Performance Reviews can be very helpful in motivating employees when done correctly. Provide honest feedback to your staff, letting each person know their strengths and weaknesses. There is no law requiring you to give a Yearly Review, but it make good business sense.
Why do a Performance Review? A yearly assessment of employee performance can accomplish many things, but especially two: 1) it motivates employees by helping them feel appreciated and noticed for their hard work, and 2) it lets employees know what areas they need to improve (and hopefully provides a plan on how they can do so).
What steps should you take? Consider having a Yearly Performance Review designed for your company. For a reasonable price you will get a professional document that is customized to your business: