It’s that time again—dreaded performance reviews. You with me?
Most managers see them as a chore: another box to check, something HR insists on you doing all too often. And I get it—managers have an average of 8 direct reports (Gallup, 2023), and each review takes 3 to 5 hours to prepare and deliver (SHRM). That’s a full workweek every cycle. But for the employee? They’ve got one manager, one review—and that conversation really matters. Employees are craving more feedback, in fact one study suggests 65% of employees say they want more feedback than they’re getting (Officevibe, 2023).
So why do performance reviews so often fall flat? Because we overload them. We try to squeeze in feedback, career development, and pay discussions all in one meeting. And that creates unnecessary pressure. Employees get nervous—not because they’re afraid of feedback, but because they think their raise or next role is on the line. Those nerves get in the way of an honest, meaningful conversation. When compensation is part of the agenda, the whole tone shifts—feedback becomes filtered, and growth takes a backseat.
That’s why we stopped tying pay to performance reviews—and in the next section, I’ll break down exactly why.
The Pay-for-Performance Trap
I’ll be direct: at TPD, we deliberately disconnected performance reviews from compensation decisions. And before you write me off as some idealistic leader who doesn’t understand business fundamentals, hear me out.
When performance reviews determine paychecks, they become negotiations, not conversations. Employees become defensive. Managers become prosecutors. Everyone starts playing a game where honesty is penalized and political maneuvering is rewarded.
I’ve watched talented people spend more energy managing up during review season than actually improving their work. I’ve seen managers avoid difficult conversations because they don’t want to “hurt someone’s raise.” The whole system becomes transactional instead of transformational.
What Actually Works (And What Doesn’t)
Here’s what I’ve learned after 15+ years of experimenting with performance management:
The myth: Consistent questions across all roles create fairness.
The reality: Consistency in process matters more than consistency in questions. A recruiter’s success metrics shouldn’t look like an accountant’s.
The myth: Manager training solves bias problems.
The reality: Bias training helps, but double-blind assessments, where neither party sees the other’s feedback until both submit? That’s where the real magic happens.
The myth: Performance reviews should happen twice a year.
The reality: Formal reviews twice a year are fine, but the real work happens in the weekly check-ins that most managers avoid having.
The Small Business Reality Check
If you’re running a small to medium-sized business (like me), you have an advantage that big corporations would kill for: you can actually know your people. You don’t need elaborate rating systems or forced rankings. You need honest conversations and genuine investment in growth.
But here’s the catch—most small business owners are terrible at this because they’re afraid of the awkwardness. They’d rather throw money at retention problems than have uncomfortable conversations about performance gaps.
Hot take: Your best performers don’t need performance reviews to know they’re valued. Your struggling performers already know they’re struggling. The review process should be about the messy middle ground where most of your people live.
What I’m Actually Looking For
When I analyze our performance data (yes, we absolutely dig into the trends), I’m not looking for who deserves a raise. I’m looking for:
- Misalignment signals: When someone’s self-assessment is wildly different from their manager’s feedback
- Growth trajectory patterns: Who’s improving quarter over quarter vs. who’s plateaued
- Cultural fit indicators: How well someone’s values align with how they actually work
The goal isn’t to rank people. It’s to spot the conversations we’re not having.
The Uncomfortable Truth
Performance reviews work when they’re designed to be uncomfortable, not punitive, but genuinely challenging. They should make people think differently about their work, their goals, and their growth.
Most companies are too scared to ask the hard questions: What would you do differently if you ran this company? What’s the biggest obstacle to your success that no one talks about? If you left tomorrow, what would break?
Those answers tell you more about performance than any numerical rating ever could.
My Challenge to You
If you’re still tying performance reviews to pay decisions, try decoupling them for one cycle. See what happens when people can be honest without financial consequences. You might be surprised at what you learn.
And if you’re avoiding performance reviews altogether because they feel pointless? Stop making them about judgment and start making them about growth. The conversation changes everything.
Performance management doesn’t have to be perfect. It just has to be real.