Its a tough one. I've never really got on with any appraisal system. The one in the military was awful, seemed unfair, but maybe it wasn't? It meant not getting promoted in 12 years, something to do with attitude and questioning authority?
The corporate world seemed fairer, but maybe because I seemed to make up for lost time as free thought and good ideas are rewarded in civvy street
But there were massive discrepancies and injustices, which directly affect people, and how much of the annual bonus comes their way.
Ironically, one of the fairest I found was during my short stint at Accenture. As a line manager it was tedious as it was continual monthly 1-1's with employees which seemed over the top, and was a pig to manage. But it was fairer for team members, with an ongoing report of progress, including score, rather than a single highlight that a manager remembered and then graded on.
Enter the small company world and it gets harder. Promotion and prospects tend to be more limited, so opportunities are scarce. Not many small businesses I know have a HR department, internal or outsourced 
But for a small team, rewards can be more instant, such as a trip to the pub, or share in profits if things are going well, rather than a formal appraisal.
Or just give yourself a virtual back slap 
Reminds me, thinking back to days in the Airforce. We used to have a system called a "good show award". eg you stopped a transit van from rolling into a cargo plane, or thought of some wonderful new way to do something more efficiently. If awarded, you would have your name in lights in the base newsletter, and that was it. Not even a marks and sparks voucher
Maybe we should adopt a more American attitude and group hug and yeehaa when someone does something well.