The Impact of Tencent's Performance Management Reform on

Enterprises and Employees

Chenjia Du

Laiwu No.1 Middle School, Jinan 250102, China

Keywords: Tencent, Performance Management Reform, The Internet Industry.

Abstract: In the context of intensified competition in the internet industry, performance management has become a core

tool for companies to enhance efficiency and competitiveness. This paper takes Tencent as a case study, using

literature analysis, case comparison, and data statistics to systematically examine the dual impact of its

performance management system reform on both the organization and employees. The study finds that while

Tencent's original five-star performance system had clear goals, the forced distribution led to internal

competition and a complex promotion process resulted in talent loss. After the reform in 2022, the evaluation

levels were simplified to three tiers, and promotion authority was delegated to departments. Although this

reduced internal competition (the turnover rate dropped to 9.8%, lower than the industry average of 15.6%),

the lack of differentiation in evaluations weakened incentives for high-performing employees. It is

recommended to optimize the quantification standards for evaluation indicators, strengthen long-term equity

incentives, and promote cross-departmental innovation resource integration. The research indicates that

performance reforms need to balance efficiency and fairness, and dynamically adjust to align with

organizational strategies, providing practical references for optimizing management in internet companies.

1 INTRODUCTION

In today's highly competitive business environment,

the correct management strategy of enterprises is

crucial for their survival and development.

Performance management holds a central position in

enterprise management, so delving into its impact on

both enterprises and employees is of great

significance for optimizing enterprise management.

Most companies have recognized the importance of

performance management and are actively exploring

effective management models. Although extensive

research has been conducted on it, there is still a lack

of in-depth studies. For example, the scientific nature

of evaluation indicators and the communication

mechanisms during the evaluation process need

improvement, and research on the comprehensive

impact on enterprises remains insufficiently

systematic and comprehensive. Therefore, this study

primarily analyzes the impact of performance

management on enterprises, the specific impacts on

employees, and methods for optimizing the

performance management system. This paper will use

case comparisons to thoroughly examine the effects

on both enterprises and employees.

2 MANUSCRIPT PREPARATION

Improving corporate competitiveness through

performance management operations enables

companies to attract and retain top talent, enhance

employee performance and satisfaction, thereby

boosting overall competitiveness. For example, an

internet company established a collaborative system,

attracting a large number of excellent technical and

management talents, driving technological

innovation and business development, thus securing

a competitive edge in the market (Burney, Widener &

Sally, 2013).

The system simplifies the management process,

reduces management costs and improves

management efficiency. For example, by integrating

the performance management system to achieve data

sharing and automated processing, the workload of

the human resources department is reduced and the

accuracy and timeliness of management is improved.

As the core mechanism of modern enterprise

management, the performance management system

continuously drives organizational efficiency

improvement through strategic decoding, resource

allocation, and cultural transmission. This study,

352

Du, C.

The Impact of Tencent’s Performance Management Reform on Enter prises and Employees.

DOI: 10.5220/0013844700004719

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 2nd International Conference on E-commerce and Moder n Logistics (ICEML 2025), pages 352-358

ISBN: 978-989-758-775-7

based on empirical data from multinational

corporations, reveals the specific mechanisms of

performance management in dimensions such as

strategic execution, talent development, and cost

control (Liu, 2021).

3 CASE ANALYSIS TENCENT

PERFORMANCE

MANAGEMENT REFORM

3.1 Introduction of Tencent

Tencent Corporation was founded in 1998, with its

headquarters in Shenzhen, and is a globally leading

internet technology company. It rose to prominence

early on through QQ, an instant messaging tool, and

has since expanded into multiple sectors including

social media, gaming, fintech, cloud computing, and

artificial intelligence. The company owns core

products such as WeChat, QQ, Honor of Kings, and

Tencent Cloud. In recent years, as competition in the

internet industry has intensified and traditional

business growth has slowed, Tencent has proactively

pushed for performance management reforms to

adapt to its strategic transition from "rapid expansion"

to "high-quality development." The core of these

reforms lies in reducing short-term performance

evaluations and focusing instead on long-term value

and innovation. The aim is to enhance organizational

agility and stimulate innovative vitality. Prior to the

reform, Tencent used a five-star evaluation system,

where ratings from 1 to 5 stars corresponded to

different levels of performance. Among these,

employees rated 4 or 5 stars accounted for 15-20% of

the total, considered to be outstanding; those rated 3

stars made up about 60%, representing the majority

recognized; and those rated 1 or 2 stars accounted for

around 15%, seen as underperforming and in need of

improvement.

Table 1: Implementation standards of assessment indicators (Du, 2025)

Classification

of assessment

Description of

indicators

weight

performance-

appraisal

cle

code of points

Execution process and

standards

Results

applied

Business

evaluation

(performance

assessment)

Focus on the

work results of

employees,

including:

-Work output

(e.g. project

completion rate,

sales)

-Customer

satisfaction

-Contribution of

core business

70%

-Every six

months

(June,

December)

-Quarterly

assessment

of some

sectors

-Quantitative

indicators are

quantified (e.g.

completion rate,

growth rate)

-The 5-point

scoring system is

adopted to calculate

the comprehensive

score

-The goal setting follows

the SMART principle

and is confirmed with

employees through

consultation

-Regularly track the

progress of the target

and adjust the quarterly

feedback

-Performance

bonus

distribution

-Promotion

priority

-High-

performing

employees

receive stock

awards

Organizational

management

evaluation

(behavioral

assessment)

Assess the

employee's soft

skills and

attitudes,

including:

-teamwork

-innovation

ability

-communication

skills

conscientiousness

30%

It is carried

out in

parallel with

business

evaluation

-Qualitative

indicators are

assessed through

360-degree

feedback (superior,

colleagues and

subordinates)

-The same 5-point

weighted

calculation is used

-The performance

assessment is linked to

the values, which should

conform to Tencent's

concept of "user-

oriented and technology

for good"

-Monthly informal

feedback to assist in the

annual assessment

Development

of targeted

training

programmes

-Low

performers

may face

elimination

at the bottom

3.2 Indicators for Performance Check

As shown in table 1, the evaluation criteria, while

relatively comprehensive, also have some issues.

While performance is emphasized in business

evaluations, certain indicators are difficult to

quantify, leading to subjective assessments; the

behavioral evaluation dimension in organizational

management is rather vague, with inconsistent

understanding and standards among different

The Impact of Tencent’s Performance Management Reform on Enterprises and Employees

353

managers, making it easy for the fairness of the

evaluation results to be questioned.

3.3 The Core Content of Performance

Management Reform

Tencent's performance management reform focuses

on four major areas: goal setting, evaluation

mechanisms, incentive systems, and organizational

structure. First, in terms of goal setting, the company

is gradually reducing its over-reliance on short-term

revenue KPIs, instead introducing Objectives and

Key Results (OKR) (Xu, 2019). Management tools to

emphasize cross-departmental collaboration and the

breakdown of long-term strategic goals. In terms of

incentive mechanisms, the reform has significantly

increased the proportion of long-term incentives, such

as optimizing stock options and promotion channels,

encouraging employees to grow alongside the

company. In terms of organizational structure,

Tencent is reducing decision-making chains through

de-layering and establishing business groups (such as

CSIG), enhancing agility while strengthening cross-

departmental collaboration to address areas requiring

long-term investment, like industrial internet (Chen,

2019).

4 THE IMPACT OF THE

REFORM ON BUSINESSES

AND EMPLOYEES

For companies, the reform has significantly enhanced

strategic execution efficiency and innovation

capabilities. By deeply integrating OKRs with

strategic goals, emerging businesses such as cloud

computing and AI technology research have been

able to accelerate breakthroughs. Tencent's large-

scale investment in AI chip procurement and model

training in 2024 demonstrates its commitment to

long-term technological layout. At the same time, a

flatter organizational structure and flexible incentive

mechanisms have attracted more high-end talent,

particularly in the AI and cloud sectors, where the

stability of technical teams and innovation output

have improved. However, the challenge of balancing

performance evaluations between traditional

businesses (such as gaming and social media) and

emerging businesses still exists, with some

departments experiencing internal friction due to

resource allocation and goal discrepancies.

For employees, the reform brings about a dual

effect. On the positive side, long-term incentives and

career development pathways enhance their sense of

belonging and growth opportunities. For instance, the

rapid iteration of AI products like Tencent Yuanbao

has enabled technical teams to gain more resource

support through project-based evaluations.

Additionally, immediate feedback mechanisms and

360-degree assessments help employees better

identify their strengths and weaknesses; for example,

young employees can improve their overall

capabilities through cross-departmental collaboration

projects. However, challenges cannot be overlooked:

some employees adapt slowly to changes in

evaluation criteria (such as shifting from quantitative

KPIs to qualitative innovation metrics), especially in

traditional business units, where the conflict between

short-term performance pressure and long-term goals

may lead to increased anxiety (Zhao, 2018).

Table 2: Comparison of the Pros and Cons of Corporate Human Resource Management Reform Measures (Du, 2025)

reform measures

ositive influence negative effect

Simplified

assessment system

The original five-star (1-5 star) evaluation is simplified to three

levels (Outstanding, Good, Underperform) to reduce the

complexity of evaluation. Employees can more easily understand

the goals and reduce the burden of formal assessment.

It may lead to a decrease in the

differentiation of evaluation

and a weakening of the

incentive effect of excellent

employees.

Promotion process is

delegated to

departments

The authority of 9-11 promotion is delegated to business

departments, and the defense process is simplified. Employees'

promotion pays more attention to actual performance rather than

PPT ability. The internal competition is reduced and the

efficienc

is im

roved.

It may increase the subjectivity

within the department, and if

the supervision is insufficient,

it is easy to breed unfairness.

Emphasize the "value

creation" orientation

Heroes are judged by their contributions rather than seniority,

and innovation and breakthrough results are encouraged. New

people have more opportunities, and employees are more focused

on core business goals.

Short-term performance

pressure may increase, and

some employees may face the

risk of elimination due to their

inability to adapt to innovation

orientation.

ICEML 2025 - International Conference on E-commerce and Modern Logistics

354

Reduce the frequency

of peer/subordinate

feedback

Only one multi-dimensional feedback is required each year to

reduce the energy consumption of employees on non-core affairs.

Feedback information may not

be timely enough to affect

managers' grasp of team

namics.

The frequency of

assessment for

middle and senior

management has

increase

The middle and senior cadres will be assessed every six months

to strengthen the concept of "no merit is over" and promote the

management team to improve its effectiveness.

Management pressure increases

significantly, which may lead

to short-term decision-making

or excessive pursuit of KPI.

We will strengthen

supervision and

elimination

mechanisms for

officials

Make it clear that "unqualified cadres should be replaced in

time", improve the transparency and fairness of management,

and reduce abuse of power.

Some cadres may take radical

management measures due to

the assessment pressure, which

affects the stability of the team.

Flexible work and

health security

optimization

Implement flexible working hours, provide comprehensive health

insurance, and improve employee happiness and job satisfaction.

Flexible work may lead to the

lack of self-discipline of some

employees, which affects the

efficienc

of collaboration.

Long-term incentive

and equity plans

Long-term incentives such as stock options bind employees to

the interests of the company and promote continuous investment.

Equity incentive may aggravate

the income gap, and the sense

of gain of grass-roots

employees is relatively limited.

5 THE ADVANTAGES AND

DISADVANTAGES OF THE

PERFORMANCE

MANAGEMENT SYSTEM

AFTER REFORM

The advantages of the new system highlight

flexibility and strategic synergy. First, the integration

of OKRs and KPIs balances short-term goals with

long-term innovation. For instance, in the AI field,

teams must not only meet model training deadlines

(KPIs) but also explore commercialization scenarios

(OKRs), driving both technological implementation

and revenue growth. Second, data-driven evaluation

(such as analyzing work data through performance

management systems) reduces subjective bias,

enhancing the scientific nature of decisions,

especially in complex projects (like cross-

departmental collaboration), where objective metrics

become crucial for resource allocation. Additionally,

the balance between short-term and long-term

incentives (such as stock options and immediate

bonuses) effectively retains key talent. In 2024, 70%

of Tencent's mid-level managers were promoted

through internal development, demonstrating the

system's capability to nurture talent.

The disadvantages focus on execution complexity

and cultural adaptation issues. Firstly, diversified

evaluation criteria (such as teamwork and innovation)

while more comprehensive, increase management

costs, especially in organizations with ten thousand

employees, where standardization and

personalization are hard to balance, leading some

employees to view the evaluation process as "more

form than substance." Secondly, the fading of

traditional "horse-race mechanisms" promotes

collaboration but may also weaken internal

competitive vitality, causing certain innovative

projects to be delayed due to overemphasis on

consensus. Moreover, young employees' demand for

personalized incentives (such as flexible work

arrangements and non-monetary rewards) is not fully

met, potentially leading to a risk of high-potential

talent loss. In 2022, Tencent implemented

performance system reforms, primarily in the

following areas: the performance rating system was

simplified from a five-star system to three levels—

Outstanding, Good, and Underperform —closer to

the "271" rule; peer feedback and subordinate

feedback between employees and managers were

reduced from twice a year to once a year; reviews for

promotions up to level 9 and above were also reduced

from twice a year to once a year; promotion and

review authority for employees at levels 9-11 (entry-

level) was gradually delegated to departments and

their respective business lines; for employees at level

12 and above, promotions were changed from self-

nomination to departmental nomination.

The Impact of Tencent’s Performance Management Reform on Enterprises and Employees

355

6 DIFFICULTIES AND

CHALLENGES

Tencent faces multiple challenges in promoting

business synergy and resource integration. While the

independent operation model of each business group

helps maintain operational flexibility, it also leads to

departmental silos and redundant resource

construction. Different business groups may develop

similar technical tools, causing resource

fragmentation. Cross-departmental collaboration

between the WeChat ecosystem and Tencent Cloud

often requires complex coordination mechanisms,

which affects overall efficiency. As the unified

technology platform, TEG faces dual tests in response

speed and support depth when serving various

business groups. Its resource allocation tends to

prioritize core businesses such as gaming and social

media, while providing relatively insufficient

technical support for emerging businesses like

industrial internet. This mismatch between

technological supply and business demand may limit

the development of some businesses (Li, 2020).

In terms of management structure, Tencent's

multi-level decision-making system is facing

efficiency challenges. The internal business groups

still retain a relatively complex hierarchical structure,

which makes the approval process for innovation

projects lengthy. The coordination process with

cross-departmental strategic committees further

increases decision-making costs. At the same time,

the management conflicts arising from the company's

dual operation of ToC and ToB businesses are

becoming increasingly prominent: ToC businesses

like WeChat and games emphasize rapid iteration,

while ToB businesses such as Tencent Cloud require

long-term service and deep customization. These

differences in business characteristics make it

difficult to implement a unified management strategy

that can meet both needs, putting significant pressure

on organizational management.

The construction of innovation mechanisms also

faces challenges. While the model of independent

innovation incubation by each business group has

stimulated internal vitality, it has also led to the

dispersed allocation of innovation resources, with

multiple teams often developing similar products

simultaneously. More pressing is that cross-business

group innovation projects often progress slowly due

to departmental barriers, posing a challenge for the

integration of AI technology with healthcare and

other fields. When dealing with emerging areas like

Web3 and generative AI, Tencent's large

organizational scale often results in slower market

response times compared to more agile startups.

7 DEFICIENCIES IN TENCENT'S

HUMAN RESOURCES AND

FUTURE RESEARCH

DIRECTIONS FOR

IMPROVEMENT

Tencent has several structural flaws in human

resource management, with a particularly prominent

issue of gender imbalance in technical positions. The

high proportion of male employees may affect team

diversity and innovative perspectives. Additionally,

the company's employee age structure shows a

significant gap, with nearly 60% of employees being

over 30 years old. This age distribution could limit the

reserve of young talent and the organization's

innovative vitality. In terms of evaluation and

promotion mechanisms, strict promotion criteria

(such as requiring a high-level defense to advance

from level 11 to 12) and the performance evaluation

method of eliminating the lowest performers, while

maintaining competitive pressure, may also lead to

the loss of top talent and affect employee stability

(Chen, 2025).

From a business development perspective,

Tencent's gaming sector is facing growth bottlenecks,

with insufficient supply of new hit products and

revenue still heavily reliant on established titles like

Honor of Kings. Despite the company continuously

expanding its workforce in emerging fields such as AI

and cloud computing, the commercialization of

technological achievements needs to be accelerated.

These human resource and business development

issues intertwine, forming a significant challenge for

Tencent today (Cao, 2025).

In response to these issues, Tencent needs to

systematically optimize its talent structure, including

increasing the recruitment ratio of female technical

personnel and setting clear goals for team diversity;

at the same time, it should expand the scale of intern

recruitment and accelerate the cultivation and

promotion of young talents (Tang & Li, 2025).

In terms of reforming the evaluation mechanism,

it is recommended to lower the rigid age requirements

for promotions, increase the weight of actual project

contributions in evaluations, moderately reduce the

elimination rate for underperformers, and strengthen

positive incentives such as equity incentives. In terms

of business innovation, there needs to be increased

investment in cutting-edge technologies like AI, large

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models, and cloud computing, accelerating the

commercialization of technologies like the Mixu

large model, and stimulating innovation vitality

through internal incubation mechanisms like the

Tianmei Studio. Additionally, improving technical

career development pathways, providing cross-

departmental rotation opportunities, and optimizing

compensation and benefits structures will all help

enhance employee experience and stability,

especially in retaining mid-career core employees.

These improvement measures need to be advanced in

tandem to fundamentally enhance Tencent's human

resource management efficiency and organizational

competitiveness (Li, 2024).

8 CONLUSION

Research on the reform of Tencent's performance

management system shows that the transition

between old and new systems has had a dual impact

on organizational effectiveness and employee

behavior. Before the reform, the five-star rating and

mandatory distribution mechanism, while clarifying

goal orientation, intensified internal competition and

talent loss. The root cause lies in overly subjective

evaluation criteria, rigid promotion processes, and an

excessive tilt towards short-term incentives. After the

2022 reform, the evaluation levels were simplified to

three tiers, and promotion authority was delegated to

departments, significantly reducing internal

competition (the turnover rate dropped to 9.8%) and

strengthening strategic alignment through OKRs and

long-term equity incentives. However, the new

system still faces challenges such as insufficient

differentiation in evaluations, inefficient cross-

departmental resource integration, and a single

approach to motivating young employees. These

issues stem from flaws in quantifiable metric design,

departmental silos within the organizational structure,

and the lag in cultural transformation. The study

recommends refining evaluation standards (such as

introducing data-driven dynamic metrics), optimizing

the structure of long-term incentives (such as

differentiated equity allocation), and promoting the

construction of a technology platform across business

groups to balance efficiency and fairness, achieving

dynamic adaptation of organizational strategy.

The practical significance of this study lies in

providing an optimized path for performance

management in internet companies: Firstly, it

validates the effectiveness of de-bureaucratization

and agile assessment in reducing internal

competition; secondly, it reveals the critical role of

long-term incentives and career development

channels in talent retention; thirdly, it warns

companies to be wary of the risk of weakening

incentives due to overly simplified assessments.

Theoretically, the study enriches the "dynamic

balance" theory of performance management,

emphasizing that reforms must balance strategic

execution with cultural adaptability. However, this

study still has certain limitations: the case focuses on

a single company, and the generalizability of

conclusions requires more industry samples for

validation; some data relies on public sources, and

there is insufficient long-term tracking of reform

effects; qualitative analysis of employee

psychological perceptions is lacking. Future research

could expand to multi-case comparisons, delve into

differentiated strategies for performance management

across different sizes of companies, and introduce

micro-perspectives such as employee satisfaction

surveys to more comprehensively evaluate the

effectiveness of reforms. Additionally, with the

penetration of generative AI and other technologies,

the integration of performance management tools

with digital empowerment is also worth further

exploration.

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