Ask lawyers who defends companies in employment litigation what they think about performance evaluations. I dare you. And then stand back. Most of us (I'd say "all of us" but there are always contrarians out there) will tell you we hate them. They're fine in theory -- providing a systematic way to provide employees with feedback on their strengths and weaknesses. But that's only in theory.
In practice, from the defense lawyer's perspective, they do more harm than good. That's because it's so rare to find a supervisor who will thoughtfully and candidly point out areas where the employee needs to improve. Time and again, we're told how horrible an employee is or was and then get performance reviews that say the employee met or exceeded expectations.
It's bad enough having to explain that evidence. But what's worse is that a lot of lawsuits could have been avoided in the first place if the company honestly informed the employee of its expectations and where he or she fell short. If that happened, then when the ax fell, the employee wouldn't be so surprised by the decision and so inclined to believe that the employer is being less than candid as to its true motivation.
So if you're evaluating employees, don't think that you're doing anyone favors by glossing over shortcomings. Supervisors are paid to help their workers perform at their highest level and you can't do that without letting people know where they can improve. Otherwise, you're just being a big chicken.