Microsoft cutting costs

Thursday, July 08 2004

This article talks about how Microsoft will be trying to cut costs, and while I can understand a company wanting to streamline and be more efficient, I was surprised to see employee benefits on the list as being one of the things scaled back on.

The article point out that "In his memo, Ballmer wrote that the company still has "the most generous benefits plan in our industry," and he added that the company had considered "more substantial changes" before rejecting them based on employee feedback."  

So basically let me sum up what he is saying, our benefits are damn good and we could have taken even more away so be happy with what we are doing.

I think a company has a responsibility to its shareholders, customers, and its employees. There are times when a company must reduce employee benefits, or even layoff employees, in order to stay in business and take care of its remaining employees, shareholders, and customers...  clearly this is not one of those times.

It seems ridiculous that Microsoft is reducing benefits when it is #1 in the market, making tons of money, and has huge cash reserves. I mean, we are talking about a company with 26 Billion dollars in gross profit over the last 12 months, and an earnings growth of 27%... but they can't afford to pay for some prescriptions for their employees? Gimme a break.

I always thought Microsoft was the best example of a company that understands that its people are its greatest asset, I hope that this is not changing.

-James

Comments

#1 Josh on 7.08.2004 at 3:04 AM

Not to mention over $50 billion (with a 'b') in *CASH* in the bank. The $1 billion in savings they'll receive is peanuts compared to the lost morale caused by these petty cuts.

#2 Robert Scoble on 7.08.2004 at 3:28 AM

>but they can't afford to pay for some prescriptions for their employees?



James, that's totally incorrect. The company is only paying for generic prescriptions now, if those are available. If you want name-brand stuff you'll have to pay for those yourself.



Health-care costs have gone up more than 50% in the past few years.



Microsoft has -- by far -- the best health care plan that I've ever had (and still does).



As an employee, I'm also a shareholder. I want Microsoft to find ways to keep expenses down so that we can effectively compete in the marketplace. Or did you miss that one of our strongest competitors is open source and that they don't pay their "employees" at all?



Also, in a year when one of my brother-in-law's is out of work, my wife was out of work for 18 months, and many people I know are still struggling, even if they do have jobs (millions of people are without any healthcare in this country) I don't think it'd do my position any good to complain about these cost cutting moves.



Is my morale decreased? Not at all.

#3 Andy on 7.08.2004 at 12:36 PM

I agree with Robert. If I were an employee of Microsoft I would much rather have small cuts to my benefits (only being able to get generic prescriptions) then seeing the company lay people off. Which would you rather have. Sure they have a lot of $$ but all companies at some point need to make cuts. You can't just spend money because you have it...

#4 James Avery on 7.08.2004 at 12:41 PM

Andy,


Microsoft is growing and growing, this was not a "cut benefits to avoid layoffs move", it was a cut benefits to make even more money move.



-James

#5 James Avery on 7.08.2004 at 12:45 PM

Robert,


I am a shareholder of Microsoft as well, and their lack of focus on their employees worries me more that give or take a billion dollars. Actually this cost cutting measure does more to worry me about the company than anything else, it shows that they are worried about their business, that maybe they dont have the confidence they once had.



-James

#6 Travis Owens on 7.08.2004 at 1:09 PM

I'm sure MS has good reasons they have no interest in disclosing with lowly employees like yourself :)



Perhaps it has something to do with all the recent lawsuit payoffs (we're talking in the millions here baby).



Perhaps it has something to do with business evaluations of how the market is changing and maybe MS anticipates with Dell entering into the Linux world, MS will start getting real competition (which reduces future profits).



Not to mention when you take "pay for some prescriptions" across all the thousands of employees, you'll see it would add up very quickly.



I highly doubt these recent cuts are purely to line Bill's pockets, I'm sure there are much greater reasons involved.

#7 Gary Potter on 7.08.2004 at 1:50 PM

I'm inclined to agree with Travis - the lure to open source is incrediblly tempting and it's possible that advances in that space have outpaced Microsoft's ability to catch-up to and pass competitors.

#8 Darrell on 7.08.2004 at 2:58 PM

Ballmer is looking to cut employee benefits because overall expenses are rising faster than revenues. Why not cut other expenses?



James is dead on in that companies have 3 key stakeholders: shareholders, employees, and customers. Ballmer is basically knocking one down to build up another.



Scoble said "Health-care costs have gone up more than 50% in the past few years". That is true, but it is an overall increase number, the annualized growth is much lower, lower than Microsoft's 27% *yearly* growth in fact. Don't just toss out numbers since they look bigger than another.



Lawsuits in the millions mean little to a company that has 56+ Billion US Dollars in the bank. To put it in perspective, a 500 million dollar lawsuit to them would be like a $10 fine to you if you had $10,000 in the bank.



The point James brings up, which is a good one, is that with the cutback in benefits it is reducing the effective salary of a Microsoft employee. Since when would you ever want your employer to say to you, "We need to cut back, so I'm going to lower your salary by x percent." But since benefits are not as tangible as your paycheck, these are the games employers play.

#9 Andy on 7.08.2004 at 3:25 PM

I'd rather have my employer say "We need to cut back, so I'm going to lower your salary by x percent." then say "We need to cut back, so collect all your things and good luck in the job market." Sure it sucks getting cuts but they all have time to find something else if it is sooo grueling. I'm sure most of the employees moral is fine. Everytime your employer changes healthcare providers you lose certain things. Do you think employers change who you go through (i.e. medical mutual or whatever) to give you better benefits??? not likely... It is cheaper for them.

#10 DarthPedro on 7.08.2004 at 5:53 PM

The only problem with cuts to benefits is that they're made during the tough times (in the economy or for a company). But, when that turns around, the companies don't go back and say, "let's add back to those benefits that we cut." Because it's a savings that they're use to having. The only time that ever happens is if a union goes in and demands additional benefits, but that's unlikely to happen in the software industry any time soon.



Most large companies, Microsoft included, pay very little (if any) of their profits in taxes to the federal government. They're well protected by tax laws, exemptions, and high-priced accountants. If these companies paid a small portion of that in taxes, the federal government could provide universal health care and many other programs. But, for these corporations all else is sacrificed for the sake of maximizing profits.


#11 Tim on 7.13.2004 at 8:57 PM

Andy said



I'd rather have my employer say "We need to cut back, so I'm going to lower your salary by x percent." then say "We need to cut back, so collect all your things and good luck in the job market."



And yes andy you just got a pay cut. And where do you think that money that micr$oft jsut saved is going to go? It went straight into shareholder pockets.


It's nothing but pure corporate greed. You will now have less expendable income to buy products that someone else is making. And now that persons company is going to have to cut corners because you don't have enough money to buy from them, this is what trickle down economics really is.



Tim

#12 Mini-Microsoft on 7.20.2004 at 2:27 AM

I work for Microsoft and I think it would be far better for us to have layoffs and downsize vs. pealing away at layers that just piss everyone off. Time for bold decisions! I spout about this at http://minimsft.blogspot.com and I hope other employees will serioulsy consider supporting a leaner, meaner, smaller Microsoft.

#13 Andrew G. S. on 8.23.2004 at 5:21 PM

It's not quite so black and white. Obviously M$ had some purpose behind the benefits reduction, however they could have more easily saved money on something tangible. Healthcare cuts screw some employees more than others. Effectively, the prolitariate, the muck-dwellers, are the ones hit hardest by benefit losses for their disposible income is far more thinnly stretched.



Conversely, they also tend to be the fat that's trimmed in down-sizing. I doubt the project coordinators and such are hurting or sobbing because they must settle for generic instead of name-brand for their anti-biotics etc.



I question whether the healthcare of 54,000 workers is so pricey as that, also. Could the tiny healthcare proviso simply be a feigned punch before kicking their workers in the proverbial gonads? Something to think about...

#14 HR vs software engineers on 6.18.2005 at 5:36 AM

Microsoft is the Walmart/Huyndai/Toyota of software. They couldn't care less about the American people.



No one likes Toyota (well maybe you Americans do, I haven't a clue) and no one likes Microsoft (ditto). Most Microsoft employees are from Red China or India and don't have any respect for the USA.



They get the citizenship and they will bring their relatives to your country. Do you think the chinese grandparents of the Microsofties will be working and paying taxes or do you think they'll be just living on taxpayers money? I am not a racist, I have worked with these people, I know what I'm talking about.



Everyone likes BMW - built by us dumb blonde leftie liberal people that the Microsoftie MBA's hate.



I am a visitor in your country and soon I'll be back to the EU. Please get a clue.


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