Though the edges of the language are softened to make it easier to swallow, I think the message is very clear. If your boss "suggests" some changes, he/she means make some changes.

Usually I agree, a "suggestion" from a boss is more like a directive. But in this case, he is being very explicit and literal. The whole point he is making with reviews and firings like this is to be very direct and emotionless. So I truly believe he means it when he says "because you’re doing fine as things are, feel free to ignore my remarks."

My personal observations of "fine as things are" would imply the odds of promotion/advancement are much higher if you do XYZ or you can forget promotion or advancement if you'd prefer, which is fine with us.

In a pyramid structure with a possibly 1:8 ratio, or higher, that means no matter what else is going on, at least 7 of 8 can never advance beyond their current level, no matter their wants or abilities, so if someone volunteers to be one of the 7 who are prevented from advancing that's a VERY happy coincidence. There's at least one of several awkward conversation we can avoid after the interviews for the higher up position, guaranteed six or less is better than having to deliver seven disappointments. Or eight, if company policy is to never promote from within.

With the general rise of job-hopping and the death of promotion from within, it doesn't really matter anymore. "If you wanted your bosses job, you'd work on X, Y, and Z, but we aren't firing your boss anytime soon and if we did we'd hire someone from ABC company, or your bosses bosses golf partner or frat buddy anyway rather than promoting from within, so it doesn't really matter".

Also see the rise of internet job sites, if you want a promotion and your company doesn't promote, then you look at job postings and discussions for competitors and talk to recruiters and headhunters. Its not the era of newspaper classifieds anymore where corporate HR pays by the word or column inch.