Stack ranking at Microsoft has a min populaton size (x) - you generally walk up the org chart until the number of employees >= x, and then apply stack ranking to that group.
If Google did it, they'd call it MapReduce and it would be the coolest thing ever.
If you feel like your company is hiring against a certain set of high standards, are your employees at the low end of the 'normalized' curve holding you back as much as the people at the high end are pushing you forward?
>> How do you know the data becomes more normal as your add [data points]?
That said, yeah this is crazy.
The worst problem with stack ratings is not what it do (firing people which don't work out will happen, it is often good even for those fired).
The worst problem is that it destroys team culture as it is described at Microsoft: "if you're in a too good team, switch or you'll be fired." It gets hard for managers to build good teams when the individuals even have an incentive to sabotage each others. And so on.
Edit: The first part had a ":-)" on it. I think that is not interesting, compared to the idea of being in a team with people that have motivation to screw their team mates over. Like being in prison or playing the Paranoia RPG (an orc in Sauron's army?)
I'm sure that it works very well in a sweatshop, though.
Instead of being a meritocracy it ends up being about whose managers play the game better and have more political power.