This sort of ruthless management is a way to destabilise the workforce and disrupt the team. What I've often found is management might cull the worst performing people but the best people follow them voluntarily because of the toxic culture, and then there's the fact that the worst performing person in the best performing team might be better than the best performing person in the worst performing team.
Also people just game the system and only do what will get them a good review.
I know some on at a big UK company who was bucking for a promotion and they blew through 1 Mill and 15 Man years for no good reason.
Wouldn't doing a good job earn a good review? This reminds me of the xkcd comic about the bots starting to have constructive messages to avoid spam filters. Mission fucking accomplished.
But what tends to happen with stack ranking is that people only do what their direct manager values and rewards in the short term, and avoid other work that really needs to be done, or what the actual customer wants. Your boss becomes your only customer. You invent redundant new shit because that's more impressive than fixing your existing shit that's broken. This can be incredibly damaging to the quality of the product, and also to the careers of anyone the boss just doesn't personally like for whatever reason. It creates a monoculture of like-minded, demographically similar people who suck up and shit down.
You even can see pathological behaviors like managers purposefully recruiting low performers as sacrificial lambs to offer up at the next review time.
Companies got rid of the rank-and-yank system in the last decade or so for a very good reason.
Nope, because incentives are not aligned to that extent. The whole point of a company is that it's not a pure market where incentives are everything by definition; it's a rather more complex organization and these often rely on "soft" constraints as better sources of drive, guidance, cooperation/coordination etc. If you're relying on "hard" incentives (like firing the 'worst' 5% no matter what) you'll invariably distort behaviors in ways that are hard to even predict, and are almost never what you really want.
If only life were that simple.
If you’re going to lay off the bottom x% every n period of time, it might be fine. But you’d better be damn sure your metrics are good (sales comes to mind though even then there’s a lot of ambiguity). If you’re dropping the weakest performer in groups you’re not only going to create the most toxic environment ever, you’re going to lay off plenty who are probably middle of the bell curve.
Microsoft’s plan was, in addition to being unwise, just poorly reasoned statistically.