I think Microsoft is going in the right direction. This is a move to end forced and artificial ranking, and to move toward Pay for Performance, which more greatly fosters collaboration.
We've seen many entities that seem to crumble, or at least stagnate, under the scarcity model of business. The general illustration of this model is that there is a limited portion of a pie available to the whole company. Therefore, it becomes the best interest of each department to get the largest piece of the pie as possible. Think of the pie as resources, skills, or operating budget. This creates swirls of bureaucracy, in which managers spend large amounts of time in political maneuvering to obtain as much of the pie as possible.
Results of this often include sandbagging budget dollars, and hoarding knowledge or information. And this simply is not an effective way for a business to grow, improve, or prosper. Just think of how this wasted time and effort (and useless frustration!) could be better employed. This causes even the most well meaning managers to rule by fear and control, and that is not conducive to employee engagement.
However, a shift to an abundance model of management begins with a cohesive vision of the company's goals and objectives, shared across the organization. This model still realizes that some resources may be less readily available than others, but encourages management to collaborate and develop solutions from within those parameters. Having an increase of ideas around the table, especially as a result of employee engagement focused on reaching the same company objectives, makes solutions much more readily apparent.
In the end, encouraging employees to collaborate - rather than compete against each other - holds greater promise for growth and development, and greater engages your employee base. Pay for performance still allows you to manage or encourage poor performers and praise your high performers while pursuing cohesive objectives.
How long will the bulk of corporate America take to follow suit?