This was a practice at an old company I worked at. Managers would would evaluate employees on a relative basis. The top 33% performing employees are ranked A, the next 33% are ranked B, the bottom performing 33% are ranked C.
So in a group of 9 engineers and 1 manager, 3 people would for sure get an A rank, 3 would get a B rank, 3 would get a C rank. There would be no situation where everyone got an A or C, no matter how well or badly the group performed overall.
A ranked employees got a 1.33x annual bonus
B ranked got a 1.16 bonus
C ranked got the normal 1x bonus
For the group I was in, this meant the grade you got was based on how long you worked there. The 10 year plus engineers got the As, while new hires like me always got a C no matter what. I always felt this system completely destroyed any incentive to work hard or get better since the results wouldn't change no matter what. Although I did get a B rating once but that was probably because I requested a transfer to my manager's boss and they didn't want to lose headcount. I ended quitting that job in 2 years.
end rant.