The biggest problem I've seen with performance reviews is that most managers actually spend very little time actually working with or observing their employees.

The biggest problem I've seen with performance reviews is that most managers actually spend very little time actually working with or observing their employees. Flip side: if you are a small enough group that know each other very well, performance reviews can be a good opportunity to raise awkward subjects. It's a tool - it can be used or misused.