James Heskett at Harvard Business Svchool's Working Knowledge has a lively exchange with readers on what needs to be done with performance evaluations.
My own take: The best evaluations that I've seen are brief and monthly. This permits problems to be addressed early, prevents employees from dodging the supervisor and then improving performance three weeks before the annual evalution is due, allows the easy use of incremental goals, and pushes supervisors to let good employees know that they are appreciated.
Every supervisor that I've known who uses monthly evaluations would never go back to the old six or twelve month system. Some time is spent up front, but far more time is saved down the road.