How to Achieve More Effective Performance Appraisals

Roughly only half of all companies conduct annual performance reviews. Of the fifty percent of companies that do tend to provide consistent and reliable feedback to their employees. However, it can be awkward at times to tell someone on your staff that they aren't doing a good job or attempt to offer constructive criticism without sounding condescending. What are some ways to make a performance appraisal more effective and less awkward for yourself and the employee?