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Create an evaluation form for each job category that focuses on the skills needed for successful job performance. Focus on job duties, not personality traits. Some generally appropriate considerations are work quality, dependability, punctuality, and communication skills. Allow your employees to see the form ahead of time, so they will know the basis for their evaluations.
Be honest and consistent with your employees. Try to maintain an overall positive approach so your employees will be motivated to improve, but don't sugarcoat the bad news. Give your employees a real opportunity to improve by giving them constructive criticism and performance goals. And make sure to back up your evaluations with real consequences: If an employee is far exceeding expectations, consider giving a raise or other recognition. If an employee is having serious performance problems, discipline might be in order.
For more on employee evaluations and performance appraisals, see Nolo's article How to Conduct Employee Evaluations.