100% agree... I worked under that system at Dow and at another company later. It's OK if you have a TON of people in your rating group... (like, 100 or more) but, even then, 10% FORCED turnover is stupid, expensive, and counterproductive.
It's especially devastating when you try to apply it to a group as small as 20, or less... which, the brainiacs running Dow attempted to do.
I don’t mean to beat a dead horse — but, as you say, in a small group it is possible to have everyone working hard and making a serious contribution. And you STILL need to get rid of some of them. That does terrible things to morale. Even if they are very, very good, they can still be fired for not being good enough. That’s awful.
I have never seen employers as “paternalistic” entities that “owe” their workers anything. But this sort of policy is needlessly corrosive. Good people who are working hard shouldn’t be fired “just because”.