Microsoft has embarked on a significant transformation, moving away from its previous lenient performance review practices to a more rigorous evaluation system. This change comes as the company seeks to streamline its workforce and enhance productivity. Nearly 2,000 employees were recently terminated due to performance issues, signaling a shift in Microsoft’s approach to employee management. The company is now focusing on creating a high-performance culture that prioritizes clear expectations and accountability. Additionally, Microsoft is exploring new ways to evaluate employees, drawing insights from external leaders and industry best practices.

The End of Leniency: A New Approach to Performance Management

In recent years, Microsoft has undergone a cultural shift, moving from a softer stance on performance reviews to a more stringent evaluation process. This change reflects the company's desire to foster a work environment where high performance is the norm. Previously, under CEO Satya Nadella, Microsoft had adopted a more compassionate approach, but now it is tightening its criteria for assessing employee contributions. The recent terminations of nearly 2,000 staff members deemed low performers highlight this new direction. These cuts are part of a broader effort to ensure that only top talent remains within the organization.

The shift began with the abandonment of the controversial stack ranking system in 2014, which was replaced by a growth mindset framework aimed at encouraging continuous learning and development. However, as the company grew, it faced challenges in maintaining high standards across its vast workforce. To address this, Microsoft introduced the "ManageRewards slider," a performance evaluation tool that assigns scores based on employee impact. While this system provides flexibility, it also allows managers to identify and address underperformance more effectively. The company is now placing greater emphasis on ensuring that employees meet or exceed expectations, with a focus on clarity and accountability in performance reviews.

Redefining Success: Balancing Growth and Accountability

As Microsoft redefines its approach to employee evaluation, it is also seeking to balance the need for growth with the requirement for accountability. The company is introducing measures to ensure that employees who do not meet performance standards are managed out efficiently. This includes a formalized process for addressing performance concerns and providing feedback, followed by a structured improvement period. If employees fail to improve within this timeframe, they may face termination. The goal is to create a transparent and fair system that supports both high-performing employees and those who need additional guidance.

To further refine its performance management strategy, Microsoft is turning to external expertise. Leaders like Mustafa Suleyman and Jay Parikh, along with internal executives such as LinkedIn CEO Ryan Roslansky, are contributing their insights to help shape a more effective evaluation process. The company is also adopting practices from competitors like Amazon, such as measuring "good attrition" to ensure a leaner, more engineering-focused workforce. These changes aim to create a more agile and competitive organization, capable of thriving in an increasingly dynamic tech landscape. By aligning its performance management practices with its strategic goals, Microsoft is positioning itself for long-term success.