The article Yes, Everyone Really Does Hate Performance Reviews  in Wall Street Journal has some good advice on making performance reviews more effective:

The good news is that none of this is the way things have to be. The one-sided, boss-dominated performance review needs to be replaced by a straight-talking relationship where the focus is on results, not personality, and where the boss is held accountable for the success of the subordinate (instead of just using the performance review to blame the subordinate for any problems they’re having). In this new system, managers will stop labeling people ‘good guys’ and ‘bad guys’ — or, in the sick parlance of performance reviews, outstanding performers, average performers, and poor performers to be put on notice. Instead, they’ll get it straight that their job is to make everyone reporting to them good guys.

This is important (if difficult) in R&D management – especially larger organizations.  Most engineers tend to dislike performance reviews any way.  The fact that engineers work in cross-functional teams and have multiple bosses makes reviews even more difficult.  Functional managers may not have all the information about actual work performed by an engineer on a project team, while the project manager may not know the discipline involved sufficiently to value the effort.  Interesting conundrum.