• Harvey committed $150 million to Azure cloud services over two years.
• The startup, which builds software for lawyers, has partnered with Microsoft since at least 2024.
• Harvey's expansion includes clients like Comcast and Verizon, and new foundation model integrations.

Legaltech startup Harvey has agreed to a two-year, $150 million commitment to use Azure cloud services, according to an internal email seen by Business Insider.

Jay Parikh, who leads Microsoft's new CoreAI unit, included the deal in an internal memo, writing that his unit "announced expanded partnership with Harvey Al with a 2-year $150M MACC and $3.5M unified expansion." Parikh joined Microsoft in October to lead a new engineering group responsible for building its artificial-intelligence tools.

Microsoft declined to comment, and Harvey declined to comment on the agreement.

MACC, or Microsoft Azure Consumption Commitment, is an agreement customers make to spend a specific amount on Azure for a period of time, often for a discount.

Harvey, which builds chatbots and agents tailored for legal and professional services, is scaling up and entering the enterprise market. It's adding legal teams at Comcast and Verizon as clients, while developing bespoke workflow software for large law firm customers.

It has raised more than $500 million from investors, including Sequoia Capital, Kleiner Perkins, and OpenAI Startup Fund, a Harvey spokesperson told BI.

Harvey has closely partnered with Microsoft since at least early 2024. That year, the company deployed its platform on Microsoft Azure, followed by a Word plug-in designed for lawyers. It also introduced a SharePoint integration, allowing users to securely access files from their Microsoft storage system through Harvey's apps.

For years, Harvey, founded in 2022, ran its platform on OpenAI models, primarily because they're hosted in Microsoft's data centers, Harvey CEO Winston Weinberg told BI last month. Law firms handle highly sensitive information and trusted Microsoft to keep it safe, Weinberg said.

"Law firms refused to use anything that wasn't through Azure," Weinberg said. That's now changing, he said, as vendors like Anthropic build the features enterprises require.

Last week, Harvey expanded its use of foundation models to Google's Gemini and Anthropic's Claude.

Still, Harvey's $150 million Azure deal signals it's not backing away from Microsoft anytime soon. The company's growing cloud footprint suggests that, while other partners are gaining traction with the legaltech start, Azure remains integral to Harvey's growth for now.

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• Microsoft hired ex-Facebook global head of engineering Jay Parikh to lead a new AI unit called CoreAI.
• Internal memos Parikh has sent to employees reveal the unit's early ambitions and accomplishments.
• Parikh's initiatives focus on cultural shifts, operational improvements, and customer focus.

Microsoft envisions an "age of AI agents," and CEO Satya Nadella recently tapped one of Mark Zuckerberg's former top lieutenants to bring it to reality.

In January, Nadella put Jay Parikh in charge of a new AI unit called CoreAI, central to Microsoft's ambition to help developers build digital personal assistants capable of taking over tasks from human workers.

Amid Parikh's first Microsoft Build developer conference in this new role, internal memos reveal his goals for the unit, its early accomplishments, and his advice to address what he sees as problems within the company. Microsoft declined to comment.

A fresh perspective for the 'next phase of Microsoft'

Behind the scenes at Microsoft, Nadella prides himself on hiring outside talent from other big technology companies to add fresh perspective and giving them wide latitude to change how things are done, several people close to the CEO told BI.

Those reports include Charlie Bell, who helped build Amazon's cloud from its earliest days before defecting to Microsoft to become its security boss, and AI CEO Mustafa Suleyman, an ex-Google executive who joined the company from AI startup Inflection.

Parikh joined their ranks in October after running cloud security company Laceworks, acquired in 2024. He previously was vice president and global head of engineering for Meta. Zuckerberg has publicly credited Parikh for many technological achievements during his 11-year tenure at the company.

When Nadella announced Parikh's hiring in an email to employees, he wrote that the "next phase of Microsoft" would require "adding exceptional talent" from outside the company.

In January, when Microsoft reorganized to create a new organization under Parikh. The group, called CoreAI, combined teams from Parikh's new direct reports like Eric Boyd, a corporate vice president of AI platform; Jason Taylor, a deputy CTO for AI infrastructure; Julia Liuson, president of the developer division; and Tim Bozarth, a corporate vice president of developer infrastructure.

Nadella said at the time that Parikh would also work closely with the cloud-and-AI chief Scott Guthrie; the experiences-and-devices leader Rajesh Jha; Bell, the security boss; Suleyman, Microsoft's AI CEO; and Kevin Scott, the company's CTO.

A copy of Parikh's latest org chart viewed by Business Insider shows he has nearly 10,000 reports, most of whom (about 7,000) are in the developer division under Liuson.

Parikh's 'agent factory' vision

Four months in, Parikh has started to make his mark on Microsoft with a vision to create an AI "agent factory." In the early days of Microsoft, cofounders Bill Gates and Paul Allen had ambitions to create the world's first "software factory," a company full of programmers who would build everything from applications to operating systems.

Parikh said he met with Gates and discussed his own concept, a production line for AI agents and applications.

"Building our vision demands this type of culture — one where Al is embedded in how we think, design, and deliver," Parikh wrote in an April 14 email to his team. "The Agent Factory reflects this shift — not just in what we build, but in how we build it together. If we want every developer (and everyone) to shape the future, we have to get there first."

The memos reveal some of the developments at CoreAI since Parikh's arrival.

Since January, Foundry — Microsoft's AI platform for developers — has "delivered $337 million of favorable COGS (cost of goods sold) impact year-to-date, with a projected $606 million on an annualized basis," according to one of Parikh's memos.

Microsoft won new customers for its AI programming tool GitHub Copilot, deploying "5,000+ Copilot Business seats" for Fidelity with 5,000 more expected, another memo stated. Copilot Business sells for $19 per user per month, which would make the deal worth as much as $2.28 million annually at full price, though customers often get discounts for large deals. Fidelity declined to comment.

Startup Harvey AI, meanwhile, has agreed to a two-year $150 million commitment to consume Azure cloud services, according to one of Parikh's memos. Harvey AI declined to comment.

Making Microsoft think macro

The memos viewed by BI show how Parikh appears to be taking seriously his mandate to introduce a new perspective to the company and fix procedural problems that Microsoft may not be able to see that it has.

In a May 10 email to his team, Parikh said shifting the company's culture is "essential" to its future, and outlined progress toward priorities like accelerating the pace at which employees work, breaking down siloes to work better as one team, and making products more reliable and secure.

"One of my early observations coming into Microsoft is that we sometimes treat symptoms rather than systems," Parikh wrote in a May 5 email. "We often focus too much on the micro, which results in band-aids and bolt-ons vs taking a broader system view (which may mean thinking beyond what one team directly owns). This often leads to more complexity and operational burden. We'll help each other get better at this."

Parikh's plan to get Microsoft to focus on the macro is to create a "learning loop" with a debrief after every product launch, incident, customer meeting, internal meeting, or decision. He's started new processes to make this happen, according to the memos.

Parikh has an "Ops Review" series, going team by team to make specific improvements but also to "find common patterns of engineering pain that need broader improvements," he wrote. The reviews, he explained, focus on longer-term operational metrics to help with strategy. "We are zooming out and taking a more end-to-end view of a team's operational setup, creating space for an open discussion around what's working and what's not." The reviews began in April with the App Services team.

Also among Parikh's mandates: more customer focus. His organization is required to conduct reviews of major incidents, like outages, that could impact customers, and chart how quickly the teams identified the problem and deployed a fix.

He also started "get well plans" for unhappy customers after he "encountered a couple of fairly unhappy customers" in recent meetings, according to an April 26 email. His solution? Weekly reviews to "understand where we went off track, identify solutions, and execute the recovery plan," tracking progress until the accounts "get well again."

What Parikh thinks Microsoft should change so far

In the May 5 email, Parikh shared "several recurring themes and insights" within Microsoft that he believes the company should seek to change or simplify.

First, he encouraged his organization to engage engineers from outside their direct team because "different perspectives help."

In his view, Microsoft also takes too long and the process is too hard to deprecate, or discourage use of, old versions of software. "Supporting too many versions is unattainable," Parikh wrote. "We are following up with C+Al (the Cloud + AI organization, under Scott Guthrie) to brainstorm how we can modernize and streamline this."

Incident reviews are overloaded with metrics that don't have enough value, Parikh wrote, and Microsoft sends out too many alerts, which creates noise. "It's important to periodically zoom out and audit how your monitoring is running and to simplify if you are overloaded on alerts and metrics. Use Al to help triage complex alerting situations," he urged.

Parikh encouraged his teams to "see the forest for the trees on scalability," and to organize brainstorming sessions when faced with a traffic load they can't support to see what it would take to support five or 10 times as much traffic. "You may be stuck in a local maxima with incremental improvements, and it might be time to brainstorm how you can get a step function more scale," he wrote.

He also recommended employees seek to address classes of problems, not just one-offs. "Quick fixes lead to complexity," Parikh wrote. "Instead of band-aids, we should aim for broader system improvements that solve whole categories of issues and boost long-term efficiency."

"We're building muscle in spotting patterns, not just patching symptoms," Parikh wrote. "And that's a big deal."

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• Microsoft is among the latest to cut middle management jobs.
• Tech giants like Intel, Amazon, and Google are also flattening structures for efficiency.
• Experts warn that while flattening can speed decisions, it is possible to take it too far.

Companies are shedding bloated layers of management in an attempt to reduce bureaucracy. Some employees are applauding the move, known as flattening the middle, in the hopes of getting faster and boosting efficiency.

Microsoft said Tuesday it's slashing around 6,000 employees. While the days since have made it clear many of those cut were individual contributor-level engineers, executives previously told BI one motivation behind the recent cuts was to increase managers' "span of control," or the number of reports per manager.

Intel announced a great flattening last month, emphasizing more time in the office, less admin, and leaner teams.

"The best leaders get the most done with the fewest people," said the chip giant's new CEO, Lip-Bu Tan, in a memo to staff.

Amazon has also increased the ratio of individual contributors to managers. They call it a "builder ratio." Google CEO Sundar Pichai told staff late last year that the company cut vice president and manager roles by 10% as part of an efficiency push. Meta has been at it for years, with CEO Mark Zuckerberg writing in a 2023 memo, "flatter is faster."

The risk is that these companies cut too many managers, leaving the remaining folks with too many direct reports.

But for now, it appears to be a risk companies are willing to take.

Agility and expertise

The logic of cutting from the middle to speed up is sound, management experts say.

"You can't go faster and be more connected to a larger ecosystem if you're having to go up and down a hierarchy for every decision," Deborah Ancona, a professor of management at Massachusetts Institute of Technology, told Business Insider.

While some companies have been trying for decades to zap management layers, there's a new urgency to do so. Businesses exist in "an exponentially changing world," Ancona said.

Dell executives explained this to employees earlier this month, when they began reorganizing managers to have more direct reports. The company, whose head count has dropped by 25,000 in two years, also pointed to the influx of artificial intelligence as a reason it needed to move faster.

Ideally, companies would remove layers and spread decision-making throughout the organization so that those closest to customers or technology, for example, could generate ideas and make decisions, Ancona said.

"You're kind of flipping the organization," she said. "Rather than all the ideas coming from on high, you have entrepreneurial leaders who are lower down in the organization coming up with new ideas."

Bayer CEO Bill Anderson is leery of having to run everything up the chain. After taking over the German biotech company in 2023, he began implementing what he calls a "dynamic shared ownership" setup that has cut thousands of managers. Staffers come together in "mini networks" for 90-day stretches to work on projects.

"We hire highly educated, trained people, and then we put them in these environments with rules and procedures and eight layers of hierarchy," Anderson previously told BI. "Then we wonder why big companies are so lame most of the time."

Fewer managers, more reporting, more meetings?

When middle managers are cut and layers condensed, inevitably, more workers report to fewer managers. The logistics of that vary, and the success in terms of morale has a lot to do with the starting point.

Amazon started flattening last year. In September, CEO Andy Jassy ordered a 15% increase in the ratio of individual contributors to managers by March. BI reported that senior Amazon Web Services managers received a memo in January instructing them to restrict high-level hiring and increase their number of direct reports.

An Amazon spokesperson told BI at the time that the memo may have been intended for one team, but does not apply to the company at large. The Amazon spokesperson also referenced a September memo from Jassy on the importance of reducing management layers.

An AWS manager told BI this month that the flatter structure has since put more burden on employees on her team to report on what they're doing day-to-day, in addition to their actual work, since managers have less time to inspect individuals' work.

Plus, this manager said they are spending more time in meetings as they took on a more diverse group of direct reports. The Amazon spokesperson also emphasized that the individual employee's anecdote does not represent the company as a whole.

Yvonne Lee-Hawkins was assigned 21 direct reports when she worked for Amazon's human resources. She told BI that she had to quickly learn new skills to handle the load, like asynchronous work strategies, but her teams' performance suffered as her number of reports grew from 11 to 21 employees.

Weekly one-on-ones — the subject of much debate among tech titans — became impossible, and she had to cut them in half.

At Microsoft, a half-dozen employees who spoke to BI about the manager flattening trend generally regarded it as a positive step to eliminate inefficient and unnecessary levels of managers. Some managers have as few as one or two reports.

Microsoft ended up with many management layers, the people said, because it often tried to reward good engineers by promoting them to become managers. Often, those engineers-turned-managers still spent most of their time in the codebase and weren't very effective as managers.

Meanwhile, larger groups of direct reports often work better for senior employees, who need less one-on-one time and can do more things in a group setting.

A Microsoft spokesperson did not comment when asked about these factors.

Gary Hamel, a visiting professor at London Business School who lives in Silicon Valley, told BI that pushing managers to take on more direct reports can reduce micromanaging, a common bane of corporate existence.

When managers have a lot of people to oversee, it pushes them to hire people they trust, mentor rather than manage, and give up a "pretty big dose" of their authority.

"Those are all hugely positive things," he said, even if they require "a fairly dramatic change" in how managers see their role.

How many direct reports is too many?

Nvidia CEO Jensen Huang famously has 60 direct reports. Managers at Dell have been told they should have 15 to 20. An AWS document viewed by BI in January mandated no fewer than eight per manager, up from six. An Amazon spokesperson told BI there are no such requirements companywide.

Gallup research indicates that the quality of a manager matters more than the number of direct reports in terms of how well teams perform. That's because more engaged managers tend to lead to more engaged teams. And small teams — those with fewer than 10 people — show both the highest and lowest levels of engagement because managers can have an outsize effect, for better or worse.

That may explain why some companies seem to thrive with dozens of direct reports per manager and others fail.

The nature of the work matters, too. When work is more complex, it can be harder for managers to oversee too many people.

Managing dozens of people gets harder when "life intersects with work," Ravin Jesuthasan, the global leader for transformation services at the consulting firm Mercer, told BI.

When employees have an issue, they often need someone to talk to about it.

"As a manager, you are the first port of call," he said.

That's one reason, Jesuthasan said, that having something like 20 direct reports would likely be "really hard." For most managers, the couple of dozen direct reports that many tech companies are aiming for is probably the limit, he said.

Strong managers can powerfully boost a company's ability to develop talent and its bottom line. A 2023 analysis from McKinsey & Company, for example, found that organizations with "top-performing" managers led to significantly better total shareholder returns over five years compared with those entities that had only average or subpar managers.

While flattening schemes may be successful at reducing bulk in the middle and speeding up decision-making, they can hinder future growth if they're not well-managed.

Jane Edison Stevenson, global vice chair for board and CEO services at the organizational consulting firm Korn Ferry, told BI that removing layers from a management pyramid can help elevate those high performers. But flatter companies may fail to develop leaders who can pull together the disparate parts of an organization.

At some point, she said, "You've got to start to make a bet on the leaders that are going to have a chance to build muscle across, not just vertically."

• Microsoft is working on a new "Tenant Copilot" offering, according to an internal memo.
• The company is also developing news ways for customers to manage AI agents alongside human staff.
• Microsoft at the time was planning to announce the developments at next week's Build.

Microsoft is working on a new Copilot and could unveil it at the company's Build conference next week, according to an internal memo viewed by Business Insider.

The software giant also has grand "Agent Factory" ambitions, and is developing new ways for corporate customers to manage AI agents alongside human employees, the memo shows.

The Tenant Copilot project is run by the organization behind the Microsoft 365 business. This new Copilot is designed to "rapidly channel an organization's knowledge into a Copilot that can 'talk,' 'think,' and 'work' like the tenant itself," according to an April 14 email sent by Microsoft executive Jay Parikh.

A "tenant" is the term used to describe corporate users of the Microsoft 365 suite of business applications. A Copilot that has access to these tenants would essentially be able to access customer information stored within their Microsoft 365 accounts.

Parikh explained in the email that Microsoft is using different AI techniques to power the Tenant Copilot feature. Supervised fine-tuning helps "to capture a tenant's voice." The tool will also tap into OpenAI's o3 reasoning model "to shape its thought process." Lastly, "agentic" fine-tuning will "empower real-world tasks," he wrote.

Microsoft at the time planned to offer a public preview of Tenant Copilot at Build, according to the memo. The company sometimes changes what it plans to announce at the conference.

Meanwhile, the CoreAI Applied Engineering team is also "working to launch a collaborative go-to-market plan for top-tier customers to drive successful adoption of our Al cloud," Parikh added in the memo.

Microsoft declined to comment.

Parikh's 'Agent Factory' concept

Parikh is the former head of engineering at Facebook. Microsoft CEO Satya Nadella hired Parikh in October and tapped him in January to run a new group called CoreAI Platform and Tools focused on building AI tools. The group combined Microsoft's developer division and AI platform team and is responsible for GitHub Copilot, Microsoft's AI-powered coding assistant.

This year's Build event will be Parikh's first at the helm of this new organization. In the email to the nearly 10,000 employees in the organization, Parikh discussed a new "Agent Factory" concept. That's likely a nod to cofounder Bill Gates, who talked about Microsoft being a "software factory."

"Building our vision demands this type of culture — one where Al is embedded in how we think, design, and deliver," Parikh wrote. "The Agent Factory reflects this shift — not just in what we build, but in how we build it together. If we want every developer (and everyone) to shape the future, we have to get there first."

Parikh has been trying to work across organizations to collaborate on AI agents, through a "new type of cross-product review" combining teams such as security services like Entra and Intune with "high-ambition agent efforts" within LinkedIn, Dynamics, and Microsoft 365.

Meet your new AI agent co-worker

Part of this effort focuses on how to manage AI agents alongside human employees.

Microsoft, for example, has been working on how to handle identity management for AI agents, according to the memo. This technology usually controls security access for human users. Now, the company is trying to spin up a similar system for AI agents.

"Our hypothesis is that all agent identities will reside in Entra," Parikh wrote, although "not every agent will require an identity (some simpler agents in M365 or Studio, for instance, don't need one)."

Microsoft is taking a similar approach to M365 Admin Center, which is used by IT administrators to manage employee access to applications, data, devices, and users. Future versions of this system will accommodate AI agents as "digital teammates" of human workers, according to Parikh's memo.

Microsoft's Copilot Analytics service is also expanding into broader workforce analytics to give corporate customers a view of how work gets done both by humans and AI agents.

And Parikh aims to make Azure AI Foundry, its generative AI development hub, "the single platform for the agentic applications that you build," he wrote. "At Build, we will have the early versions of this, and we'll iterate quickly to tackle a variety of customer use cases."

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• Microsoft is cutting about 6,000 jobs to increase the span of control per manager.
• The move aligns with similar strategies used by other tech companies to flatten management layers.
• Microsoft is investing heavily in AI while trying to optimize workforce efficiency.

Microsoft is slashing thousands of jobs to try to increase what it calls "span of control," or the number of employees who report to each manager.

The software giant on Tuesday confirmed the cuts, which Business Insider first reported in April. Microsoft said about 3% of its global workforce, roughly 6,000 employees, will be affected.

Microsoft's attempt to flatten management layers follows similar announcements from big tech peers. Amazon has been trying to increase the ratio of individual contributors to managers. Google CEO Sundar Pichai in December told staff that the company cut vice president and manager roles by 10% as part of an efficiency drive.

Microsoft started notifying affected US employees on Tuesday. A spokesperson confirmed impacted US staff will stay on the payroll for 60 days, but that will vary globally based on local regulations.

'Too many levels and layers'

A half-dozen Microsoft insiders who spoke to BI about the changes generally consider the effort to flatten management layers as a good thing. One executive told BI there are a lot of managers who just aren't that great, while another Microsoft staffer said the company has too many levels and layers. These people asked not to be identified discussing sensitive matters.

The company ended up with many layers, the people explained, because it often tried to reward good engineers by promoting them to become managers, sometimes with as few as one or two reports. Often those engineers-turned-managers still spent most of their time in the codebase and weren't very effective as managers. Having so many layers of management also proved to be inefficient, these people said.

Microsoft doesn't have any centralized goals for span of control, or number of reports per manager, but some leaders have their own targets, according to people with direct knowledge of the situation.

Cloud + AI boss Scott Guthrie, for example, wants to increase the span of control in his organization to eight engineers per engineering manager, and seven project managers per manager, according to the people.

Microsoft Security chief Charlie Bell is going for nine reports per manager, though he hasn't separated goals for span of control of engineers and PMs, the people said. Bell has, however, set goals for the ratio of PMs to engineers, similar to the "builder ratio" at his previous company, Amazon, BI previously reported.

In response to a request about Bell's and Guthrie's span of control goals, Microsoft's spokesperson said there are no blanket ratio numbers.

Tuesday's job cuts also target non-coders, aiming to increase the number of coders on projects, which Microsoft internally calls its "PM ratio" BI previously reported.

Microsoft has no stated maximum for the number of reports per manager, the people familiar said, though it's generally believed that larger groups of direct reports work better with senior employees, who need less one-on-one time and can do more things in a group setting.

While some kind of flattening is generally regarded as necessary, there's uncertainty related to how Microsoft will collapse all of its management layers and make it work, the people added. One staffer told BI that managers are particularly concerned.

Why Microsoft is making cuts

The changes come as Microsoft tries to reduce costs amid significant investment in artificial intelligence.

Barclays analysts on Tuesday said the cuts are "a commitment to profitable growth and optimizing the company's workforce, particularly with AI becoming a more prominent and efficient tool within the organization."

Microsoft's culling of management layers comes after earlier performance-based cuts to its workforce this year. Microsoft beginning in January ousted 2,000 employees it deemed to be "low performers" and started a new performance improvement plan.

A recent internal email sent to Microsoft managers, viewed by BI, said this new plan was "globally consistent" with "clear expectations and a timeline for improvement."

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• Microsoft plans to cut about 6,000 jobs, less than 3% of its global workforce.
• The cuts aim to reduce middle managers and increase coders versus noncoders, as BI earlier reported.
• Tech industry trends show a shift toward fewer managers, as seen with Amazon and Google.

Microsoft plans to cut less than 3% of its global workforce, or about 6,000 employees, with notifications beginning Tuesday, the company confirmed.

A person familiar with the cuts said some affected employees would stay on the payroll for 60 days and still be eligible for rewards and bonuses. Microsoft's spokesperson did not comment on or confirm these terms.

As Business Insider reported last month, these cuts are intended to reduce the number of middle managers and increase the ratio of coders versus noncoders on projects. Microsoft organizations want to increase their "span of control," or the number of employees who report to each manager. A spokesperson said these latest cuts were not performance-driven.

Across the tech industry, a culling of middle managers is already underway. Amazon has been trying to increase the ratio of individual contributors to managers. And in December, Google CEO Sundar Pichai told staff that the company cut vice president and manager roles by 10% as part of an efficiency drive.

Microsoft is also trying to decrease the "PM ratio" on some teams, which is the ratio of product managers or program managers to engineers.

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• Microsoft has a new, two-year rehire ban on employees who are ousted due to performance issues.
• It's also embracing an infamous Amazon approach that treats some employee attrition as "good."
• The tech industry in general is moving toward stricter performance management and reduced perks.

Microsoft is embracing two controversial management approaches that suggests the software giant is getting tougher on employees.

When the company ousts employees due to performance issues, it will now put them on a two-year block list that bars them from being rehired, according to an internal document viewed by Business Insider.

In addition, Microsoft will count these job cuts as "good attrition," according to the document. This means the company is shedding staff that it's happy to see leave.

These two tools are new for Microsoft and they're part of a broader effort by the company to change its performance-management process to shed low performers faster and keep them out.

There are no goals for this "good attrition" metric at present — or at least BI has not uncovered any yet. However, this is already being reviewed at the executive level and appears to be becoming more of a focus as the company dials up performance expectations, two Microsoft managers told BI. They asked not to be identified discussing internal matters. A Microsoft spokesperson declined to comment.

Good attrition is similar to an infamous "unregretted attrition" metric at Amazon, which gives a goal to organizations for the percentage of employees they want to lose every year.

Microsoft's new two-year block list is also similar to an approach used by other tech companies. Meta, for example, maintains internal lists barring some former employees from rejoining the company through systems that track rehire ineligibility, including a "non-regrettable attrition" designation and a "do not rehire" flag, as BI previously reported.

Overall, the industry overall is shifting toward more rigorous performance expectations and less coddling. Performance-based cuts are becoming more of a regular occurrence as tech companies get tougher on employees.

Earlier this year, Microsoft fired 2,000 employees deemed underperformers without severance and started a new performance improvement plan. A recent internal email sent to Microsoft managers, viewed by BI, disclosed that this new plan is "globally consistent" with "clear expectations and a timeline for improvement."

The new process gives employees an option to enter the PIP or quit and accept a "Global Voluntary Separation Agreement (GVSA)," according to another email that BI viewed. Another document, also viewed by BI, shows the agreement includes a payout equal to 16 weeks pay.

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• Microsoft reported third-quarter earnings on Wednesday.
• CFO Amy Hood touted Microsoft's 50th anniversary and AI agents in a memo about the quarter.
• Hood called AI agents Researcher and Analyst, built on OpenAI models, a "glimpse of what's ahead."

As Microsoft reported third-quarter earnings on Wednesday, chief financial officer Amy Hood's quarterly internal message to employees reflected on the company's 50th anniversary and touted recent AI agents as an example of what's to come.

Hood sends the emails quarterly when Microsoft reports earnings, and they mostly rehash the public financial reports.

"Celebrating our 50th anniversary earlier this month was a significant milestone, and I really enjoyed reminiscing about pivotal (or just funny) moments from those years with so many former and current employees — but what excites me most is still what's ahead," Hood wrote in a memo to staff, which was viewed by Business Insider.

Hood hyped the company's recent release of two AI agents called Researcher and Analyst, built on OpenAI models and used in Microsoft 365 to analyze work data, as a "glimpse of what's ahead."

"Each week the bar seems to be raised on what's possible," Hood wrote. "With that, new tools and capabilities are arriving fast, and I find myself asking almost daily if there is a better way to approach my work. These innovations are pushing each of us to think differently, work differently — and I hope they inspire all of us to lean in and try something new."

Microsoft's stock rose 6% in after-hours trading after the company released a third-quarter financial report that beat analyst expectations.

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• Microsoft is trying to simplify AI sales, according to slides from an internal presentation.
• The current approach slowed sales, confused customers, and affected cost and quality, insiders say.
• Microsoft plans to slash the number of "solution areas."

Microsoft is trying to simplify its many AI offerings by streamlining how the products are pitched to customers, according to internal slides from a recent presentation.

The software giant has a bunch of different AI tools called Copilot. There's Copilot for its Teams chat app, Copilot for its PowerPoint presentation tool, Copilot for its Outlook email service — just to name a few.

These products are often split into different "solution areas," as Microsoft calls them. Having Copilot tools in many different buckets can slow down sales, confuse customers, and affect cost and quality of the tools, people in the organization told Business Insider. They asked not to be identified discussing private matters.

Microsoft has sales teams focused on each solution area, which will now be consolidated.

Microsoft Chief Commercial Officer Judson Althoff this week unveiled plans for addressing these issues in the company's upcoming fiscal year, which begins in July. BI obtained copies of slides from his presentation.

According to one of the slides, three major changes include:

• Consolidate Microsoft's solution areas.
• Accelerate regional skills at scale.
• Align teams working with small, medium, and corporate customers with those working with outside channel partners who market and sell Microsoft products.

The organization currently has six solutions areas: Modern work, Business Applications, Digital & App Innovation, Data & AI, Azure Infrastructure, and Security.

Beginning in July, these areas will be combined into three: AI Business Solutions, Cloud & AI Platforms, and Security.

AI Business Solutions will include tools such as Copilot for Microsoft 365, Copilot for Teams, Copilot for Outlook, plus a data visualization product called Power BI, according to a person who attended a Thursday all-hands for Althoff's organization. This person asked not to be identified discussing private matters.

"We are evolving the commercial solution areas within our sales organization to better reflect the era of AI and support the growth of our customers and partners," a Microsoft spokesperson said in a statement. "This evolution reflects the shift in how customers and partners are buying and will better serve their needs."

The other changes include expanding training for salespeople and a reorganization to Small, Medium Enterprise & Channel (SME&C) team, which was announced internally earlier this year.

The changes come as Microsoft is trying to figured out how to make money from its significant AI investments. It has mulled changes including new software bundles with Copilot. The company earlier this year said it plans to spend $80 billion on expanding its network of AI data centers.

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• Microsoft's new performance improvement plan includes an offer for employees to quit.
• The new system is similar to Amazon's Pivot program, which has been criticized by some employees.
• The tech industry is shifting to stricter performance expectations.

Microsoft is offering a new choice to employees who are deemed low performers: Accept a payout to quit or risk termination on a performance improvement plan.

An internal email sent to Microsoft managers on Friday disclosed the company's new "globally consistent" performance improvement plan with "clear expectations and a timeline for improvement."

Affected employees can enter the PIP or quit and accept a "Global Voluntary Separation Agreement (GVSA)," the email, viewed by Business Insider, said.

"This performance improvement process is available year-round so you can act quickly to transparently address performance issues, while offering employees choice," said the email, which was from Amy Coleman, Microsoft's new chief people officer.

Another internal Microsoft document viewed by BI said that the payout to employees would be equal to 16 weeks of pay. Affected staff have five days to decide which option to take. If they choose to start the PIP, the payout is off the table, this internal document said.

The new PIP system may work differently outside the US, as other countries have different laws. Microsoft declined to comment.

Shades of Pivot

Microsoft's approach is similar to Amazon's Pivot program, which offers a PIP option or a payout if the employee leaves.

BI has reported extensively on Pivot, a central cog in a broader Amazon performance review system that some employees have said is designed to meet firing quotas rather than revive careers.

Amazon has defended its system in the past. In 2021, the company told BI that it provided managers "with tools to help employees improve their performance and grow in their careers." It added: "This includes resources for employees who are not meeting expectations and may require additional coaching."

More PIP, less coddling

The latest changes come as Microsoft, and the tech industry overall, shifts toward more rigorous performance expectations and less coddling.

Earlier this year, Microsoft fired 2,000 employees deemed underperformers without severance.

Leaders in at least some parts of the company are considering additional performance-based cuts as soon as May. They're looking at cutting middle managers and how to increase the ratio of coders versus noncoders on projects.

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• Microsoft is adding policies meant to enhance performance management and address low performers.
• The tech industry is shifting toward more rigorous performance expectations and less coddling.
• Microsoft's new policies include a two-year rehire ban for employees found to be underperforming.

Microsoft has created new policies and tools for managers as part of an effort to dial up performance pressure on employees, according to an internal email viewed by Business Insider.

Amy Coleman, Microsoft's new chief people officer, on Friday emailed managers about "new and enhanced tools to help you accelerate high performance and swiftly address low performance."

There's a new option for exiting underperformers, and a policy that bars these people from transferring within Microsoft or getting rehired by the company for two years, according to the email.

Many tech companies have been getting tougher on employees in the past year or so. Efficiency has replaced perks and pampering, as performance-based job cuts become more of a regular occurrence.

For instance, Mark Zuckerberg targeted low performers when Meta eliminated thousands of jobs earlier this year. And, similar to Microsoft's new policy, Meta puts ousted employees on "block lists" meant to stop them from being rehired by the company. 

Earlier this year, Microsoft fired 2,000 employees deemed underperformers without severance. Managers spent months evaluating employees all the way up to the executive level as part of changes to the company's performance review and management process, insiders told BI.

Coleman's email, in full below, details some of those changes and suggests others on the horizon. Microsoft declined to comment.

"Employees with zero to 60% rewards" refers to employees with low scores in Microsoft performance reviews, which use a scale from 0 to 200 that influences how much they receive in stock awards and cash bonuses.

Read the full email to Microsoft managers:

Managers,

Thank you for your patience yesterday with the unexpected technical product issues. As customer zero, this was an opportunity to learn and quickly make improvements.

As Satya shared at the recent Employee Town Hall, our success as a company depends on our relevance in year 51 and beyond - in terms of our innovation, the products we deliver, and the impact we have for our customers and partners. With that, our focus remains on enabling high performance to achieve our priorities spanning security, quality, and leading Al. This focus and our growth mindset encourage excellence, motivates us to push ourselves through challenges, and enables us to deliver results.

Today, we're rolling out new and enhanced tools to help you accelerate high performance and swiftly address low performance. Our goal is to create a globally consistent and transparent experience for employees and managers (subject to local laws and consultation). These tools will also help foster a culture of accountability and growth by enabling you to address performance challenges with clarity and empathy.

Manager Readiness: FY25 Performance, Connect and Rewards: Register for a 60-minute virtual, facilitated session to dive deeper into the performance landscape at Microsoft. Each session will explore what's new for FY25 rewards, provide guidance on differentiating rewards outcomes, and define what it means to deliver "significant impact." Next week, you'll also see a mail from Performance and Development to all employees with more details on Connects.

Clarity and Transparency in Rewards: This year, we'll ensure more transparency and clarity in the Rewards process for managers including additional guidance for each rewards outcome and showing payout percentages to help you make decisions that align with our high-performance expectations. More Rewards details will be shared by the end of the month.

Performance Improvement Process: If an employee is not meeting expectations, you can use the Performance Improvement Plan (PIP), a new globally consistent approach to set clear expectations and a timeline for improvement. The employee can accept the improvement plan or choose to transition out of the company with the offer of a Global Voluntary Separation Agreement (GVSA). This performance improvement process is available year-round so you can act quickly to transparently address performance issues, while offering employees choice.

Updated Internal Movement/External Rehire Policy: Employees with zero and 60% Rewards outcomes and/or on an active PIP will not be eligible for internal transfers. Former employees who left with zero or 60% Rewards or during/after a PIP will not be eligible for rehire until two years after their termination date.

Manager Excellence Initiatives: Additionally, in the coming months, we'll launch several initiatives to strengthen how we measures manage, and motivate teams to deliver for our customers. You'll have access to scenario-based, Al-supported tools designed to help you prepare for constructive or challenging conversations by practicing in an interactive environment.

Thank you for your leadership and commitment to driving high performance and accountability across your team. This isn't just about Microsoft's success. This is about your success, your team's success, our customers' success, and together, fostering a culture where high-performing, winning teams can thrive.

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• Microsoft is discussing job cuts that could happen as soon as next month.
• The cuts would aim to improve metrics such as "span of control" and "PM ratio."
• Microsoft earlier this year ousted 2,000 employees it deemed low-performers.

Microsoft is considering another round of job cuts that could come as soon as May, according to people familiar with the matter.

Leaders on some Microsoft teams are specifically discussing cuts to middle managers, and how to increase the ratio of coders versus non-coders on projects, the sources told Business Insider.

Some Microsoft organizations want to increase their "span of control," or the number of employees who report to each manager, these people said.

The sources, who hold senior positions at the company, asked not to be identified discussing sensitive topics that are still in the planning stages. It's unclear how many jobs will be cut, but one of the people said it was a significant portion of their team. A spokesperson for Microsoft declined to comment.

In the tech industry, there's already a culling of middle managers underway. Amazon has been trying to increase the ratio of individual contributors to managers. And in December, CEO Sundar Pichai told staff that Google cut vice president and manager roles by 10% as part of an efficiency drive.

Inside Microsoft, the discussions focus on decreasing the "PM ratio" on some teams, which is the ratio of product managers or program managers to engineers.

Charlie Bell, Microsoft's security boss, brought this concept from Amazon, where he was a cloud pioneer. There, it's called the "Builder Ratio," and tracks the ratio of software engineers to "non-builders," such as program managers and project managers.

Microsoft is considering increasing these targets in some organizations. For example, Bell's security organization right now is around 5.5 engineers to one PM, and his goal is to reach 10:1, according to a person familiar with Bell's plans.

One of the people familiar with the matter said this ratio is basically a proxy for how many people code. Under discussion are not only cuts that would require managers to meet a certain budget, but to meet a specific team-based ratio, too, the person explained.

Earlier this year, Microsoft ousted about 2,000 employees it deemed low-performers.

The potential cuts coming in a month or so could also include lower performers. At least some Microsoft leaders are considering terminating those who received an "Impact 80" or lower score in performance reviews for two consecutive years, one of the people said.

Microsoft evaluates employees on a scale of 0 to 200 called the "ManageRewards slider." Those ratings influence how much an employee receives in stock awards and cash bonuses.

The middle of the range is 100, while 0, 60, and 80 are lower performers and 120, 140, and 200 are higher performers. "Impact 80" gives employees 60% of their normal stock award and 80% of their maximum bonus.

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• Microsoft has replaced its chief people officer as it overhauls performance reviews.
• Kathleen Hogan is switching to a role in the "Office of Strategy and Transformation."
• Amy Coleman, a longtime HR executive, will step in as the new chief people officer.

Microsoft has replaced its chief people officer as the company rethinks its performance review process.

CEO Satya Nadella announced in an email to employees on Wednesday that Kathleen Hogan will leave the chief people officer position and take on a new role as executive vice president of the "Office of Strategy and Transformation." Amy Coleman, already a longtime Microsoft HR executive, will take over for Hogan.

"As we've seen time and again throughout our 50-year history, times of great change for the world and for our industry require us to have a mindset that enables us to continually adapt and transform ourselves," Nadella wrote in the email. "There's no question that we are at the forefront of another such moment, with the rapid changes across every industry and business function in this AI era."

The change comes after Microsoft fired nearly 2,000 employees deemed low-performers in January and February as it reviews its performance review and management process, several people with knowledge of the plans recently told Business Insider. The move also comes amid an overall shift in the tech industry toward more rigor and less coddling of employees, as reported in BI.

One of Nadella's first big leadership moves after he took the helm in 2014 was to name Hogan as Microsoft's chief people officer.

Hogan has served in the role since then, helping Nadella craft a new workplace management system around the concept of a "growth mindset," the idea that employees develop skills through hard work and that challenges and failures are opportunities to learn. This is counter to a "fixed mindset," which assumes talent is innate and struggles are a sign of failure.

"Kathleen and I have been discussing this transition and succession planning for some time, and we both agree this is the critical juncture to apply new focus and intention to this work," Nadella wrote in an email to employees announcing the change.

Coleman, the incoming chief people officer, is likely to have a big impact on the redesign of Microsoft's performance review process.

Read CEO Satya Nadella's email to employees:

Subject: Senior Leadership Update

As we've seen time and again throughout our 50-year history, times of great change for the world and for our industry require us to have a mindset that enables us to continually adapt and transform ourselves. There's no question that we are at the forefront of another such moment, with the rapid changes across every industry and business function in this AI era.

This means we must have the right product portfolio, the right business models, attract and retain top talent, and optimize our processes to meet changing customer expectations and succeed in the marketplace.

With this context, I've asked Kathleen Hogan to transition to a new role focused on defining our overarching corporate strategy and structure and leading our continuous transformation as a company. Kathleen will assume a new role as EVP, Office of Strategy and Transformation, reporting to me.

It is hard to overstate the impact Kathleen has had on Microsoft as Chief People Officer. Over the past 10+ years, she has led our cultural transformation, as we embraced a growth mindset, positioning us to seize new opportunities with agility and attract and retain world-class talent. She is recognized externally as a consequential HR leader transforming culture and the world of work. Her more than 20-year tenure at Microsoft, including leading our global services business, paired with her prior experience as a McKinsey partner in Silicon Valley, and a development manager at Oracle, makes her uniquely suited to lead this work as we accelerate our pace of change across our people, processes, and portfolio. Kathleen will work across the SLT as we chart this next phase of our transformation, which requires both interpreting the outside and redefining the inside.

Kathleen and I have been discussing this transition and succession planning for some time, and we both agree this is the critical juncture to apply new focus and intention to this work.

With this transition, I'm very pleased to share that Amy Coleman will assume the role of EVP, Chief People Officer, leading our HR organization. She joins the senior leadership team reporting to me.

Amy has led HR for our corporate functions across the company for the past six years, following various HR roles partnering across engineering, sales, marketing, and business development spanning 25 years. In that time, she has been a trusted advisor to both Kathleen and to me as she orchestrated many cross-company workstreams as we evolved our culture, improved our employee engagement model, established our employee relations team, and drove enterprise crisis response for our people. Amy's commitment to operational excellence and high performance will be key in driving our continued success, and I'm confident in the perspective, expertise, and thoughtful approach she'll bring as we navigate the next phase of our journey.

Please join me in congratulating Kathleen and Amy on their new roles.

Satya

• A trifecta of economics, pandemic-era realities, and political pressure is changing tech culture.
• From Big Tech to Silicon Valley startups, companies are pushing to "do more with less."
• Leaders aren't shy about wielding their power and aligning around a hard-driving strategy.

For years, Shopify CEO Tobi Lütke enjoyed a reputation for growing the $125 billion e-commerce company without working the grueling hours expected of startup founders.

"My job is incredible, but it's also just a job. Family and personal health rank higher in my priority list," he wrote in a now-deleted post on X, then Twitter, shortly before the pandemic, as reported by Business Insider at the time. "The only times I worked more than 40 hours in a week was when I had the burning desire to do so."

This year, even Lütke appeared to change his tune.

"I'm at home for dinner but I work at least 10 or so hours a day and a lot of the weekend," Lütke wrote on X. He was responding to a user who called him a "counter-example" to a meme suggesting you can't have work-life balance and a breakthrough startup. "I don't want people to get misguided by this meme."

Across tech, the tables have turned for employees as performance pressure and proclamations of "efficiency" and "intensity" replace perks and pampering. Sweeping layoffs have become the norm in an industry that, in recent memory, enjoyed job security. The pressure to dominate in AI has created intense competition, as companies use the technology to do more with fewer workers. Already hard-driving workplaces have become even harder.

While the situation for tech employees has been changing since the pandemic boom ended in 2022, more recent developments include a decidedly different tone from executives. Now, companies aren't just making these changes; they want to be seen making them.

Meta earlier this year said it was cutting 4,000 employees deemed low performers as CEO Mark Zuckerberg said the "culturally neutered" corporate world had gotten away from "masculine energy." Amazon insisted that employees return to the workplace every weekday, a policy some employees say is stricter than before the pandemic.

Other companies have cracked down, too. Microsoft, which was once referred to as a "country club" for its relatively lax culture, cut 2,000 employees as it overhauled its review process to eliminate underperformers more quickly.

Google, which practically invented tech perks like free lunch, started an "efficiency drive." Its cofounder Sergey Brin, who had stepped away from leading Google but now often shows up to work on the company's Gemini AI models, recently recommended that employees working on its Gemini tools should work 60 hours a week and go into the office "at least every weekday." Wall Street has rewarded this rigor, as stock prices of Meta, Amazon, Microsoft, and Google's parent, Alphabet, have surged since 2022.

Startups also see a trickle-down effect from Big Tech companies' pressures. Krish Ramadurai, a partner at AIX Ventures, said he had noticed a "pronounced shift" toward leaner teams and rigorous performance standards at startups.

Between performance-based cuts, return-to-office mandates, and the stripping of workplace perks, it's clear not only that the tech industry is done coddling employees, but that companies want to send the message those days are over. BI interviewed employees from tech giants, including Microsoft, Google, Amazon, and Meta, as well as various tech startups, about the changes. Some spoke on the condition of anonymity since they're not authorized to talk to the press, though their identities are known to BI.

Meta, Microsoft, Google, and Amazon did not comment. Shopify did not respond to a request for comment.

From comfy to collapsed

For years, fierce competition for tech workers meant companies spoiled employees with astonishing salaries and swanky perks, such as in-office massages and free food cooked by fancy chefs.

By 2022, tech companies seemingly couldn't throw enough money at workers. Early that year, Amazon more than doubled its maximum base salary, and Microsoft gave across-the-board raises to employees up to a certain level of seniority to dissuade them from leaving for competitors.

As the pandemic boom ended, tech stocks plummeted, and interest rates increased through 2022. This prompted an efficiency drive by many companies as investors demanded profitability over growth at all costs.

Also that year, companies watched the billionaire Elon Musk's handling of the Twitter acquisition, in which he cut thousands of employees, plus perks like free lunches, and demanded a commitment to a new "extremely hardcore" vision and "long hours at a high intensity." At one point, Twitter workers were begging on Slack for toilet paper and clean bathrooms amid Musk's drastic cost-cutting.

As of late last year, Fidelity valued X at only about 20% of the $44 billion that Musk bought it for in 2022. Still, his approach may have expanded what the tech industry thought possible in terms of workforce and cost cutting.

"People paid attention because the prevailing wisdom was you couldn't take out that much of an engineering organization and put that much instability on it and not have it fall over," Brad Porter, the founder and CEO of Cobot, told BI. "It did come close to falling. He pushed right to the edge of it actually falling over, but it didn't fall over."

'Do more with less'

By the end of 2022 and in early 2023, tech giants had conducted unprecedented rounds of layoffs. Meta, Amazon, Google, and Microsoft collectively laid off more than 60,000 employees during that time.

Layoffs have remained at a steady drip across the industry since. Such cuts have become so frequent at Google, for example, that employees have taken to crowdsourcing information on layoffs in an internal Google Doc.

Employees told BI about the pressure across the industry to "do more with less." "There's lots of uncertainty," one longtime Amazon employee said, "and lots of pressure to perform the jobs of multiple people at the mercy of ruthless middle management."

Tech companies are also culling middle management layers. Amazon in September announced a plan to increase the ratio of individual contributors to managers by 15% by the end of this month. In December, CEO Sundar Pichai told his staff that Google had cut vice president and manager roles by 10% as part of its efficiency drive. Microsoft also monitors what it calls "span of control," tracking the number of reports per manager.

Performance pressures

Amid the cuts, employees across the industry say companies are dialing up the performance demands.

Meta told its staff in January that it would eliminate roughly 5% of its workforce, or about 4,000 employees, to "raise the bar on performance management," as Zuckerberg wrote in an internal memo.

Google also increased pressure on employees. Perhaps most telling was Pichai's December comments attempting to clarify what "Googleyness" means for a modern Google. Once a squishy and vague philosophy for the search giant's corporate culture, Pichai said he believed it now meant, among other things, being "mission first."

"There is more pressure for individuals to be better in their roles, and there is much more aggressive performance management happening these days," a longtime Google manager said.

"We're being asked to do more for less," said another current longtime Google employee.

That same Google employee said that Silicon Valley had been moving toward more ruthless, efficient workplaces for a while — and that the current political climate "gives them the green light to do it openly." Google has been working to become more efficient since its chief investment officer Ruth Porat joined the company as CFO from Morgan Stanley in 2015, "but now the masks are off," the person said.

Microsoft was once referred to as the tech industry's "country club," meaning a place employees would go after they were done working hard in their careers and wanted to coast before retirement. A change this year shows how far Microsoft has shifted when it fired 2,000 employees deemed low performers without severance and ended their health benefits the same day. This kind of performance-based mass cut showed a shift for the tech giant.

One longtime Microsoft senior-level employee said they felt that the "culture shifts toward firmer performance expectations" at peer tech companies like Google, Meta, and Amazon made it more acceptable for Microsoft to do the same.

At TikTok, the pressure to perform jumped last year after the company directed managers to deliver more low scores in performance reviews, leading to PIPs and eventual exits. At the same time, six current and former employees told BI their goals had become much harder to hit. One staffer called the goals "unattainable."

The company has also recently heightened RTO requirements for some teams. In February, it told its US e-commerce workers that in addition to being in the office five days a week, they would physically need to be in the building for eight hours a day. Ten current and former workers told BI that burnout had become common, leading to some going on mental health leave to get a break. TikTok did not respond to a request for comment.

"You feel like if you're not hitting a target, even if it's a moving target, you're in trouble," a former staffer who went on leave for mental health reasons told BI. "For me, it was just feeling like a failure, like I couldn't do anything right."

It's gotten hardcore in the 'valley of death'

The increasing pivot to performance has even made it to already hard-charging startups.

Startups have a time-honored tradition of an always-on, work-first lifestyle. Early employees are expected to put in grueling hours of coding and customer support during this critical phase, known as the "valley of death," when startups are flush with initial funding but not yet profitable.

The free-money era tested this tradition of hustle and thriftiness. Investors heaped money into small startups when interest rates bottomed out, and the blitz scaling that followed set off an arms race of perks to help startups attract top talent. Employees could work from home and set their own schedules. They pocketed wellness stipends and trotted the globe on extravagant off-sites. The tech startup Bolt gave many employees Fridays off.

"I think many individuals — founders included — lost sight of the true goal of a company. It is to make money," Mang-Git Ng, the founder of Anvil, a paperwork automation company, told BI.

Now, the executives who had lavished high salaries and fancy perks on their employees are resetting expectations, winding down remote work, and cutting head count.

"Everyone who comes into our office at Decagon has opted into working with a team that's here because we want to do big things and see bigger and better results," said Jesse Zhang, the founder of Decagon, who now badges into the office six days a week. "There's no such thing as a rocketship that doesn't have a certain level of intensity to fuel its trajectory."

Call it the Big Tech trickle-down effect.

"Founders aren't sugarcoating it," said Natan Fisher, who runs a recruiting firm, SingleSprout, that specializes in hiring technical talent. "I've had a few cofounders tell employees they aren't working hard enough, and, 'If you're not all in, no hard feelings, we can give severance, but we can't slow down.' Late nights, weekends, even people crashing at the office, it's real."

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Emma Cosgrove, Eugene Kim, and Pranav Dixit contributed to this report.

• Microsoft's latest internal poll shows 65% of workers think working there is a "good deal."
• This is key for assessing work-life balance and compensation satisfaction at the software giant.
• Past low scores led Microsoft to raise pay in 2022 to address employee dissatisfaction.

In Microsoft's latest employee survey, more workers responded positively to a question about whether they're getting a good deal by working there.

A total of 65% of employees agreed with a question stating that "there is a reasonable balance between what I contribute to Microsoft and what I get in return" in the survey from October. That's up three percentage points from the previous survey six months prior, a Microsoft spokesperson said.

Last summer, responses to this question had fallen from 69% to 62% compared to the previous year, according to results viewed by Business Insider.

Microsoft uses this specific question as an important barometer for sentiment about work-life balance and compensation.

In 2022, a low and declining score on this question helped compel Microsoft to raise pay to address growing dissatisfaction with compensation and stop employees from leaving to competitors like Amazon.

Since then, the tech industry has undergone radical changes. Tech stocks plummeted through 2022 as the pandemic boom ended. That prompted an efficiency drive by many companies as investors demanded profitability over growth at all costs. New AI tools may also be denting demand for some tech workers. In 2023, Microsoft froze salaries.

The next survey, scheduled in April, comes after Microsoft cut nearly 2,000 employees deemed low performers.

The company is also revamping its performance review process, another sign that the industry is getting tougher on how it treats employees after a decade or more of mollycoddling talent.

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• Microsoft cut nearly 2,000 employees deemed low performers this year.
• The cuts come with the company said to be reevaluating its performance review process.
• Microsoft was once known to be tough in reviews, but it took a softer stance under Satya Nadella.

In 2023, a Microsoft employee asked to take on a lighter workload when his wife was found to have terminal cancer.

His managers were supportive, and they appeared happy with his performance during his wife's illness as recently as late 2024, when they told him to expect 120% of his bonus.

Then, on January 22, the employee said, an HR representative unexpectedly joined his weekly manager meeting. The employee was fired without severance and was told his health insurance would expire that night.

The employee's wife had to skip chemotherapy treatments for a month after.

"I'm still shocked," he told Business Insider in a recent interview. "Shocked and angry. I did everything right."

The Microsoft employee asked not to be identified to protect future career prospects. BI has verified his identity and confirmed details of his performance, his termination, and his wife's illness through documentation.

A Microsoft spokesperson, Frank Shaw, said performance-based terminations rarely come as a surprise to employees and people could elect to have COBRA coverage.

This person is one of nearly 2,000 fired by Microsoft in January and February in a culling of those deemed low performers, according to a person familiar with the cuts.

This kind of performance-based mass cut is a shift for the tech giant, which continues to review the approach. Managers spent months evaluating employees all the way up to the executive level as the company considers changes to its performance review and management process, several people with knowledge of the plans said.

"We aspire to have a high-performance culture and want to make sure managers have the ability to drive that and that expectations are clear," Shaw said, adding that the company wasn't trying to design a tougher system, but one that removes ambiguity, provides clarity and flexibility, and allows managers and teams to move with speed.

A new way to evaluate employees

Microsoft's new approach to performance management is shaping up to be one of the biggest changes to the company's management strategy since Satya Nadella became CEO more than a decade ago.

Before he arrived in 2014, Microsoft had a reputation for a cutthroat performance-review system, at least in a tech industry that often mollycoddled talented employees. Nadella softened that considerably.

Microsoft once had a reputation for a "country club" culture, as Amazon's founder, Jeff Bezos, called it, a place employees would go after they were done working hard in their careers and wanted to coast before retirement.

Now, some leaders worry the company has gotten too soft, making it difficult to shed underperformers, according to the people familiar with Microsoft's plans.

The company is looking to new external leaders, such as the former Google executive Mustafa Suleyman and a former Meta engineering chief, Jay Parikh, along with existing executives like the company's senior leadership team and LinkedIn CEO Ryan Roslansky, to help design a new way to evaluate employees, these people said.

Microsoft has had an incredibly successful decade, becoming a leading cloud provider and AI player. It's worth about $3 trillion, making the software giant the third-largest company by that measure. The stock has stagnated over the past year, however, as questions mount about the company's Copilot technology, and as AI competition intensifies.

The broader tech industry is facing other challenges, and Microsoft is not immune. A decadelong hiring boom has fizzled as companies focus more on profit, and AI coding tools reduce competition for software engineering talent. Meta recently cut about 5% of its workforce to "raise the bar on performance management." Amazon is culling managers. Even Google is trimming jobs.

Microsoft's termination letter

Employees who were let go in Microsoft's recent round of performance cuts got termination letters explaining the abrupt exit.

"The reason(s) for the termination of your employment include your job performance has not met minimum performance standards and expectations for your position," said the letters, which BI viewed. "You are relieved of all job duties effective immediately and your access to Microsoft systems, accounts, and buildings will be removed effective today. You are not to perform any further work on behalf of Microsoft."

The letters mentioned severance but said medical, prescription, and dental benefits ended on the last day of employment. The letters also said Microsoft would consider past performance and termination if the person applied for other jobs at the company in the future.

"At Microsoft we focus on high performance talent," a company spokesperson told BI recently. "We are always working on helping people learn and grow. When people are not performing, we take the appropriate action."

'Right to fire'

Deena Merlen, a partner at Reavis Page Jump LLP, told BI her law firm had received more inquiries about performance-based layoffs as of late.

"Employers generally have the right to fire, just as an employee has the right to quit," she said. "As long as Microsoft's alleged performance-based reasons are not for some other, unlawful reason, Microsoft is within its rights to engage in these layoffs."

The company has no obligation to provide severance, but such agreements often come with a release of legal claims that can protect the company from lawsuits, Merlen added.

Stack ranking

Before 2014, Microsoft used a controversial system to evaluate employee performance. Called stack ranking, it forced managers to put employees on a curve and cut the lowest performers.

At Microsoft, that meant managers had to rank employees from 1 to 5, and someone always had to get a 5, the lowest score, no matter how well they or the team performed. Shaw, the Microsoft spokesperson, said that the system was especially problematic for small teams and that while terminating the lowest rung was not a companywide policy, it happened on some teams.

Stack ranking was unpopular internally and was seen as prioritizing individual work, pitting employees against one another and creating a barrier to collaboration. Developers and even entire organizations had a tendency to reject acceptable solutions to problems if they hadn't developed those solutions themselves, the company's chief people officer, Kathleen Hogan, previously told BI. There's even a famous cartoon depicting Microsoft's org chart as warring factions.

'Model, coach, care'

The company officially abandoned stack ranking just before Nadella took over as CEO in early 2014. He redesigned the company's performance-review system around the "growth mindset" concept. The idea is that skills are developed through hard work and that challenges and failures are opportunities to learn. This is counter to a "fixed mindset," which assumes talent is innate and struggles are a sign of failure.

Nadella and his new leadership team applied this growth mindset to a new framework called "model, coach, care," which called on managers to set a positive example for employees, help staffers adapt and learn, and invest in people's professional growth.

Instead of ranking employees from 1 to 5, Microsoft moved to a performance-review system that gives managers a simple payroll budget they could divide and dole out to employees based on performance.

Kevin Oakes, the CEO of the Institute for Corporate Productivity, has worked with Microsoft on implementing a growth mindset. He told BI this approach was a way to encourage top performers but noted that even companies like Microsoft need to cull their workforces to become leaner and higher performing.

"Any high-performing organization should make sure employees are performing at an acceptable level, and they should be weeding out people who are not performing at an acceptable level," he said. "Over time, you tend to get a little bloated as a big company where you've let hiring go unchecked in some areas and need to get back to a lean, efficient machine."

The ManageRewards slider

Today, employees are evaluated on a scale from 0 to 200 called the "ManageRewards slider." The process begins with frontline managers, who evaluate an employee's impact and recommend where they think they should land on the slider. Then, a higher-level manager considers "differentiation" — i.e., making sure the team is distributed along the slider.

The middle of the range is 100, while 0, 60, and 80 are lower performers and 120, 140, and 200 are higher performers. Those ratings influence how much an employee receives in stock awards and cash bonuses. A score of "Impact 60," for example, generally gives employees 0% of their stock award and 30% of their maximum cash bonuses while the slightly higher rating of "Impact 80" gives them 60% of their normal stock award and 80% of their maximum bonus. Shaw, Microsoft's spokesperson, said 100 would be considered a good score and mean an employee had met all of their objectives.

In general, the company's senior leadership team gives managers a budget that allows for every employee on the team an average score of 109.

"So you want to pay someone impact 140 for doing an outstanding job? Find 3 people you're giving Impact 100 so it's affordable," one executive-level manager explained. "Keep this guy around. He'll be paying for everyone's bonuses."

The manager said they typically had paid top performers by finding a set of people who failed in the previous year and giving them all zero or reduced rewards. This person asked not to be identified discussing sensitive topics. "That's a bad manager," Shaw said. "You certainly can't give everybody high rewards," but you can give one person high rewards and the rest of the people around 100.

How Microsoft handles low performers

While low rewards can indicate a performance issue, Microsoft's actual system for managing out low performers is separate from this employee-rating process.

Generally, managers email an internal system called AskHR@ and request a consultation for performance concerns, and the manager will be matched with an internal consultant. More seasoned consultants are used for higher-level employees, or if the situation is difficult.

These consultants give written formal feedback to employees, saying they delivered "Less Impact than Expected" and start a three-month performance-management process.

Some managers can cut low performers who don't improve within about four months through this process. But sometimes Microsoft's HR department concludes that managers haven't done enough performance coaching, one manager said, meaning they have not generated enough documentation showing employees have been given the opportunity to improve and have repeatedly failed.

It can take two or three more 90-day programs before these employees are ousted. One high-level manager said the average time to exit a low performer was seven months from the time a manager notified HR about the situation, which often comes after sustained low performance.

"It takes too long to performance-manage folks out," one executive said.

These exits can be further delayed by leaves of absence. One of the Microsoft managers who talked to BI said employees sometimes shared tips on how to complicate the company's performance-improvement process.

One common suggestion: If your manager is working to fire you, go to a doctor and say you have certain symptoms, get a supporting letter, and secure health-related time off work. This can pause or reset aspects of the process, this person said.

Short-term paid disability typically covers 60 to 90 days away from work, and Microsoft's HR department can be reluctant to exit these employees for some time after that, the person said.

"For employees gaming the short-term disability policies, you can be talking 12 to 18 months to get to a point where HR is comfortable firing them," they added.

'One Year, One Reward'

In the US, a common refrain for the 0-to-200 performance reviews was, "One Year, One Reward," meaning employees are judged on a single year's performance.

The separation between rewards and the formal performance-management process gave flexibility to managers to "harvest the budget," as one manager said, in other words give lower ratings to relatively adequate performers so big rewards could be doled out to high performers. They could do this without much risk to the employment status of the adequate performers. Shaw, the Microsoft spokesperson, said this was not company policy.

Hogan, Microsoft's chief people officer, in an internal email in 2023 instructed managers to give fewer employees "exceptional rewards," meaning a high performance rating that leads to higher pay and bonuses. "More will need to be at the middle of the range," Hogan said in the email. Shaw, the spokesperson, said the email was specific to that year and that rewards changed annually based on factors like the economy and company performance. Changes to this year's rewards cycle won't be solidified until later in the year, he said.

"Microsoft just summarily terminated hundreds of employees who had year-over-year insufficient performance based on rewards, without a lengthy documentation and feedback process," one executive said, adding that this coming rewards season would be more difficult on managers, who would have to be more careful about doling out low rewards.

Shaw, the Microsoft spokesperson, confirmed that the decisions about whom to cut came from looking at rewards year over year but said the company still believed in "one year, one reward." Just because an employee gets high rewards one year, for example, doesn't mean they've earned it the next.

New leaders, new perspectives

As Microsoft evaluates its performance-review process, people familiar with the plans say the company is looking for perspectives from new leaders such as Suleyman, the former Google executive who is now Microsoft's CEO of AI, and Parikh, the former head of engineering at Meta who runs AI platforms at Microsoft. Shaw said that Suleyman and Parikh were just some of the people providing perspective and that Roslansky, the LinkedIn CEO, had also provided a lot of input.

"The company will have a much stronger point of view, like some of our competitors," one Microsoft executive said.

'Good attrition'

The company is making other changes to prioritize engineering talent and level out organizations, taking a page from Amazon.

Separate from its performance-management processes, Microsoft is starting to weigh how it can become leaner and more engineering-focused. The company measures what it calls "good attrition," which is reviewed at the executive level, the Microsoft executive said. That's reminiscent of Amazon's "unregretted attrition."

Right now there are no targets for this Microsoft metric. But the company is borrowing from Amazon in trying to increase the ratio of engineers working on projects. Amazon has something called the "Builder Ratio," which analyzes the ratio of software engineers to "non-builders," such as program managers and project managers. The goal is to try to keep organizations lean.

Charlie Bell, Microsoft's security boss who came from Amazon's cloud unit, has brought this metric to Microsoft. Microsoft tracks the "PM ratio" which is the ratio of product managers or program managers to engineers, and has increased targets in the current fiscal year. For example, Bell's security organization right now is around 5.5 engineers to one PM, and his goal is to reach 10:1, according to a person familiar with Bell's plans.

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• Microsoft has started performance-based job cuts, according to termination letters seen by BI.
• The letters state benefits stop immediately. Ex-employees also say they won't receive severance.
• As BI reported earlier this month, Microsoft is taking a stronger stance on performance management.

Microsoft has started performance-based job cuts, according to termination letters viewed by Business Insider.

Employees losing their jobs will see healthcare benefits end immediately, the letters state. In three specific cases, employees were told by Microsoft they're not getting severance, according to people familiar with the situation. These people asked not to be identified discussing sensitive topics.

"The reason(s) for the termination of your employment include your job performance has not met minimum performance standards and expectations for your position," the letters viewed by BI state. "You are relieved of all job duties effective immediately and your access to Microsoft systems, accounts, and buildings will be removed effective today. You are not to perform any further work on behalf of Microsoft."

The letters do not mention severance, but note that medical, prescription, and dental benefits end on the last day of employment. The letters also say that Microsoft will consider past performance and termination if the person applies for other jobs at the company in the future.

As BI reported earlier this month, Microsoft is taking a stronger stance on performance management like its competitors and managers at the company have spent the past few months evaluating employees all the way up to level 80, one of its highest levels. A company spokesperson declined to comment on Thursday.

A Microsoft spokesperson previously confirmed the job cuts, stating that when people leave for performance reasons, Microsoft often backfills the roles, so there may be little change to the company's overall headcount. At the end of June, Microsoft had roughly 228,000 full-time employees.

"At Microsoft we focus on high performance talent," the spokesperson said. "We are always working on helping people learn and grow. When people are not performing, we take the appropriate action."

Microsoft also this month started cutting jobs across organizations including Security, Experiences and Devices, sales, and gaming, according to two people familiar with the matter. At the time, a spokesperson said those layoffs were separate from the performance-based cuts.

Read an excerpt from Microsoft's performance-based termination letters:

"The reason(s) for the termination of your employment include your job performance has not met minimum performance standards and expectations for your position. You are relieved of all job duties effective immediately and your access to Microsoft systems, accounts, and buildings will be removed effective today. You are not to perform any further work on behalf of Microsoft.

Note: If you apply for employment at Microsoft in the future, your past performance and basis of termination will be considered.

You must immediately return your Microsoft cardkey, corporate American Express card, phone card, and any other Microsoft property, including but not limited to hardware, software, email files, source code, customer contact information, financial data, status reports, or any other proprietary or confidential data or trade secret information that you have in your possession to me.

You are bound by the terms of your Microsoft Employee Agreement to return such materials and to protect Microsoft confidential information after termination of your employment. If any such materials are stored on any personal device (including, without limitation, computers, mobile phones, tablets, storage devices) you are required to permanently delete them."

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• Microsoft CFO Amy Hood urged employees to focus amid recent AI news.
• One bit of recent news is DeepSeek's AI model, which raised questions about infrastructure spending.
• Microsoft stock fell after it reported AI and cloud computing services grew less than expected.

Microsoft chief financial officer Amy Hood had a message for Microsoft employees in an internal memo amid recent AI news: Keep your head down and focus.

Hood sends the emails quarterly when Microsoft reports earnings, and they mostly rehash the public financial reports.

This quarter's email was preceded by AI news, including Chinese AI startup DeepSeek's model that raised questions about infrastructure spending, developments with White House AI policy, and a joint venture from OpenAI, Oracle, and SoftBank called Stargate to spend $500 billion on AI infrastructure, announced by President Donald Trump.

"There has been a lot of AI-related news this week, but our focus is clear: delivering real-world AI solutions while simultaneously globally scaling our cloud and AI infrastructure to support our partners and customers as they adopt, build, and grow as well," Hood wrote, according to a copy of the email viewed by Business Insider. "As a company, we remain steadfast in the priorities which are required to deliver on that product promise — security, quality, and AI innovation. Thank you for your focus as we work together for our customers who rely on us."

Chinese AI startup DeepSeek recently launched a model that competes with OpenAI at a fraction of the cost. The release has caused many in the technology industry to call into question the trillions of dollars being spent on AI infrastructure.

Microsoft is familiar with criticisms of the industry's significant spending on AI infrastructure and whether it will lead to actual returns. The company recently said it plans to invest about $80 billion to build AI-enabled data centers in its 2025 fiscal year alone.

The debate around DeepSeek set the stage for Microsoft's second-quarter earnings release on Wednesday. The company's stock dropped after it reported its AI and cloud computing services grew less than expected.

Read Amy Hood's full memo to Microsoft employees:

"Team,

This afternoon, we announced our second-quarter financial results. We grew revenue by 12% to $69.6 billion, operating income by 17% to $31.7 billion, and earnings per share by 10% to $3.23. Our results exceeded our Q2 outlook given to Wall Street.

Our Microsoft Cloud revenue was $40.9 billion, up 21% year-over-year. Our results reflect strong customer demand as we continue to create cutting-edge capabilities that are driving real value and measurable impact for our customers. This quarter, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year. Highlights from our commercial business, which grew 17%, are below:

Commercial bookings were significantly ahead of expectations and increased 67% and 75% in constant currency. The outperformance was primarily driven by Azure commitments from our partner, OpenAI, and strong execution across our core annuity sales motions.
Azure and other cloud services revenue grew 31%, landing at the lower end of our expectations. This includes 13 points of growth from AI services, which exceeded expectations. Growth in non-AI services came in slightly below our expectations, influenced by some near-term execution challenges.

Microsoft 365 commercial cloud revenue grew 16%, slightly ahead of expectations, driven by our E5 suite and M365 Copilot. M365 Copilot has seen growth in adoption, expansion, and usage.
Dynamics 365 revenue grew 19% driven by growth across all workloads.

We invested $22.6 billion in capital expenditures as we invest against both short- and long-term demand signals for our Microsoft Cloud inclusive of AI workloads.

In our consumer business, revenue grew 2%, which was better than expected. As we work to accelerate growth in our consumer business, we remain focused on delivering consumer experiences that delight and earn user loyalty. Below are key points from our consumer businesses:Search and news advertising ex TAC revenue grew 21%, above expectations, with rate expansion and continued volume growth from Edge and Bing.

Windows OEM and devices revenue grew 4%, ahead of our expectations, driven by commercial PC inventory builds in advance of Windows 10 EOS as well as uncertainty around tariffs.
Gaming revenue decreased 7%, primarily driven by hardware. Xbox Content and services revenue increased 2%, ahead of expectations, driven by better performance in Blizzard and Activision content, including Call of Duty.

LinkedIn revenue grew 9%, reflecting growth across all lines of business. However, ongoing weakness in the hiring market in key verticals negatively impacted growth in the Talent Solutions business.

As a reminder, our stock trades not only on our results, but on our outlook for the next quarter and beyond. Investors listen to our earnings call to gain deeper insights into these indicators, and I would encourage you to listen too, as it offers useful context to help align our efforts in driving toward our priorities and commitments. You can join the call live today at 2:30PM Pacific Time, listen on-demand, or read the transcript on the Investor Relations Website.

There has been a lot of AI-related news this week, but our focus is clear: delivering real-world AI solutions while simultaneously globally scaling our cloud and AI infrastructure to support our partners and customers as they adopt, build, and grow as well. As a company, we remain steadfast in the priorities which are required to deliver on that product promise — security, quality, and AI innovation. Thank you for your focus as we work together for our customers who rely on us.

With appreciation and gratitude,

Amy"

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• Amazon mandated office work five days a week and is changing how it tracks badge data.
• Employees have taken to an internal Slack channel to cobble together how it will work.
• The new system provides more flexibility and no longer tracks time in the office as closely.

Amazon's strict new RTO policy comes with changes to how the company tracks office attendance, according to internal messages viewed by Business Insider.

The new approach provides managers with less granular data on office attendance and appears to give managers more freedom to decide which employees are not complying and how to deal with these situations, the messages show.

Amazon tracks when employees use their internal ID, or badge, to gain access to an office. This past summer, it started monitoring attendance by the hour to crack down on "coffee badging," when staff pop in briefly just to log a day in the office.

Until recently, the company's tracking system also applied labels to employees, such as "inconsistent badger" and "zero badger," depending on how they complied with the previous three-day return-to-office mandate.

Now, according to internal messages, those designations are gone. And managers get raw badging data and have more discretion over how to interpret the information and what action to take with employees, the internal messages suggest.

An Amazon spokesperson said the tool "gives employees and managers visibility into the days they badged into a building."

"The information helps guide conversations between employees and managers, as needed, about coming into the office with their colleagues," the spokesperson added.

Employees and managers cobble together details

When Amazon announced plans to require employees to work in offices five days a week, it said in an internal FAQ document that the company would continue to collect badge data, but it was unclear how exactly that would work.

"In general, badge reports provide visibility of the days you badged into an Amazon building," the guide said. "This includes nearly all corporate buildings, data centers, fulfillment centers, and delivery stations. The badge reporting system will also reflect any PTO which you've recorded, including recorded sick days and leaves of absence."

Employees have taken to an internal Slack channel to cobble together how badge tracking will work under the new five-day RTO mandate, according to the recent messages viewed by BI.

In place of the "inconsistent badger" or "zero badger" designations, managers can now see "raw data about which days they've badge in or taken paid time off," one manager said on Slack.

Another Amazon manager said what's visible now is a "pretty basic table view." Managers can see the badging report at all times, and it refreshes daily at 5 p.m. PT, according to the Slack messages.

Days, not hours

Locations aren't tracked, at least in a way that's visible to managers. The new tool doesn't record how many hours someone was in the office or track when they came and left. Instead, the new system mostly focuses on counting the number of days staff come in.

If employees fail to meet the five-day expectation, the internal system instructs managers to have a conversation with them.

"The missing piece here is there is nothing that tells managers what to do with this data other than to talk to the employee to understand," one Amazon manager wrote in a recent Slack message. "I think the answer is going to be 'work with your manager,' and your manager is going to have to work with HR to get clarity on a case-by-case basis."

One manager said Amazon's human-resources department or company leaders may have another mechanism that tracks more detailed attendance information.

"It's not clear what additional monitoring they will be doing but I suspect they will not make that visible to us," this manager wrote. "More likely it will be visible to HR and HR will reach out to ask what's up with an employee who isn't hitting five days a week."

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• Most Amazon corporate employees started working in the office five days a week in January 2025.
• Some employees reported issues such as lack of desks, full parking lots, and office theft.
• Others are keen to re-connect with colleagues. "You just can't recreate these connections online."

Amazon's five-day return-to-office mandate is off to a bumpy start.

Employees who spoke to Business Insider said the new office policy, which kicked off at the beginning of the year, has resulted in full parking lots, a lack of desks and meeting rooms, and items being stolen from desks.

While some employees praised the new policy as more face-to-face interactions have at times resulted in better collaboration, others say they still spend much of their time on video chats and in other virtual meetings.

BI spoke to seven current Amazon employees about the new office mandate. The employees also shared screenshots of group Slack messages and other private communications.

"Please go back to RTO3," one Amazon employee wrote on Slack, referring to Amazon's previous policy that allowed staff to work two days a week from home. "Or allow employees the option to WFH if they have the proper set up and they are high performers."

That Slack post garnered at least 22 supportive emojis from other Amazon colleagues.

Change is hard

Amazon has 1.5 million workers, of which roughly 350,000 are corporate staff. So those people who are openly complaining about the full RTO experience represent a tiny fraction of the company's workforce.

Some of the complaints may be a natural reaction to what is a drastic change of daily life for thousands of employees who slowly got used to working from home in the pandemic, and now must adjust again to a new reality.

Peter Cappelli, director of Wharton's Center for Human Resources, told BI that forcing employees to return to the office can stoke resentment. But even if management does a poor job with the transition, employees cannot do much because RTO is often "painful." And quitting isn't an option as fewer companies offer remote work these days, he noted.

"Employers have all the power here," Cappelli added.

Some Amazon employees are RTO-happy

Not all Amazon employees are grumpy about working in the office every day of the week.

BI asked Amazon for examples of employees who are positive about the full return to office. The company's press office shared thoughts from two employees.

Rena Palumbo, an Amazon Web Services employee, said re-establishing human connection with colleagues has been important, and she's now more excited about working with them.

Cash Ashley, another AWS employee, said face-to-face interactions have been crucial for building work relationships and creating mentorship opportunities. He said RTO also helps with work-life balance because there's a clear separation between work and home.

"You just can't recreate these connections online," Ashley said.

In an email to BI, Amazon's spokesperson said the company is focused on ensuring the transition is "as smooth as possible."

"While we've heard ideas for improvement from a relatively small number of employees and are working to address those, these anonymous anecdotes don't reflect the sentiment we're hearing from most of our teammates," the spokesperson said. "What we're seeing is great energy across our offices, and we're excited by the innovation, collaboration and connection that we've seen already with our teams working in person together."

CEO Andy Jassy said last year that the new policy is meant to improve team collaboration and "further strengthen" the company's culture. AWS CEO Matt Garman also told employees in October that 9 out of 10 people he spoke to were "excited" about the change.

Lack of desks and meeting rooms

Most of Amazon's corporate employees started following the five-day office return mandate in early January. There are some signs that the company wasn't fully prepared for the logistical challenges.

Some workers found there weren't enough desks and had to track down space in a cafeteria or a hallway, two employees told BI. Others said there weren't enough chairs in offices and meeting rooms.

There's also been a shortage of meeting rooms, one of the people said. Some people got used to speaking openly about private topics while working from home. Now they're surrounded by colleagues in the office, so they are unofficially slipping into meeting rooms and phone rooms to conduct these conversations, this person said. That's clogged up meeting spaces and left some managers having private chats in open areas for everyone in the office to hear.

Full parking and shuttles

Some Amazon employees complained on Slack that when they drove to the office they were turned away because company parking lots were full. Others said they just drove back home, while some staffers found street parking nearby, according to multiple Slack messages seen by BI.

One employee from Amazon's Nashville office said the wait time for a company parking pass is backed up for months, although another staffer there said the company was providing free commuter passes which they described as "incredibly generous."

Another Amazon worker said some colleagues are joining morning work meetings from the road because the flood of extra employees coming to the office is making commutes longer.

Other staffers said they were denied a spot on Amazon shuttle buses because the vehicles were full, according to one of the Slack messages viewed by BI.

Signs of strain

With so many Amazon employees spread out across well over 100 locations around the globe, getting everyone back into an office smoothly is going to take more than a few weeks.

Indeed, Amazon delayed full RTO at dozens of locations, with some postponed to as late as May, due to office capacity issues, BI previously reported. Amazon subsidiaries, such as One Medical and Twitch, have also delayed or received exemptions from the five-day office-return policy, BI reported.

"Our upper 'leadership' has botched this so hard along with so many other things. Makes one wonder what other poor decisions will impact the company in the coming year," an Amazon worker recently wrote on the company's Slack.

Amazon's spokesperson told BI that the company is ready for the vast majority of employees to be back in the office.

"As of early January, the overwhelming majority of our employees have dedicated workspaces and have returned to the office full time," the spokesperson said. "Of the hundreds of offices we have all around the world, there are only a relatively small number that are not quite ready to welcome everyone back a full five days a week."

Office thefts and daily shower reminders

In some cases, basic office etiquette seemed missing as staff returned in the first week or so of January.

Several employees at Amazon's Toronto office complained of their personal belongings being repeatedly stolen from desks, according to the Slack messages.

One person complained that a keyboard and mouse placed on their assigned desk had gone missing, while another urged employees to keep their possessions in a safe place.

"Despite being adults that are well-paid, it's shameful that we can't trust each other with leaving personal belongings unattended," one worker wrote on Slack. An Amazon spokesperson declined to comment when BI specifically asked about this issue.

An office "survival guide"

On Blind, which runs anonymous message boards for corporate employees, Amazon staffers posted an "essential survival guide," offering tips for colleagues coming back to the office.

"Operation: Don't Be The Office Menace" listed several dos and don'ts for working around other people.

"Deploy personal hygiene protocols BEFORE leaving your launch pad (home). Yes, that means actually using the shower you've been avoiding since WFH began," read one piece of advice for office life at Amazon.

Another urged colleagues to keep the toilets tidy. "The bathroom stall is not a 'serverless' environment. Flush after use — it's called 'garbage collection' for a reason."

A third tip focused on the types of shoes to wear in the office. "Footwear is not optional. This isn't a beach sprint retrospective — keep those toes contained in their proper containers (shoes)."

'Very little team discussion'

RTO has been one of Amazon's most contentious issues over the past couple of years. Tens of thousands of Amazon employees signed internal petitions opposing the mandate, while internal Slack channels blew up with questions about the change. Jassy has had to address the issue repeatedly during internal all-hands meetings.

This month, some employees were still questioning the logic behind the policy. They said being in the office has so far had little effect on their work routine and has not generated much of a productivity gain.

A considerable portion of their in-office work is still being done through video calls with customers who are located elsewhere, these employees told BI.

Many Amazon colleagues are based in other office locations, so face-to-face meetings still don't happen very often, they added.

"Very little team discussion while here," one employee wrote on Slack.

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