Many of you have heard of this, some were even appraised and few where directly involved in creation of such reviews. No doubt, reviewing someone's contribution helps to develop skills required to drive the team to strategic goals as well as to avoid silly mistakes. But today I am not going to judge upon the process of performance reviews, nor I am here to express ideas on how to do it right. The mere fact I am writing this is to resolve a potential risk for those of you who just start to implement this process.
Some believe that performance appraising (PA) is a great tool in managing someone's... expectations of the compensation. So, it's... wrong!
We should not mess together things that are better to keep apart (herring and milk so to say), things that serve different purposes. Compensation is a way to keep employee from leaving the company. PA is a tool in hands of a manager but it is written for the employee. These goals are not the same. If you pretend they are, you will end up having a logical inconsistency because if you introduce salary parameter into equation then you will inevitably write a review which will serve your goals on keeping the salaries down or keeping the employee. Anyways there will be no "written for employee" thing anymore.
So, don't mess it up. Write reviews in order to help people to develop the required skills and fix the problems. Use salary to keep and motive people to move ahead. No need to blend it all together if you want to stay mentally healthy ;)
If I confused things for you just leave me a note. It's my bad and I will do my best to help you out :)