Not that it applies to you, but in my experience, small companies with a single owner or a small group of founders are sometimes the very worst in regards to politics. They will always say (and may even believe) they are doing things out of a pragmatic interest in the business's success, and often will definitely say something like "at my company we don't have politics issues" ... but it's just not true. Either they are openly duplicitous and only say those things because they believe it creates an outward message of stability that positively affects workers (generally it doesn't), or they really believe that whatever their particular actions are, they are not motivated by politics even when in truth they are overwhelmingly motivated by politics.

If owners enter 'dictator mode' it can be very hard to separate out what is cognitive dissonance vs. what is a genuine attempt to manage a business without politics.

As far as your question goes, I think it begins with a fundamentally different outlook. You write about it in terms of who to promote / keep / fire as if that is the right menu of options to orient your thoughts around.

Instead, I'd say you should think more about how best to develop the workers you have. Firing people ought to be a distant thought that is only brought up under serious conditions, like overt misconduct, extreme underperformance over time or incompetence (that can't be corrected with training and investment).

You strike me as someone who is not thinking in terms of employees as investments that payoff over time, but rather you are using some kind of hyperbolic discount function that only looks at some short window of recent productivity or some short forward-looking window of possible future productivity -- classic short-term thinking that leads to a lot of bad outcomes.

If you just want some kind of cookbook style management process, you can find books endorsed by millionaires, billionaires, political leaders, athletes, coaches, etc. etc. and just pick whichever one tickles your personal confirmation bias fancy. (I'm not speaking just to you specifically, we all do this, certainly me included). So you can always justify pretty much anything you choose by saying, "isn't this how other people do it?" or "Wealthy Person X said to do it like this..." -- it doesn't actually mean you're making the right choice for your business.

The other thing is that you conceive of your employees as falling on a linear ranking, which I feel is misguided. I think it is not possible to put a useful ordering on employees like that, because they are individuals and you can't discount their potential, drives, passions, personal circumstances, etc., all of which are changing often.

There are all kinds of dimensions in which a person can be good or bad in their job for you, and there is almost surely no coherent "norm" you can define on that high-dimensional space that adequately orders employees ... and certainly not something entirely subjective like "who do I happen to think is most productive modulo special circumstances". Even if Person A is "more productive" than Person B, you don't know that will always be true. Maybe Person B is a faster learner, a more creative thinker, or has other latent talents that you have not properly tapped into yet.

What you propose almost sounds like a proto form of stack ranking [0], which is a notoriously horrible way of doing things. But at least with stack ranking, you tended to receive scores from multiple people who function in mostly uncorrelated ways in the firm, so as to (mostly) remove dictator effects or sabotage effects. I don't think you could easily get that in a very small company where everyone knows everyone else and where the founder/owner is highly visible in day-to-day actions.

Overall, I'd just generally recommend a totally different mindset. Stop trying to apportion wage to micro measurements of productivity. Just admit you (and everyone else) can't measure productivity well enough for that to be accurate and robust to social biases.

Don't conceive of your lowest performers as candidates for termination. Rather, spend lots of time first seeing them as examples where your management style, workplace offerings, equip/tools/etc., have not been good enough to coax good performance out of them, and invest in them. View their payoff as something that happens over time, yes still with some discount rate more like bond pricing, but not so extreme that their short-term productivity counts for so much that it could lead to them being fired. If their productivity is low for a long time, after you have implemented many strategies for helping them improve, then you can be more confident that you're making a fair and correct decision to let them go.

[0] < https://en.wikipedia.org/wiki/Vitality_curve >