From:Otellini, Paul
Sent:Thursday, July 13, 2006 11:11 PM
Subject:An important and difficult step: Managerreductions
To: AllIntel employees
This weekwe’re taking an important and difficult step in our efficiencyproject: reducing the number of Intel managers by about 1,000people worldwide. Only managers, ranging from senior to first-line,are affected. This step is important because it addresses a keyproblem we’ve found in our efficiency analysis—slow andineffective decision-making, resulting, in part, from too manymanagement layers. It is difficult because the managers who willleave the company are our colleagues and friends, and since we havelimited internal job opportunities, redeploying their skills is nota viable option.
We arenotifying the majority of impacted employees on Thursday and Fridaythis week, and (except where a country’s laws require differentsteps and timelines) we plan to have all affected employeesinformed by Monday, July 17. In the U.S., most employees’ last dayof work will be July 28, and their benefits will include a minimumof about three months’ separation pay (and more for lengths ofservice over two years). In other regions the process and benefitswill differ. While we can’t eliminate the impact to theseemployees, we’re committed to offering them support during thisdifficult time.
Thismanager reduction is one of the first major actions coming out ofour structure and efficiency project, and I believe it’s anessential first step toward making us more competitive. Over thelast five years at Intel, the number of managers has grown fasterthan our overall employee population. Our efficiency analysis andindustry benchmarking have shown that we have too many managementlayers, top to bottom, to be effective.
Inaddition, this finding is consistent with what our organizationalhealth surveys have suggested: that the relative increase inmanagement has impaired decision-making and communication, reducingthe company’s efficiency and productivity. Many of you have madethe same point in your individual inputs to the efficiencyteam.
As I’vesaid in previous Webcasts, one of the outcomes of the structure andefficiency project is that we’ll be a leaner and more agilecompany. We’ll make quicker decisions, collaborate better acrossthe company, and enable a cost structure that allows us to continueto win in our extremely competitive industry as itevolves.
Thismanager action is one step along that path. Another was thedecision to sell our communications and applications processorbusiness to Marvell. We’ll continue to identify otheropportunities, act on each one as soon as we can, and tell youabout the changes as soon as possible. I’ll talk more about thisand our business priorities in my employee Webcast on July 19 at 4p.m. Pacific time.
In April Isaid that we had decided not to do an immediate “across theboard” layoff, because that would be reactionary – focused onlyon the current environment rather than the long term strategicneeds of our company. Instead, we chose toundertake a longer, more comprehensive project to analyze all ofour operations and make strategic, data-drivendecisions. That is still ourplan. This manager reduction was the result ofcareful assessments of the management and leadership roles we needfor our future success. We are in the process offundamentally changing our behaviors and our structure for whereour business and industry are going. You should expect that we willcontinue to take actions, including selective reductions, as wecomplete analyses and decisions about investments, expense levelsand organizational structures. You should also keep in mind that atthe end of this process we will still be the largest and mostprofitable semiconductor company on earth. Our actions are focusedon ensuring that is true well into the future.
I knowthis is hard for all of us to internalize and accept. We have doneextremely well over the past 25 years of the “PC era.” But weneed to adjust now for where our industry is going. Competitionwill intensify across our product lines. Pricing will beaggressive. We should not only accept that reality, but recognizethat it reflects the position we have earned in the industry andthe strength of our strategic direction. Weak companies pursuinglow-growth markets do not attract competition. Strong companiesthat have commanding positions and generate strong earnings growthare the onesthat attractcompetition.
Ourobjective, and our destiny, is to refashion Intel now while we havethe means and the time to do so, and ensure we continue to remainnumber one.
Paul