Stack Ranking was pioneered by Jack Welch who was operating in an environment where labor was the dominant party in the labor-capital relationship, and he was taking over companies that had had decades of labor growth and power while capital was stagflating nationwide. Introducing stack ranking was a way of trimming excess fat from decades of build up within companies, while reasserting capital in the relationship within the company.

Long term, it has been a disaster in every company. Because eventually you run out of fat, and then what you describe as "far more willing to hire non-standard candidates on gut and hunches, knowing that if it didn't work out, it didn't work out they would be gone" becomes "I need to hire people I don't want to work with, so I have someone to fire in the next stack rank". And that's its own form of fat.

In short, stack ranking makes some sense if you have a fat organization, not unlike restricting calories to lose fat when working out. But once you've lost fat, continuing to restrict your calories results in losing more muscle than fat.