Comment by bruce511
The root of the problem is scale.
If your company has say < 100 employees then you pretty much know everyone and there are enough interactions for the pecking order to become clear quickly.
By this point you're already dividing into teams - sales, support, development etc. There are probably only 2 layers if management. Everyone is ultimately a human.
But large tech companies aren't happy unless there are hundreds of thousands or millions of employees. And human interactions simply do not scale like this.
So, we need non-human approaches to manage all this. Spreadsheets, forms, percentages, in other words data. So we "datafy" people, and (shocking I know) it doesn't turn out well.
I worked at a tech company with 30k+ people for 3+ years. We avoided all these issues by trusting department leadership. Our department had 50-60 people and everyone knew everyone else just as you describe. Our VP would look over our numbers and ask some questions about outliers and of course give us our share of the budget but we pretty much operated as you described for a smaller company. This probably only worked because our product existed somewhat in isolation. Seems like an approach though that should still work for many organizations.