Over the years, I’ve seen the ritual of performance reviews and compensation discussions from every angle. As a founder of our legal research company and as an independent contractor supporting performance and engagement as an executive coach, I’ve been on all sides of it. I’ve heard department heads groan about the paperwork and the process, rarely believing in its effectiveness. I’ve also supported employees who are starving for development, people who want to grow, who crave real leadership feedback, and who are desperate to understand the mysterious gap no one ever seems able to articulate clearly enough for them to improve or advance.
I’ve asked both sides of the table a similar question: What might be possible if compensation were untangled from performance feedback? Leaders imagined giving feedback without anyone bracing for financial consequences. Employees described finally being able to receive leadership development without fear or defensiveness. Over the years, I’ve recorded these insights, always disguising details to maintain confidentiality of course.
The possibilities they described were striking:
- Real growth conversations, instead of guarded, scripted performance meetings.
- Higher trust, because development would not feel like a disguised negotiation about money.
- Better leadership development, since managers would not be trying to justify a compensation decision while attempting to offer supportive feedback.
- More risk-taking and innovation, because people would not be afraid that a learning curve might cost them financially.
- A healthier culture, where development is ongoing rather than tied to one high-stakes annual ritual.
- Improved performance naturally, because people could focus on their growth rather than protecting themselves.
- Less money wasted on performance management, HR interventions, and engagement programs trying to fix problems the compensation structure created in the first place.
- A stronger sense of shared success, because compensation could then be aligned with actual organizational performance, not subjective feedback.
In short, they described what becomes possible when development and money are not tangled together.
Currently, managers scramble to assess individual performance. Employees wait to hear whether they’ve earned a 2 percent, 3 percent, or if they’re lucky, a 5 percent increase. And everyone pretends this process is a true reflection of contribution.
But here’s the truth:
Most companies structure compensation in a way that has very little to do with what actually motivates human beings.
Compensation is usually tied to individual performance metrics, which sounds logical and fair, but in practice, it often misses the psychology of how people are truly motivated to contribute.
We talk about ownership thinking and engagement, yet we rarely align compensation with the one thing that actually drives human behaviour:
People do not own their roles because of external drivers. They contribute more fully when they feel they belong, when they feel valued and appreciated, and when they can see that their efforts create meaningful results. Not someday. Not theoretically. But directly. It’s an inside-out process. ~ Tracey Burns
And yet, that is not how most companies operate.
The Missing Ingredient: Visibility and Shared Success
Look, I am not talking about profit-sharing only and I am not suggesting compensation be tied solely to company-wide results.
I am talking about something more intuitive and more human.
When employees can actually see how well the company is doing, and they know they will personally share in that success, motivation unfolds naturally.
This is not complex psychology. It is basic human wiring.
When people feel the company is thriving because of their contribution, and that they will benefit when it does, they lean in. They take initiative. They care. They contribute, not because of pressure, but because it feels good to participate in something meaningful that gives back.
Why Traditional Compensation Systems Fall Flat
Organizations rely on individual performance-based compensation for four reasons:
- It is administratively simple. It is easier to evaluate one person than to open up the books and talk about real company performance.
- It maintains control. Companies can tightly manage compensation growth by sticking to a predictable formula.
- It avoids transparency. Sharing financial data, even at a high level, feels uncomfortable for many leaders.
- It is the system we inherited. We are still using compensation models designed for a factory economy, not necessarily a knowledge economy.
But in practice, this system often backfires.
Individual performance-based compensation does not create motivation. It creates anxiety, unhealthy competition, and a quiet sense of “I am on my own.”
The Path Forward: Aligning Compensation with Shared Success
The solution is not complex. It begins with visibility and a clear link between contribution and organizational outcomes. When employees can see how the company is doing, understand their role in that success, and know they will share in the rewards, engagement and performance increase naturally.
This approach cultivates true ownership. People take initiative, collaborate, and focus on meaningful results because they feel they belong, they feel valued, and they can proudly say, “We did that.” Compensation becomes a reflection of shared achievement, not a source of anxiety or competition.
Organizations that embrace this mindset create healthier cultures, more innovation, and sustained performance. Leadership development thrives, talent retention improves, and the energy that would have been spent navigating fear or defending performance can now be fully invested in growth and impact.
It is time to rethink the way we connect development, recognition, and compensation. When we do, we unlock the potential of human motivation at its most fundamental: the desire to belong, contribute, and see real meaning in the work we do.
Leadership Development for Founders and Executive Teams
Transform the way your organization thinks about performance, motivation, and shared success. Tracey Burns works with founders and leaders to create cultures where people feel valued, connected, and aligned with the vision they’re helping build.
Support for human-centered leadership:
- Reworking performance, compensation, and feedback systems
- Leadership presence and emotional intelligence
- Team alignment and trust-building
- Navigating conflict and tough conversations
- Creating cultures of high engagement and shared success
When leaders understand how people are wired and build systems that honour that performance follows naturally.
Strengthen your culture and impact by booking a session today.
