Have you ever considered how your company handles terminations when annual review season rolls around?
Back in the day, Tesla made headlines when they let go of 400 employees right after performance reviews. If you missed the details, it’s an interesting read, and you can check it out online. Plus, my friend Kris Dunn took a deep dive into Tesla’s unique culture over at The HR Capitalist—definitely worth a read!
When the news broke, Tesla confirmed in a statement that these departures were “part of an annual review” but didn’t provide an exact number.
The San Jose Mercury News reported that up to 700 employees across roles, from engineers to factory workers, were cut. Tesla’s statement mentioned that performance reviews sometimes lead to employee departures—a common practice for companies of their size, with more than 33,000 employees worldwide.
But here’s the question: is tying terminations to annual reviews a good way to sustain a healthy workplace culture?
Sure, Tesla’s got the cool factor—having “Tesla” on your resume is a badge of honor for many. But does that still apply if employees feel like they’re on the chopping block every review season? I get that letting go of underperformers is a necessary part of business, but should it be tied to once-a-year performance reviews?
Picture the lead-up to review week at Tesla. I can almost imagine the “just-in-case” goodbye lunches, where everyone’s invited to break bread “just because.” And once reviews are over, that Friday could be one big post-review party.
Let’s be real—firing employees around annual review time can turn a standard process into a high-stress, anxiety-driven experience. If a company only addresses performance issues annually, that’s a sign performance management might be falling short.
Strong, performance-driven cultures don’t wait for review season to give feedback; they make it a continuous process. If improvement isn’t happening, high-performing companies usually address the issue immediately, rather than waiting for an annual purge day that piles on unnecessary stress.
But hey everyone can march to their own drumbeat! I’d love to meet Tesla’s HR leader back then and hear their take on how they think this approach strengthens their culture.
Keep it real in HR!
Tim, Good article and you have nailed the root issue behind Tesla’s decision. I am very curious as to why the HR person decided to do this. I think that we can attempt to understand that possibly management was not on the same page as well in this scenario. If people were not performing all year, would it be realistic to think that one level of management felt that a lower level was not holding their team accountable. Has their performance evaluation process become a fail safe for performance?