Many people believe grading on the curve is the fair way to do gradings/evaluations. The problem is it is based entirely on a comparison and not on a true evaluation.
If I want to be top of my group, I have a few options:
1) I can work very hard
2) I can avoid groups with top people in it.
3) I can sabotage others in the group.
4) As soon as I realize I wont be at the top, I can slack off since the majority of the people will just be average anyway.
While the first option is the ideal one, it’s not necessarily the one everyone will choose. If you have some of your best people not wanting to work together because it might adversely affect their gradings (if only one person can be the top, the incentive to avoid collaborating with other top people isn’t there).
Companies use “stack rankings” in the same way that professors use “grading on the curve” and while it might be easier for the person doing the evaluation, its not in the best interests of the group as a whole.
There are times when you can have a group of extremely talented people working together. You want to encourage these occurrences and if you use a stack ranking, someone will have to be “on the bottom” even if they are far superior to others in other groups.
If you want to encourage mediocrity and complacency, continue using stack rankings, grading on the curve etc. If you want to encourage excellence, evaluate and grade based on actual performance and capabilities.
Have a great day!