When rating, is it better to set the expected goal in the middle with hard to reach upper bounds or higher with desired outcomes at the upper bounds?
You might want to read about goal setting theory (see the review by Lock &amp; Latham, 2002).
This literature talks about setting challenging but attainable goals that are specific and measurable. 

You might also like to think about performance management systems. In particular a lot of organisations use management by objectives. In this case, goals are negotiated between the supervisor and the employee.   

References


Locke, E. A., &amp; Latham, G. P. (2002). Building a Practically Useful Theory of Goal Setting and Task Motivation On November 9th, 2011· In Business Models, Business Theories. American psychologist, 57(9), 705-717. PDF