You might've seen the recent Deloitte study making waves across LinkedIn. They report, traditional performance reviews aren't worth the time, cost, or energy they demand.
It's a big statement from one of the world's leading consultancies, and it's sparked plenty of debate.
But I think Deloitte's right. Not because reviews can't work, but because most businesses set them up to fail.
And as a CFO, I can tell you with 100% certainty this is not just an HR problem. It's a financial one.
→ Why a CFO is Talking About Performance Reviews
→ The Subtle Mismatch That Wastes Millions
→ When Performance Becomes Subjective
→The Once-a-Year Review Problem
→The Real Cost of Getting It Wrong
→ What High-Performing Businesses Do Differently
→ How CFO Dynamics Helps Businesses Build Performance Clarity
→ Final Thoughts
In most finance meetings I'm part of, we start by talking about numbers. Sales, gross profit, working capital, margin pressures, cash flow, the works. At some point, (and usually fairly quickly) the conversation shifts to people.
This is because behind every number in your P&L, are the actions (or inactions) of people.
Poor communication, lack of clarity, or misaligned goals create more than frustration. They directly impact financial performance.
When a sales team chases the wrong kind of deals, when production prioritises the wrong metrics, when marketing and operations aren't aligned, all of that translates into wasted time, wasted salaries, and wasted opportunities.
That's why performance reviews, when done right, can be one of the most valuable management tools a business has. And when done wrong, they're exactly what Deloitte says.
A complete waste of time and money.
The first issue is misaligned expectations.
If you asked one of your employees:
'What are the top three things you need to deliver in your role to be successful?'
And then asked their manager the same question, how close would the answers align?
In my experience, they don't.
Most of the time, they're close, but off just enough to create friction. The employee thinks success means delivering great customer service, while the business values efficiency and output.
Those subtle mismatches are dangerous. Small misalignments compound over time leading to wasted effort, slower progress, and ultimately lower profit.
Clarity isn't nice to have. It's a performance multiplier.
As business owners and leaders, it's our responsibility to make sure every person in the organisation knows exactly what success looks like in their role, and how that rolls up into department and company-wide objectives.
When that alignment is missing, no amount of performance reviews will fix it.
The second reason performance reviews fail is subjectivity.
Let's say you have a salesperson whose target is $1 million in annual sales.
Now you're stuck in a blame game.
Instead of an objective discussion about results, it becomes a subjective argument about circumstances, and suddenly everyone is defensive.
Subjectivity kills accountability.
That's why I encourage businesses to quantify even the 'soft' parts of performance.
If you're unable to directly measure something, find a proxy.
The goal isn't to turn people into numbers. It's to make performance visible, fair, and unemotional.
When everyone knows how success is measured, accountability becomes a natural part of culture. Not a once-a-year confrontation.
Even when expectations and metrics are clear, most businesses still make one big mistake:
They treat performance reviews as an annual event.
If you only talk about performance once a year, you've already lost.
A review should never surprise anyone.
When employees hear feedback for the first time in a 12-month window, it's human to go on the defensive. They feel blindsided. The conversation becomes emotional instead of constructive.
The solution is simple and powerful: make performance part of the everyday conversations.
When you discuss results weekly or monthly, feedback becomes normal.
If someone's off track, course-correct early.
If someone's doing great work, recognise it in real time.
If someone consistently misses targets, you have a clear trail of data and discussions that support your decisions. No surprises, no tension, just clarity.
High-performing teams aren't built on annual reviews.
They're built on consistent, transparent conversations.
Let's put this in financial terms.
A mid-sized business with 50 employees might spend:
If those conversations aren't driving alignment, clarity, or measurable improvement, that's money straight down the drain.
Now let's flip that around. If these same reviews result in better productivity, improved retention, and even a 1-2% improvement in output, the ROI becomes enormous.
That's why Deloitte's conclusion isn't that reviews are bad, but that bad reviews are expensive and ineffective.
The cost isn't the review itself, it's the lack of clarity leading up to it.
When expectations are clear, metrics are objective, and conversations are ongoing, reviews stop being a dreaded chore and become a strategic advantage.
The best-performing companies we work with at CFO Dynamics don't do traditional reviews. They focus on real-time performance clarity.
That means:
Instead of asking 'How did you do last year?', they're asking, 'How are we tracking this week?'.
That shift, from reactive to proactive, transforms not only performance but culture too. When people know what is expected of them, they can see their progress, and understand how it connects to the bigger picture, they don't need an annual review to stay motivated.
They're already aligned, already accountable, and already improving.
At CFO Dynamics, we help businesses turn performance reviews into performance clarity.
We work alongside business owners to:
The truth is the numbers don't mean anything unless your people understand how their role drives them.
We bridge that gap.
When people and performance align, the financial results follow.
If your performance reviews feel like a box-ticking exercise, maybe it's time to talk about how to make them a driver of profit, not pain.
At the end of the day, performance reviews aren't the villain. It's the way we've been doing them. The businesses that thrive are the ones that treat performance as a living, breathing part of their culture, not a yearly admin task.
When goals are clear, conversations are frequent and data drives decisions, reviews evolve from judgement to growth.
As CFOs and business leaders, we need to remember that clarity isn't just about numbers. It's about alignment. Every line item on a P&L tells a story about a person, a process, or a decision.
When you get those stories right, the financial results follow naturally.
So rather than asking, 'Do we need performance reviews?', maybe the better question is: 'How do we build a system that keeps our people (and our business) performing at their best, every single day?'
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