Harvard Business School Working Knowledge has an excerpt from Dick Grote's book Forced Ranking: Making Performance Management Work. According to the description, "Forced ranking assesses employee performance relative to peers rather than against predetermined goals." Mr. Grote says that:
"By implementing a forced ranking procedure, organizations guarantee that managers will differentiate talent. While conventional performance appraisal systems may allow managers to inflate ratings and award Superior ratings to all, a forced ranking system ensures that distribution requirements will be met. Assuming that the system is wisely constructed and effectively executed, a forced ranking system can provide information that conventional performance appraisal systems can't."
While I haven't read this book, it looks like an intriguing alternative to traditional performance reviews that have, in many organizations, fallen out of favour. According to an article cited by author, "Results suggest that a forced ranking system of the type we simulated could improve the performance potential of the typical organization's workforce and that the great majority of improvement should be expected to occur during the first several years." (Andy Meisler, "Dead Man's Curve," Workforce Management, July 2003.)