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Direct observation of clinical skills is central to assessment in a competency-based medical education model, yet little is known about how direct observation is experienced by trainees and observers. The objective of the study is to explore how direct observation was experienced by residents and faculty in the context of the I-PASS Handoff Study. In this multi-center qualitative study, we conducted focus groups and semi-structured interviews of residents and faculty members at eight tertiary pediatric centers in North America that implemented the I-PASS Handoff Bundle. We employed qualitative thematic analysis to interpret the data. Barriers to and strategies for direct observation were described relating to the observer, trainee, and clinical environment. Residents and faculty described a mutual awareness that residents change their performance of handoffs when observed, in contrast to their usual behavior in a clinical setting. Changes in handoff performance may depend on the nature of the observer or 'audience'. Direct observation also highlighted the importance of handoffs to participants, recognized as a clinical activity that warrants feedback and assessment. Dramaturgical theory can be used to understand our finding of 'front-stage' (observed) versus 'backstage' (unobserved) handoffs as distinct performances, tailored to an "audience". Educators must be cognizant of changes in performance of routine clinical activities when using direct observation to assess clinical competence.