[curun1r]

Rather than politics, I think the primary motivation is predictability and control over costs and the ability to link costs to the company's financial performance. A ranking process that buckets employees into performance categories allows you to determine the company-wide increase in salaries and the bonus pool first and work backwards to arrive at each employee's raise/bonus. And since bonuses are usually timed with the end of the fiscal year, that increase (or lack thereof) can be based entirely on the numbers they deliver to investors.

Also, by forcing a relative appraisal of each employees performance, you force managers to view employees with a more critical eye. If I were to simply have to answer, "did X do a good job on this project?", my answer would almost always be yes, absent any incentive to say no. But there are members of my team who deliver significantly better than others, so the calibration process forces me to find a way to put them above the team members who perform at a lower level. Getting rid of performance reviews would, from what I've seen, create a culture of "don't screw up" rather than one of taking risks and trying to do as well as possible.

As a manager who both received an annual performance review and delivered 10 of them in the past week (our FY15 ends 7/31), I hate the process more than most people. But I think this discussion is ignoring the advantages just because we all hate the process. We run the risk of creating a whole new process that we hate just as much as the old process. Because it all boils down to finding an impartial way to evaluate performance and, unless you can crack that nut, your process isn't going to work. Top performers will move on and you'll be left with only under-performers. And that's because humans naturally evaluate their circumstances relatively rather than absolutely, once you get beyond the basics (i.e. can I pay rent and bills). Someone making $100k/yr is going to feel underpaid if someone they feel they're better than makes more. Just because the current system for ranking is flawed doesn't mean that there doesn't mean that ranking isn't necessary.

[pound]

I'd say that having performance reviews enforces: 1) culture of "don't screw up". (Yes, opposite to your thought) What risks would anyone will want to take if it means preparing yourself to be scapegoat if something will not work out perfectly? 2) enormous amount of politics, lies, and self-promoting by shameless liars and back-stabbers. How can you tell whether someone delivered significantly better then others? In most cases it's mutual BS feeding/consuming between manager and certain type of employees.

[curun1r]

> How can you tell whether someone delivered significantly better then others?

I can tell because I don't suck at my job. I look at pull requests. I look at ticket completion. I'm with my engineers during planning to know whether people are padding their estimates. I make a note whenever someone steps up in some way (handling emergencies off hours, helping another developer get their work done, etc.) If a manager doesn't understand the work of the people s/he's managing, that manager is unqualified to do the job.

As to your 1), it all depends on what type of culture a company has and how much employees are punished for screwing up. At a company like Facebook, you're expected to "move fast and break things." I'd be very surprised if people were inhibited there. If you're at a bank where screw ups mean someone gets fired, you're probably right.

[digikata]

The review/ranking process is not going to influence if top performers stay one way or another.

I'm strongly skeptical that the review process that I've seen various company is any good at helping to make the real connections between employee performance and company bottom lines. In the end, the ranking process of doling out salaries is fooling itself by cloaking the process in numbers.