Undead Labs has doubled in size since being acquired by Microsoft. However, the Xbox’s first-party studio is now reportedly struggling with the State of Decay 3 development, facing accusations of mismanagement and discrimination.

Kotaku reported the internal problems at Undead Labs on March 31, speaking with 12 current and former employees. Although some of them think that the studio is a good place to work at and can be improved, others call the last few years since the acquisition a “period of crisis.”

Key takeaways

  • Most employees were surprised by Microsoft’s announcement of the Undead Labs acquisition at E3 2018, taking into account founder Jeff Strain’s previous comments about the studio’s desire to stay independent.
  • Strain responded to Kotaku’s questions in a separate post on Medium, saying that he has been trying to find potential buyers for Undead Labs instead of bragging about independence.
  • According to the report, some of the problems started in 2019, soon after Strain left the studio and ArenaNet head of development Philip Holt became the chief of staff.
  • During that time, Undead Labs hired Anne Schlosser as the studio’s first head of people and culture. Considering her HR experience at companies like Dell and Microsoft, she should have helped bring Undead Labs’ culture to a new level.
  • However, some employees said that Schlosser did little to confront discrimination and even sided with toxic and sexist people. She also allegedly ignored complaints and offered people excuses instead of actual support.
  • “It got to the point where nearly every week, someone would sob on a video call with me, because I was the only one who would listen to them,” one current developer said.
  • Schlosser, however, denied these allegations, telling Kotaku that she would never tolerate that kind of behavior. She also noted that she implemented new hiring practices “that increased workforce diversity by more than 30 percent.”
  • After Microsoft conducted a review following numerous complaints, Schlosser quietly left Undead Labs. However, she said that her departure was part of a “planned reorganization at the studio.”
  • These allegations aside, current and former employees said that some employees experienced bullying, sexism, and other forms of discrimination. On top of that, they accused the studio’s leadership of mismanagement.
  • All these problems affected the State of Decay 3 development. The team didn’t want to announce the game in 2020, and management panicked when Microsoft started requesting internal demos.
  • According to one former developer, Holt has been putting pressure on the team instead of trying to find a compromise with Xbox: “Philip was pushing us because he was obsessed with proving himself as a leader inside Xbox Game Studios. He was using this as leverage to further his own career and image, at the cost of the developers.”
  • Undead Labs divided developers into several teams to prototype new features, but it led to confusion because “there was no consistency with who worked on what system.” The leadership also allegedly asked the QA team to not log multiplayer bugs to “show artificial progress” on State of Decay 3.
  • Some developers are still optimistic about the game’s future despite all the problems. However, it is still unclear when State of Decay 3 will come out.