Microsoft may drag out layoffs for a year

Long periods of uncertainty about who goes, who stays, can corrode a company's morale

Microsoft yesterday said it could take as long as a year to lay off the 18,000 workers who will be eventually shown the door, a long, drawn-out morale-busting process that was criticized by both labor experts and industry analysts.

"I'm definitely not a fan," Wes Miller, an analyst with Directions on Microsoft, and like many at the Kirkland, Wash. research firm a former Microsoft employee, said of the lengthy process. "You owe it to your long-term Nokia and Microsoft employees to do it as quickly as possible. You also owe it to yourself to do it as cleanly and quickly as possible. The longer it drones on, the more randomized people get."

According to a filing with the U.S. Securities and Exchange Commission (SEC) (and an identical press release), Microsoft said it would "substantially complete" the layoffs by the end of this year, and that they would be "fully completed" by June 30, 2015.

In the previous biggest layoff of 2009, when Microsoft cut a total of 5,800 jobs, the company took up to 18 months to finish the dismissals.

"They should have learned from 2009. Morale suffered," Miller said of the uncertainty when workers wondered for months whether they would be laid off.

Mini-Microsoft, an on-again, off-again blogger who is purportedly a current Microsoft employee, agreed with Miller in the first post to the website since former CEO Steve Ballmer announced his retirement nearly a year ago.

"[The 2009 layoff] was implemented so poorly, with constant worries and concerns and doubts about engaging in new ideas due to expectations those would be the easiest to trim during ongoing cut-backs," Mini-Microsoft wrote Thursday. "When was it over? When was the 'all clear' signal given?

"So if this truly drags on for a year: we need a new leader. This needs to be wrapped up by the end of July. 2014," Mini-Microsoft added.

Comments on the blog echoed the hope that the ax would fall quickly. "When you take a Band-Aid off, you just grab hold and rip," wrote one of dozens of anonymous commenters.

Other comments on the blog suggested that some layoffs had taken place immediately. It was impossible to verify the authenticity of those comments, however.

"Most of the follow-up emails I've seen suggest that it will be a quick process (C+E, OSG, Devices, etc.) for those in Redmond who should find out today if they are about to be axed," wrote another unidentified commenter. At Microsoft, "C+E" stands for the Cloud and Enterprise Group, headed by Scott Guthrie; OSG for the Operating Systems Group, led by Terry Myerson; the chief of the Devices Group is Stephen Elop, former CEO of Nokia.

According to the state of Washington, Microsoft said it would eliminate 1,351 jobs in the state.

"I don't think it's a good thing to do," Wayne Cascio, a professor at the University of Colorado, Denver and an expert in human resource management -- specifically downsizing -- said in an interview about long layoffs. "It creates massive uncertainty and a big drop in productivity. People spend their work time on social networking and getting a resume up to date. And there's the very real risk that the company might lose the most valuable, and marketable, employees."

Anything company executives and managers can do to reduce uncertainty, which is the root of the disruption, is all to the good, Cascio added, for both those destined to receive a pink slip and those who will remain.

That uncertainty often leads to an often-overlooked phenomenon, said Cascio. "There's empirical research that has shown that a year after layoffs, the unanticipated turnover rate goes up," he said, of people who, although spared the hatchet, took initiative and left on their own for other jobs. "The larger the layoff, the more that rate goes up."

If a company normally has an annual turnover rate of 10%, it should expect a jump to 15% within a year following a layoff, Cascio said.

When asked whether companies take that into account when they plan layoffs, Cascio said, "I don't even think they know about this."

Cascio acknowledged that in some instances a long layoff stretch can't be avoided. "Microsoft may not know how many to let go," he said. Other factors, including regulations in foreign countries where a company operates, can come into play as well.

He characterized the Microsoft layoff, which aimed to cut 14% of the workforce, as "large." The average is 10% to 11% nationally, with anything over 20% considered an "extreme" downsizing.

"People wonder what's going to happen, but they don't know," said Carolina Milanesi, chief of research and head of U.S. business for Kantar WorldPanel Comtech. "Am I invested in the company or not? Is the company invested in me or not? There's a need for more clarity about what will happen."

"It's important that companies reduce the uncertainty, not only for the people laid off, but for those who remain," said Cascio. "Those who are staying will be looking for signals on how those laid off are treated."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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