I was a supervisor for a company that utilized this system... I had to rank people into the infamous Bell Curve. I hated this system with a passion. It divides teams and forces you into an adversarial relationship with people on your team. As another commenter noted, if you are worth your salt as a supervisor/manager you've identified those poor performers long before the annual review and are actively working to get them to an acceptable level of performance or getting ready to show them the door. Being forced to pick one person as a 1 or 2 even though they are performing at a 3 or better is the best way to demoralize the workforce and sow the seeds of discontent that will destroy the fabric of any organization.