Microsoft layoffs and the downfall of tech’s great cultural experiment

Let’s get the obvious out of the way: Layoffs are awful. They’re the most awful for those impacted, who face both emotional and practical consequences. But they are also awful for the people who have to plan and execute the layoff, and for those who have to carry on working having lost teammates and friends.

Layoffs are also currently more popular in tech than the latest dance trend on Tik Tok — it’s terrible, but true. As a communications strategist I’m a firm believer that good messaging can make layoffs slightly less awful for all involved. And of course, bad or poorly thought-through messaging can make the experience a whole lot worse (*cough Elon cough*). But most importantly, the content and tone of a company’s messaging says a lot about the state of the business — and the world through their eyes.

This week it was Microsoft’s turn. Let’s talk about some of the cultural themes emerging across tech and how they show up in their layoff memo.

Theme 1: The “mea culpa” layoff era

The primary justification we’re seeing companies give as layoffs continue across the industry is that over the last couple of years they grew too fast, their projections were too optimistic, and 2022 caught them off guard. It’s a popular narrative because it is largely true. And while we should absolutely expect leaders to hold themselves accountable, the companies themselves are only partially to blame here. We need greater accountability from the VCs and institutional investors who back these companies. They have a wealth of expertise and perspective and should use that to better advise on how to be prudent in both good times and bad.

We haven’t seen enough of that over the past few years — probably because incentives are misaligned at a systemic level. The VC model means it’s in their interest to push all portfolio companies to make hay while the sun shines in the hope that a few will have what it takes to survive and thrive (and prop up the VC balance sheet) when the inevitable rainy days come. But I digress.

Interestingly, this “mea culpa” narrative is notably absent in the Microsoft memo. Instead, they point to their successful 47-year track record to explain that environmental fluctuations happen and hard decisions have to be made periodically in order to stay the course. They are upfront and unapologetic about saying that while they are reducing their headcount in some areas, they will actively continue to hire in others in a way that allows them to “invest in strategic areas for the future”. It hangs together to me, and the honesty is refreshing.

Theme 2: The contrition problem

If we all put our empathy hats on for a moment and look at layoffs on the most basic human level, I think we’d agree that companies objectively have a lot to be sorry for when they do a layoff. Losing your job suddenly usually negatively impacts a person’s life.

But despite that, I’ve noticed a curious trend across the majority of layoff communications — a reluctance to show contrition. Perhaps it’s because those tech CEOs who have gladly welcomed the mass hero worship and celebrity status that have become the norm in recent years don’t suddenly want to tarnish their reputations by admitting fallibility. Of course the reality is quite the opposite — any CEO worthy of admiration can admit they are flawed just like the rest of us.

In all the layoff comms strategies I’ve (unfortunately) worked on I always recommend that a little contrition goes a long way. I don’t ask leaders to say anything they don’t mean — companies don’t regret the layoff itself otherwise it wouldn’t be happening at all — but it’s possible to feel and express empathy for those impacted. I know there are different POVs out there on this and I’m not saying I’m right — but when you’re dealing with people’s livelihoods, I think it’s important to be human.

With regard to this theme, the Microsoft memo is very much on track. They acknowledge that “this is a challenging time for each person impacted” and commit to going through the process “in the most thoughtful and transparent way possible”. They mention transparency a few times actually — only somebody within Microsoft could tell us how that’s playing out in reality and if it is an effective substitute for contrition.

Theme 3: The re-emergence of high performance cultures

As the job market deteriorates we’re seeing an industry-wide shift in the balance of power from employees to employers. With it comes a high level narrative shift from focusing on work perks to focusing on high performance. This is compounded by the fact that it’s true — the reality of a less favourable macroeconomic environment is that companies have less money (and less desire) to spend on free food, ping pong tables, and even headcount. Instead, they are doubling down on driving the most impact from their existing workforces.

Again, the Microsoft memo aligns perfectly here. In the penultimate paragraph, Satya Nadella (or whoever writes his comms) says “every one of us must raise the bar and perform better than the competition”. We saw very similar language from Meta this week as The Information reported that they’re changing their performance review process to increase pressure on their workforce to deliver. The article mentions an executive who last summer instructed managers to identify and “move to exit” low performers or anyone deemed to be “coasting”. I’d predict that Microsoft employees should prepare for a similarly increased level of scrutiny around their output and value in the near future.

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The tech industry is having a collective identity crisis. We’re seeing an industry-wide cultural moment of reckoning ushered in by a struggling economy that’s prompting companies to think about how important the historically prized trappings of a career in tech such as nap pods and stocked kitchenettes *really* are when your workforce is still underperforming. And we’re seeing all of that show up in each company’s layoff messaging.

But just as companies shouldn’t over index in any particular direction during the good times, I’d caution the same now. The thing tech has always gotten right is the emphasis placed on being values-driven. CEOs and leadership teams can reduce environment-induced cultural volatility if they ensure they are operating authentically in accordance with their values regardless of the circumstances. But that’s an article for another day.