1. You're doing a great job. Keep at it.
2. You're doing terribly. We are going to start a paper trail to fire you (aka performance improvement plan).
The only reason performance reviews exist at companies is so they have an established way of firing people. Even if I do a great job, top marks across the board, I only receive a 2-4% increase in salary. On the rare occasion I might get a bonus. So there's zero incentive to go "above and beyond" or otherwise improve in a way that benefits the company I am currently employed for.
Now, I continue to improve every day by learning new skills. But these new skills rarely relate to what the current company needs - these are simply things I am curious about. However, these skills will never end up in a "core competency plan" because those plans, by nature, only list skills that benefit the company. Because the target / competency plan only benefits the company, the performance review (which is based off the comp plan) feels very one-sided / binary.
So instead of focusing intently on those competencies, I do the minimum necessary to fulfill them (less than 2 hours of work) and spend the rest of my "self improvement time" learning things I'm genuinely curious about. Then, when I have a marketable understanding of these new tools / tech, I jump ship, usually for a higher compensation package.
If you want performance reviews to actually matter, allow people to set goals that do not always benefit the company. Understand your employees have many different interests and give them space to explore those interests.