It only classifies people and does not reflect the actual value of employees. As a form of feedback ranking is virtually useless. If our goal is to develop people, we need to provide specific concrete feedback. Ranking can be devastating to the morale and trust of an organization. Because it is difficult to rank objectively, employees will almost always disagree with a ranking that places them anywhere but in the top percent in the organization.
Employees often perceive the process as unfair and arbitrary.
Research has shown that the large majority of people believe they are above average in job performance. Ranking guarantees disagreement. Finally there is the issue of comparisons. Both contribute in their own way. It really is like comparing apples and oranges.