The perils of bell curving

This is Joseph.

As people probably know, I tend to be a bit of a Marissa Mayer fan.  However, this one item from a recent piece is definitely something that I would prefer not to see in a company that I worked for:

Mayer also favored a system of quarterly performance reviews, or Q.P.R.s, that required every Yahoo employee, on every team, be ranked from 1 to 5. The system was meant to encourage hard work and weed out underperformers, but it soon produced the exact opposite. Because only so many 4s and 5s could be allotted, talented people no longer wanted to work together; strategic goals were sacrificed, as employees did not want to change projects and leave themselves open to a lower score.

The problem with this sort of approach is twofold.  One, it makes people reluctant to join elite teams and groups (where they get to be rated as sub-average) instead of letting these teams mentor and nurture up and coming talent.   Two, since any ranking is partially a political process (only so much of the data can be objective, especially since the manager presents the evidence), it encourages political infighting among the managers of closely related teams.

Neither process is ideal.  Furthermore, you have to pay extra to compensate for the fear and uncertainty around a low ranking (base salary gets more important when bonuses can be variable). 

Now I am not saying that this process cannot work effectively under some circumstances, but it has notable downsides that need to be thought carefully about.