What could be done to motivate employees yet establish training and development needs?

Healthrus System had two goals for its annual employee performance evaluations:
(1) to motivate employees to work hard and (2) to identify areas in which employees could improve. Healthrus recently made a major change in its approach to reviews by implementing a performance management system that required managers and their employees to simultaneously complete an evaluation of the employees’ activities throughout the year.
The evaluation form contained seven separate areas in which the employee could be rated from “1—totally unsatisfactory” to “7—outstanding.”
Then each employee and manager were to meet, discuss their individual ratings, and come up with a composite form that would be submitted for significant bonuses. Although the amount of bonus changed each year, the potential bonus this year was a hefty 25 percent of base salary. The problem was, as most employees knew, the hospital had only budgeted an average of 8 percent for the bonus payout.