Wouldn't it make sense to just pay everyone (in the same type of role) essentially the same amount and then bonus people from time to time on particular outstanding achievements. Nothing is a more powerful inducement than financial incentives and a bonus gives an impact that the ongoing salary doesn't. People don't give a crap about annual reviews unless they think its low enough to get them fired.

My sense is performance evaluations should be banished from the corporate world, for the most part. Usually a waste of time, but that is where managers can be helpful as they are carrying an ongoing assessment of the value of each of their employees at all times.