In my experience employee reviews are typically de-motivational. My employer has me rate my team members on a scale from 1 to 6 on a variety of work related criteria. The basis for getting a raise rests on the employees ability to increase their ratings on a review to review period. It's horrible (and I've told them I think so).

The entire ratings system is ripe to be exploited by people who know how to play the game. This is especially bad if non-technical people are reviewing technical people. I had to witness the worst developer on my team become the highest paid because he knew how to sell himself and could speak a language that upper management understood.

I'm more in favor of (arguably) less subjective methods of determining an employees worth (like Bioware's RPG style ratings, or Joel Spolsky's ladder). There's still room for person bias, but at least there's less room.