing well overall, adjustments are necessary in sales execution—especially following weaker-than-anticipated growth in non-AI Azure services.
Microsoft’s latest round of layoffs is a strategic pivot toward efficiency, innovation, and AI-led growth. While the changes may be difficult for affected employees, the company’s leadership sees them as essential for long-term competitiveness in a rapidly evolving tech landscape.
