Microsoft Organizational Structure: Divisional Structure with Focus on Innovation

By John Dudovskiy
January 31, 2019

Microsoft organizational structure can be classified as divisional.  In June 2015, the senior management announced a change in Microsoft organizational structure to align to its strategic direction as a productivity and platform company. This restructuring initiative resulted in elimination of approximately 7,400 positions in fiscal year 2016.[1] The current divisional pattern of Microsoft organizational structure is the result of this restructuring initiative.

As it is illustrated in figure below, Microsoft organizational structure is divided into divisions according to engineering groups and business functions. Specifically, on the basis of engineering groups, the company is divided into three divisions, whereas according to business functions it is divided into 9 divisions:

Microsoft Organizational Structure

Microsoft Organizational Structure

The latest restructuring of Microsoft organizational structure and shift to divisional organizational structure offers the following advantages to the business:

Firstly, under the new organizational structure, heads of engineering groups directly report to CEO Satya Nadella with positive implications on new product development initiatives and innovation potential. This is particularly important to be able to introduce new products and services to the marketplace in the short duration of time. Moreover, a clear distinction between engineering groups and business functions, as illustrated in figure above, is an indication of the technology giant ‘s focus on business directions under engineering groups such as cloud and artificial intelligence.

Secondly, organizational restructuring eliminates bureaucracy in business processes and procedures to a great extent, increasing the flexibility of the business to adapt to changes in the external marketplace.

Thirdly, the initiative resulted in the elimination of approximately 7,400 positions, thus saving considerable amount of financial resources that can be channelled for new product development and increasing the competiveness of the business in many other ways.

Another important aspect of corporate culture at Microsoft refers to a high level of dynamism. Specifically, the CEO of the tech giant Satya Nadella is continuing with simplification and de-layering initiative of Microsoft operations in the global scale and these initiatives are expected to further impact Microsoft organizational culture.

Microsoft Corporation Report contains a full analysis of Microsoft organizational structure. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Microsoft. Moreover, the report contains analyses of Microsoft leadership, business strategy and organizational culture. The report also comprises discussions of Microsoft marketing strategy, ecosystem and addresses issues of corporate social responsibility.


[1] Annual Report (2016) Microsoft Corporation

Category: Management