Layoffs have become the corporate reflex to uncertainty — a quick way to steady the balance sheet, but one which often undermines long-term growth. Economic headwinds are intensifying, and CHROs are under pressure to deliver results in any climate. Nearly half (45%) of CHROs identified rising operational costs as a major challenge for their organization and their function, according to SHRM's CHRO Perspectives and Priorities report. Between rising costs, wage inflation, and the rapid adoption of artificial intelligence, CHROs are under growing pressure to rethink workforce strategy.
One response, seen in companies such as Meta and Amazon, is shifting to performance management methods such as stack ranking. In pursuit of efficiency, Meta called to reduce costs through shrinking headcounts and streamlining their work. They set the goalpost at cutting 12% to 15% of team members, before moving it to 15% to20% of team members.
Does this approach truly build a resilient, high-performing organization for the long term? The evidence suggests it often damages morale, increases attrition, and fails to address the root causes of underperformance.
In the face of external and internal pressure, performance management must focus on transformation, not elimination, to be truly sustainable and business accretive.
Stack Ranking and Its Discontents
Stack ranking typically requires managers to rate their employees against each other and cut those who fall into the bottom performance percentile.
One of the side effects of stack ranking is the propensity for team members to silo themselves in order to focus on boosting their own personal performance rather than collaborate more openly for the growth of the organization. It also creates a cap on the number of employees labeled as "high performers" in an organization, which has been shown to push high achievers to leave, seeking organizations where there is no limit on the number of high performers.
Proponents argue stack ranking doesn't have to breed competition or isolation. When done well, they say it can sharpen performance insights and lead to better development decisions. By rigorously analyzing data and reviewing work across multiple dimensions, proponents argue managers gain a clearer picture of each employee's contribution. That clarity, in turn, allows organizations to upskill or retrain underperformers rather than automatically cutting them from the team.
Meta, like many other company, faces internal and external pressures to "do more with less," driving a renewed interest in stack ranking as a key form of performance management. However, successful implementation can be difficult, with the risks reaching to damaged morale, attrition of high performers, and negative impacts on long-term (five to 20 years) organizational success.
The New Era of Workforce Planning
CHROs face a unique set of circumstances when it comes to workforce planning. Varying economic outlooks, shifting labor markets, and the rise of AI are pushing leaders to reconsider the roles, skills, and people needed to carry their organization forward. These pressures can make short-term solutions such as stack ranking appealing, discounting the long-term implications.
Organizations that shift toward stack ranking may be fueled in part by the way our brains are wired. Temporal discounting, or time discounting, is the tendency to focus on the short-term gains, even when future rewards outrank the present offerings. Executive compensation also incentivizes short-term thinking, with many compensation packages including stock options. Depending on the ratio of stock to cash compensation, CEOs, in tandem with CHROs, may place a higher weight on actions which boost share prices in the near term, including reducing headcount.
Going against natural tendencies and entrenched incentives to favor the short-term can pay off, however. Organizations with a focus on the long-term had on average, 36% greater earnings growth than other companies, in addition to higher revenue, market cap, and profits, according to a report from McKinsey Global Institute. This study, which ran from 2001 to 2015, continues to have implications today, particularly when it comes to economic uncertainty. The same report showed organizations with a long-term focus were hit harder during the financial crisis of, but they also recovered faster. This highlights the resilience that comes from investing in your people and your future, even when times are tough.
Three Transformations CHROs Must Lead
Short-term pressure or long-term goals aside, performance management remains front-of-mind for HR leaders. In fact, performance management was in the top five priorities for 2024, with 26% of HR professionals selecting it as a priority, according to SHRM's 2025 State of the Workplace report. Stack ranking may appeal to leaders as a way to support a performance culture and develop workforce capacity, but in both cases, there’s a large risk for disillusionment and lowered morale.
To combat short-term thinking and prepare teams to navigate uncertainty, CHROs need to focus on three key areas.
Step One: Upskill, Don't Discount
Before labeling an employee as a "low performer," it's important to look deeper. Often, performance issues stem from correctable challenges rather than a lack of ability or motivation. Consider if an employee is struggling due to:
- New skill gaps created by technological changes, like AI implementation.
- Shifts in management or team dynamics, such as reorganizations or turnover.
- Personal health issues or difficult life circumstances, including new diagnoses or the loss of a partner's income.
Instead of immediately moving toward termination, which can cost between 50% and 200% of an employee's salary to replace them, consider upskilling or reskilling. Investing in your current employees is a far more cost-effective solution. It demonstrates a commitment to your people, which in turn boosts retention, engagement, and overall morale. By recycling talent, you build a stronger, more capable workforce from within.
Step Two: Spread Out Performance Feedback
Frequent, informal feedback creates a supportive dialogue. It allows managers to reinforce positive behaviors in real-time and gently correct course when needed. This approach helps employees feel seen and supported, giving them the opportunity to grow and adapt. Research shows consistent feedback can improve performance, motivation, and alignment with company goals.
Fair treatment and recognition for contributions are essential workplace features according to U.S. workers surveyed in SHRM's 2025 State of the Workplace report. Yet, in 2024, 34% of U.S. workers reported a lack of recognition while 15% cited unfair performance evaluations. Continuous feedback directly addresses these concerns, building trust and strengthening the manager-employee relationship.
Step Three: Remove Bias from Ratings
Performance ratings can be a powerful tool, but they can also introduce unintentional bias which holds talented individuals back. It's crucial to re-evaluate your rating systems to ensure they are as fair and objective as possible.
Research has shown simple changes, such as adjusting the rating scale, can significantly reduce gender and racial bias in evaluations. Removing bias isn't just about fairness; it's a strategic move to unlock hidden potential across your entire workforce. When assessments are bias free, you gain a clearer picture of who your true high-performers are and where development is needed. By creating positive feedback loops built on objective data, you can cultivate performance instead of suppressing it through flawed metrics.
"In a previous role, when we overhauled performance reviews to remove scoring, we found it faltered without a replacement," explained Jim Link, SHRM-SCP, CHRO at SHRM. To make up for the lack of scoring, Link had to find an agreed upon communication methodology. He and the team settled on setting up checkpoints, with specific questions for each quarter. While the initial transition took careful planning, front line managers began to report the more frequent checkpoints they did, they spent less time in needing to manage the actual performance of an employee.
The CHRO's Mandate: Lead with Vision, Not Just Efficiency
From upskilling team members to removing bias from reviews, performance management is more than simply an HR process, it's a strategic business function. Elimination as a tool may yield short-term gains, but transformation can deliver long-term value. In Link's case, more than two weeks' worth of productivity was saved to be redirected to more valuable tasks when the organization embraced change.
Adopting more progressive workforce planning models and upskilling managers with the People Manager Qualification (PMQ) can help CHROs:
- Future-proof talent.
- Elevate morale and culture.
- Drive sustainable productivity.
With performance management transformed, organizations can better face what's ahead.
Build a Workforce for What's Next
Meta's year of efficiency has turned into a multiyear effort, with restructuring and layoffs creeping into 2025, a few years after their announcement. The short-term thinking is turning into a long-term strategy which churns talent.
While cutting headcount may offer a temporary financial boost, it's the investment in your people that delivers lasting value. By championing a progressive model of workforce planning — one built on upskilling, continuous dialogue, and fairness — you can future-proof your talent and elevate morale.
The companies which thrive in the years to come will be those whose HR leaders chose reformation over reduction. By leading with empathy and a clear vision, you can build a resilient, engaged workforce ready for whatever comes next.