Episode Transcript
[00:00:00] Good morning everybody. I would like to spend a little bit of time debunking the AI layoff myth just for a little while and particularly talk about the Microsoft announcement last week that they were quote, unquote, enabling 60,000 employees to go through a voluntary termination program. And I talked to Microsoft about this and of course what happened was the minute the announcement came out, 50 articles appeared about layoffs around AI and criticizing Microsoft and lots of people poked up on TikTok and Instagram and LinkedIn demeaning Microsoft for being an evil company. Now I have a few reactions to this. Of course layoffs are no fun, but this is not a layoff. This is an example of a company that had an early retirement program back in April that was a very kind of a rich program for anybody who had a combination of age plus tenure of 70, which, which by the way, this is very, very common. It happens all the time in companies early retirement programs to try to encourage senior people to leave. It happened many, many times in my career at many places that I worked. And what happened at Microsoft was after they did that early retirement, a lot of people came to the HR organization and said, gee, this is kind of cool. I wish I could take it. In other words, you know, it's a big company. A lot of people at Microsoft have been there a long time. People see other opportunities for their careers. Maybe they want to go work for a startup, maybe they want to take time off, maybe they don't want to start their own thing. So Amy Coleman, the Chro apparently decided, well, let's put together another program for people that want to leave and give them a standard severance. So the voluntary time off is not a layoff. It's not even a forced or sweetened package to encourage people to leave. It's simply a program that says that if you're in one of these non essential areas and you want to leave, Microsoft will give you a severance package. And they don't expect 60,000 people to take it. They expect about 2 or 3, 5% at most to take it. So they expect a few,000 to 3,000 people to take it. Now is that a layoff? Is that an AI job elimination?
[00:02:17] No, it is not. It's a company that is simply saying we want the most engaged, energetic, aligned workforce we can possibly create. We know that some of the people in the company may not be doing what they want or may want to find other things to do with their lives and we don't want to make it difficult for them to leave. We want to make it easy for them to leave so we can make room for the people that really want to be part of Microsoft to thrive. And this is a very, very sound talent strategy and it's a new way of thinking about management and leadership in this world of talent density. Now I talked about this in the article I wrote many years ago, in the 1990s, maybe it was the early 2000s, no, 1990s. I was working for a company by the name of Sybase, S Y B A S E. It was a very well known database company, very hot company. And the first five years I worked there it was a rocket ship. And then, you know, things kind of fell apart and Oracle kind of caught up to us and we got into some problems competing with Microsoft and a variety of other things. We acquired another company that kind of didn't work out as well as we had hoped and the company started Stumb and the CEO founder sort of stepped aside. Some new managers, leaders came in and I was in this job doing business development and channel stuff and it was kind of boring. I had a big account and did a bunch of business with this big account. But once we signed the deal with this big account, there wasn't that much to do. So for a year or two I was, you know, fairly bored. There were a couple of layoffs. I didn't get hit by any of them per se, but I was working in a building here in the Bay Area in Emeryville where most of the desks were empty. A lot of people had left or been forced to leave. And I used to go in the office. Another friend of mine who now works for SAP and I used to schmooze around and say, hey, you know, we're the only ones here. What are you doing today? I don't know. What are you doing today? We go out to lunch. It was kind of boring. And so my kids were young. I spent a lot of time taking care, coaching their soccer team, doing things like that. And I remember that year or two thinking, this is sort of a stasis or pause in my career. I'm not going anywhere. The company's not going anywhere. There's no really big opportunities at the moment until this company turns itself around or changes itself. I was not that senior at the time and eventually a startup got hold of me and I ended up to go work for a startup and that started a whole new career for me. If they had had a program like the voluntary departure program that Microsoft has, I don't know, I probably would have taken it and you know, maybe Sybase would have been a little bit better off not having me there. I might have been a little bit quicker to find something else to do. I might not have coached quite so many soccer games. But there's lots of opportunities to make it easy for people to leave.
[00:05:13] And great companies encourage this because they don't want people in the company that don't fit. Lots of times you'll be in a business or a job or a role, or you have a manager and it's just not working out for some reason. And the reason you usually don't quit is it's hard to find a new job and it's a little bit painful to say goodbye. But if the company facilitates that, and I don't mean they're pushing people out, but makes it a little more attractive and gives you career transition services and a termination package, what the heck, maybe it encourages more people to leave. And Microsoft's revenue per employee is quite a bit lower than Google. It's much higher than companies like Dell that make hardware. So they absolutely do have opportunities to improve talent density. Now, you know, I'm not saying there aren't layoffs taking place in different parts of the economy, and I read almost every story that comes out about this, but I usually find from this perspective that I can gather from my own experience and talking to people is that most of these layoffs are not some giant AI transformation that just was suddenly unleashed and a whole bunch of jobs were eliminated, but rather the company hired too many people or it acquired an organization. And a bunch of the people that in the acquired organization just don't want to be there because they don't like the new company. So they have to let these people go. Oracle just went through this. Oracle's got all sorts of financial shenanigans going on with this shift to becoming a data center company, which is a doll story in itself, that maybe I'll talk about that some other time, but it happens all the time. And the reason it happens is we have a somewhat outdated management model that the way to acquired skills is to hire them or to acquire them. The way to grow is to staff up. The way to make more money is to have a larger span of control.
[00:07:08] The way to be a cool company is to have more employees.
[00:07:13] All of those are not true. Sometimes they are, but usually not. So, you know, if you're OpenAI or anthropic and you see the entire planet wanting to buy your stuff, yes, you have to hire a lot of people. And it makes perfect sense to hire or acquire headcount, especially if they're the right people or if you're a, you know, relatively fast growing hot AI company that's a little bit smaller, like Sana Labs, for example, who is acquired by workday. You can't grow and tell people about your hot product unless you have more marketing, more sales, more product, more engineering, et cetera to do that. But those are unique situations of high growth companies that are in a point in their growth cycle where they happen to be in just the right place at the right time and the market really wants what they have. A lot of companies want to grow, but there isn't enough market demand for their product. So hiring more people is not going to help. It might, but most likely what'll happen when you hire a lot of people is the productivity per person will go down because number one, the new people need training, so they don't really know what to do for a while. Number two, the managers get overstretched with more staff and new staff, so they oftentimes aren't prepared or experienced managing a lot of new people. And number three, you create more intercommunication between people because the larger the company is, the more you have to break it into small pieces to prevent bureaucracy. Because if you hire hundreds and hundreds of people, you need line managers, middle managers, middle level directors, Senior Directors, Junior VPs, VPs, et cetera. And all of a sudden you have more communication, more meetings, more staff stuff, and the whole company slows down. So nothing wrong with hiring people if the business conditions are good, but it's just not the rule anymore to hire to grow. I call it the opposite. I call it grow to hire. In other words, you build a great product, you market and sell it like crazy. You create demand, you make sure your customers are really, really happy. And as the growth accelerates, you hire more people as needed. Because as you grow, you become clearer and clearer at who to hire and what is the right staff, the right culture, the right skills, the right personalities that you need.
[00:09:43] You know, Microsoft's been around a long time. Microsoft. I mean, I was literally a young man when Microsoft was founded. So this is a company that goes way, way back to early days of the PC. And you know, that legacy is still there. There's probably people at Microsoft, maybe not very many that are my age, that might have worked there in the days of Windows 3.1. I mean, I don't know how many, but there could be some. I imagine there's quite a few. Kind of like when I was at IBM. There were a lot of people that worked on mainframes when I left in the late 80s, early 90s. So I think we're misinterpreting these headlines. And you know, I know there's a lot of people that I don't know like to demonize big companies for lots of different reasons and think about the capitalistic system as being inhuman and not very positive in its approach to careers and individuals. And that happens a lot. I mean, that's a common refrain from anybody who's ever been fired or anybody who's ever been laid off. I'll tell you, I've been laid off once severely and then once before inadvertently. And it is a shock. And the first thing that goes through your head is I'm really mad. So it's not fun, it's not a nice experience. And some companies do it well and some companies don't. By the way, one of the things that's really shocked me over the years, especially the last five to 10 years, is how letting people go has become so inhuman and mechanical that all you get is an email and all of a sudden your computer doesn't work or your badge reader doesn't work and you can't get into the building. Even the federal government seems to be doing that. I don't think that's a good idea. I mean, you definitely, when you let people go, you have to do it quickly, but you should be humane about it because your brand is at stake. But that's not what happened at Microsoft. That's not what Microsoft's doing. Microsoft, by the way, in the middle of all this, they had a fantastic quarter. The stock market was sort of a little jittery in general, but Microsoft's doing great in almost all areas of their business. So you know, there's more work to do up there. There's plenty of things for them to do and lots of exciting projects. But they want the right people there and they want people that want to be there. And it's pretty simple. So anybody that wants to talk about this, one more thing. The Microsoft people told me that as a result of this program they're getting a lot of inquiries from other companies asking them how to do this because everybody has people in their organization that are sort of midd performers or semi checked out or slightly grumbling about this or that. And maybe they shouldn't be there and we don't want to fire them, but maybe they should voluntarily leave. And getting back to the very beginning, the two companies that I think can be credited with pioneering. Some of the ideas that we now call talent density are Netflix and Amazon and one or both of them, and I can't remember which one, have a policy that if you join the company in the first, I think 90 or 120 days and you don't like it there, they will pay you to leave because they don't want you to hang around if it turned out to be a bad fit. And it makes a lot of sense in a world of hyper superworkers, super powered employees fueled and empowered by AI. So that's my little update for the week, and we've got some really great client podcasts coming out, so stay tuned for a couple of those in the next couple of days. Bye for now.
