The worst time to tell someone their work has been a problem for six months is during a meeting they thought was about a salary review.

Yet that is still how a remarkable number of small businesses handle performance. Everyone stays busy. The founder notices little things, makes a mental note, hopes the issue settles down and tells themselves they will deal with it at the annual review. Then the meeting arrives carrying twelve months of unresolved irritation, half-remembered examples and a person who has not been given a fair chance to adjust.

That is not feedback. It is an ambush with a spreadsheet.

A 2026 international review led by Macquarie University examined 173 studies of performance feedback and came to an awkward conclusion: the foundations of conventional performance feedback are shakier than most workplaces realise. The traditional annual review compresses a year of work into one high-stakes conversation, even though performance develops in real time.

For a founder without an HR department, this should feel less like bad news and more like permission. You do not need a grand performance-management system. You need to stop outsourcing ordinary leadership to one dreadful meeting.

An annual review cannot carry a whole year

By the time an annual review comes around, the details have blurred. You remember the frustration, perhaps, but not necessarily the precise work, expectation or pattern that led to it. The employee remembers their own version. Both people arrive slightly defensive because the conversation may affect pay, promotion or job security.

It is a poor setting for genuine learning.

The Macquarie review found that negative feedback works only when there is a strong, trusting relationship between manager and employee. That does not mean you should wait for a perfect relationship before you raise a problem. It means that honesty works best when it is part of how you lead all year, rather than a special event that appears when somebody is in trouble.

If somebody’s work is falling short in April, bring it up in April. If an expectation changes in July, say so in July. If someone has done excellent work, say that while it is still connected to a real moment rather than squeezing it into a generic compliment at year-end.

Your team should not need to decode your mood to know where they stand.

Make check-ins about the work in front of you

Regular one-to-ones do not need to be long. Twenty or thirty minutes on a dependable rhythm can do more than a glossy annual-review form ever will, provided the conversation is specific.

Ask what is moving, what is stuck and what the person needs from you. Then talk about the work: the expectation, the outcome, the evidence and the next move.

Instead of saying, “You need to be more proactive,” try: “The client asked for an update on Tuesday and we did not respond until Friday. For this account, I need you to flag a delay the same day and tell me what you are doing to resolve it. What got in the way this time?”

That is direct. It is also fair. The employee knows what happened, why it matters and what success looks like next time. You are not asking them to reverse-engineer a personality judgement.

Good check-ins also make praise more useful. “Great job” feels pleasant and disappears quickly. “Your summary made a complicated issue easy for the client to act on, and that is the standard I want in these updates” tells someone what to repeat.

Separate coaching from consequences

One reason managers avoid feedback is that every conversation starts to feel like a potential dismissal meeting. It should not.

Coaching is about helping someone improve. Formal performance management is about documenting a sustained issue, setting clear requirements and deciding whether the employment relationship can continue. Both may be necessary. They are not interchangeable.

If you are still diagnosing the problem, ask questions. Is the person unclear on the standard? Do they lack a resource, skill or decision right? Is the workload unrealistic? Have priorities changed without anyone saying so? Founders can be particularly guilty of changing the target while assuming the team received the memo telepathically.

Once the expectation is clear and support has been offered, continued underperformance needs a clearer response. Kindness does not require endless vagueness. It requires telling the truth early enough that a person has a real opportunity to respond.

Where a matter may lead to formal action, get proper HR or employment-law advice for your location. The legal process differs by jurisdiction. The leadership principle does not: people deserve clarity before consequences.

Do not confuse bluntness with honesty

There is a fashionable strain of management advice that treats unfiltered criticism as courageous. It is usually just lazy.

Research discussed in Harvard Business Review this year found that when negative feedback feels belittling or humiliating, it can impair performance rather than improve it. The aim is not to make the person feel small enough to change. The aim is to make the work better.

You can be very clear without being contemptuous. Focus on observable behaviour and impact. Avoid piling on unrelated complaints because you are finally having the conversation. Give the person room to answer, but do not let the discussion drift into a debate about whether standards exist.

Say what needs to change, what support is available, when you will check in and what happens if it does not improve. Then follow through. This is where confidence and compassion meet: you respect someone enough to be plain, and you respect the rest of the team enough not to leave persistent problems untouched.

Let the annual review become a summary, not a surprise

There is still a place for a structured review. Pay decisions, career development and long-term goals deserve a dedicated conversation. But the annual meeting should gather the year’s conversations, not unveil them.

Before your next review cycle, create a simple rhythm. Monthly check-ins for priorities and support. Prompt feedback around meaningful work. A quarterly conversation about development, capacity and the bigger picture. Keep brief notes so neither of you has to rely on memory.

If that sounds less sophisticated than an elaborate performance platform, good. Your team does not need more software to know whether you are paying attention.

They need a leader who says the useful thing while it can still make a difference.

Sources: Macquarie University’s 2026 performance-feedback review and Harvard Business Review on harmful feedback.