In the same environment that is affecting SDEs right now, managers are more and more being asked to do more individual contributor actions, while increasing their span of control.
They have their own work to do, primarily in how they report progress and vision UPWARDS. Most IC's don't realize but depending on their skip level, managing "upwards" may be requiring more than half of a manager's time.
So sure, they know if the overall team work gets done. And they absolutely know their top and bottom performers. But in the middle? Lots of room for variability. Is someone good even if they're not coding becaue they seem to be unblocking others? Is someone good if they're not talking to anyone but cranking out tons of code? This is where most performance management time ends up going to.
And in no point in today's culture, does it account for the possibility of catching people that are moonlighting or coasting.