Performance management isn’t just about celebrating top performers - it can also be about addressing the uncomfortable reality of managing low performers out of the organization. While it’s never an easy conversation, it’s a critical one for maintaining a high-performing, engaged workforce.

Many organizations that focus on maintaining a high-performing workforce often transition out 5% to 10% of their workforce annually, knowing that the final number often lands closer to 4% to 7% after leadership reviews and adjustments. But gone are the days of rigid forced ranking systems. Today, organizations are adopting more nuanced strategies that balance accountability with fairness, all while navigating budget constraints and the risks of employee disengagement. 

So, how can companies handle performance-based exits effectively? Let’s explore.

Why Managing Low Performers Matters

Low performers can drag down team morale, hinder productivity, and strain resources. However, mass terminations or poorly handled exits can create fear and uncertainty across the organization. 

That’s why many companies are taking a growth-oriented approach first - offering coaching, reassignment, or reskilling opportunities before making final decisions.

The key is to strike a balance: holding employees accountable while treating them with respect and transparency. After all, how you manage performance-based exits says a lot about your company culture.

How are some of the biggest tech companies handling performance-based exits?

1. Microsoft (early 2025)

   Workforce Reduction: ~2.5%

   • Approach: Shifted to a stricter performance management system, moving away from its previous "growth mindset" model.
   • Key Focus: Clear, measurable performance expectations and accountability.

2. Amazon (2022-2023)

   Workforce Reduction: 27,000 jobs cut

   • Approach: Decisions were driven by performance metrics, but also considered factors like missed KPIs, disengagement, resistance to change, and poor communication.
   • Key Focus: Job criticality and skill set relevance played a major role in final decisions.

3. Meta (early 2025)

   Workforce Reduction: ~5%

   • Approach: Adopted an aggressive performance management strategy to “raise the bar.” Managers identified 12% to 15% of employees with the lowest ratings, but final cuts also considered role importance and future skill alignment.
   • Key Focus: Balancing performance ratings with long-term business needs.

Beyond Performance Ratings

While performance ratings are central to these decisions, other factors come into play:

• Role Criticality: Is the role essential to achieving the company’s goals? Are processes well-documented to ensure knowledge transfer? Is the position a single point of failure?
• Skill Set Alignment: Does the employee have skills that align with current or future business priorities? Are their capabilities difficult to replace in the market?

Effective performance management isn’t just about addressing low performers - it’s also about recognizing and rewarding high achievers. When performance and compensation management are aligned, they create a culture of accountability, motivation, and fairness. 

Conclusion

Managing low performers out is never easy, but it’s a necessary part of maintaining a high-performing organization. By taking a thoughtful, transparent approach, companies can navigate these tough decisions while preserving employee trust and morale. Companies that handle it well communicate transparently, offer reskilling opportunities where possible, and ensure that remaining employees see a clear path forward.