How do you define performance? It's a fantastically difficult thing to define. In my experience every attempt at this (at least for engineers) ends up in a situation where people are putting their effort into maximizing metrics as opposed to furthering business goals.
We completely decouple performance reviews from compensation. Full stop.
What? Why? Don't the overachievers then become bitter knowing that the guy next desk to them is making more by working less, just because he was better at negotiating at some point?
You'd think that, but in fact, it fosters such a collaborative and unselfish environment that people who might otherwise be "along for the ride" can't help but be caught up in the team.
Build a culture of productivity, not productive individuals.
We solve that through careful hiring, and not being afraid to part ways with folks who can't get the job done satisfactorily.
Interestingly we decouple the two precisely because of what you're describing. When you start singling out specific people, other folks who are also doing very good work pretty quickly become disinterested in their job. That's bad.
Even worse, measuring ACTUAL value to the company is really really difficult (I'd suggest that it is impossible). So now you are in real danger of driving your most valuable people, the ones your system failed to recognize, out the door. That's bad news.
In a startup / smallish company it is pretty easy to evaluate relative impact for a given quarter. I would agree its really really hard to do that algorithmically.
We completely decouple performance reviews from compensation. Full stop.