The stack ranking system is and was hugely popular with this org. It is popular nowhere else.
MSFT still likes to think of itself as an engineering company, but it is hard to have a tail that big and not sometimes accidentally wag the dog. Stack ranking is probably the best example of how true this is.
EDIT: To add some color to this tale, a Technical Fellow once told me that during the "rank and yank" period (when everyone was ranked and the bottom 10% were effectively fired) he was continually on the verge of quitting. If you are doing something like inventing the CLR, and you hired 5 of your favorite engineers, how are you supposed to react when someone tells you that it is imperative to fire one of them per year? What could the point of that possibly be? This is more or less a common sentiment among extremely senior engineers who ran important orgs at that time.
That said, I'm skeptical that the stack rank system is gone, based on what I hear from those that are still there (I've been out for many years now). It sounds like a lot of the same curve-fitting is just renamed.
Now I'm by no means a great developer (as one of my Microsoft-employed friends brutally said about my declining, "No loss for Microsoft"), but I imagine this concern could scare away genuinely good developers too worried that the politics of "keeping the team together" would outweigh any actual individual contribution they'd make.
That's a pretty poor thing to say to a friend.
I would review his definition of a friend... I'd say that was a very poor thing to say even for an acquaintance.
A real friend might have said "From my perspective you could improve as a programmer. Your weakest point is field x and therefore I recommend that you read the following book."
Saying a person sucks is pretty pointless without a detailed performance review, identifying a few key points to improve in the next span (of months/years) and keeping tabs on progress. Usually saying someone sucks in general is pointless demotivation and hurts feelings without purpose.
Identifying specific sucky aspects in ones work and suggesting helpfull improvements is beneficial, if requested.
Ask HR about bad attrition and they would totally deny it. "Sure, people leave. They leave all the time." But if your really, really good systems programmers are bailing, you have a problem; those people do not grow on trees.
And the worst thing is that these strategies aren't any better in managing subjectivity and prejudice. For all its quantitativeness and statistically-oriented methods (e.g. fitting the performances to a normal distribution), these systems are subject to biases just like others. More often than it should, your placement in the stack or distribution reflects more your influence and relationship with evaluators than your actual performance.
Not totally as brutal as it sounds as they would have got medical retirement.
The bottom of the stack should be the juniors, not the GE yank bullait
Stack ranking actually works, unlike the naysayers like you to think. The problem is that it works to good. You burn out your engineers killing themselves to avoid the yank and everything starts falling apart. Stack ranking is a lazy and uninspired technique that is the last resort of a CEO who can't excite the ranks with great ideas.
That's a odd definition of a system that "actually works"