Don't kid yourself - stack ranking and forcing a distribution in performance management is the easy way out. It's much harder to create a culture where managers are expected to have coaching conversations with depth, to take the time to really dig into what good vs. great performance looks like in any area or overall.
Vanity Fair's pointing to stacked ranking as a "company" performance problem at Microsoft. Here's a clip from the article on problems in Redmond:
"Eichenwald’s conversations reveal that a management system known as “stack ranking”—a program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor—effectively crippled Microsoft’s ability to innovate. “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Eichenwald writes.
“If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”
The problem with that isn't so much managing non-performers out, it's the concept that the 7 in the middle see a couple of rockstars in their group and inherently know that there's no way they can get to the top ranking.
Managers assume that too. So why should they coach hard about what it takes to get to that top level if they can't give them the rating and the rewards to go with it?
It's much harder to start at zero with each employee and coach hard for innovation, discretinary effort and growth in performance. That's why so few companies try.