Retro Microsoft Re-org

By Tony Clark, 2-Dooz Inc. – July 16, 2013 (Original Publication Date)

Microsoft is going retro—moving from a business unit oriented organizational structure to a functional unit organizational structure.  The stated goal of the reorganization is to rally “behind a single strategy as one company.”  This is a laudable objective.  Microsoft desires to improve focus, internal alignment, and collaboration.  The unfortunate reality is that the company is merely replacing business unit silos with functional group silos.  And, the outcome is likely to be little to no impact on their stated intention.  

A simple way to assess any organizational structure is to look at the impact on a company’s three most important stakeholders: (1) customers, (2) employees, and (3) investors.


From the perspective of Microsoft’s customers, the impact of the reorganization will likely be mixed.  On one hand, consolidating all of the communications activities into one Marketing group should allow the company to deliver a less disjointed, “more coherent message” to customers.  On the other hand, functionally separating the Marketing and the Engineering groups will have the effect of moving the Engineering groups further away from the customers.  In practice, new customer requirements will be filtered through the Marketing organization; likely, this inefficiency will lead to misunderstandings regarding the real customer requirements, which in turn will lead to missed opportunities.  At best, the impact of the Microsoft reorganization on its customers will be neutral.


Having worked in both business unit oriented and functional unit oriented organizational structures (and in hybrid structures as well), it has been my experience that beginning just two levels down the org-chart from the CEO, all organizational structures look the same and more importantly behave the same.  From the perspective of an employee, the reason for this is straightforward—the most important person in the organization to consider is one’s immediate supervisor; generally, the level above one’s immediate supervisor is opaque.  So, looking at the Microsoft reorganization from the vantage point of a typical individual contributor, there should be no impact.


In the short term, excluding the effects of the “rising stock market tide raises all issuances,” the affect of the Microsoft reorganization on investors will be slightly negative.  Investors who had hoped that the company could have realized more value by spinning out one, or more of the old business units, are now facing diminished prospects for such an action.  The new functionally oriented organization will make it more difficult to tease out the individual performance of each constituent business.  Moreover, depending on how Microsoft moves forward with its financial guidance, vis-à-vis the new organizational structure, the task of trying to discern the underlying business segments could be nearly impossible.

Overall all, considering the likely impact on its major stakeholders, the Microsoft reorganization, by itself, will do little to help the company accomplish its stated “One Microsoft” objective.  As is the case for most reorganizations, at best, this one should be a case of “no-harm, no foul.”

Those are my thoughts.  And, as always, I invite and look forward to learning what you think.


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