To the original question, at the beginning of the year we set up goals with our managers, we have a mid-year review, and an end of year review. The result effects your raise as well as how much of a bonus you get, assuming the company met or mostly met it's goals for the year and funds the bonus.
It can be helpful if done correctly, it's one of those things where you kind of get what you put into it. If your manager isn't a big proponent of it, then you're mostly wasting your time. I've seen people in my company where the manager didn't even bother working with the person to set up goals, skipped the mid-year, and basically gave lip service to the end of year. Unfortunately it can have a negative impact on the employee and cause problems when it comes to either promoting, or trying to get rid of someone.
Personally I've had pretty good experiences with it. Not to say it isn't sometimes hard, I have a difficult time rating myself and examining my performance without being overly critical. Most of the time I end up rating myself lower than my manager does. However having honest feedback from a good manager can be productive and also motivating.
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Some people are like slinkies, they aren't really good for anything, but they still bring a smile to your face when you push them down the stairs.