This employee-ranking system is common at big companies, including Microsoft and Amazon. There are two key difficulties with such a system, and it would be interesting to learn how Facebook grapples with them:
1 - It's imperative that the criteria for ranking employees is well-aligned with company goals. At Microsoft for example, on most teams you are ranked mostly on what features you ship. That sounds great but it can lead to extreme feature bloat in products. It's hard to take a stand for simplicity and elegant design in a meeting when the other guy's job depends on shipping the feature, and your job depends on getting the other guy to agree to include your feature.
2 - AMZN and MSFT both merge each manager's ranked list of direct reports with the lists created by other managers who report to the same Director or Senior Manager. This process can often be much more political than meritocratic, since other managers usually don't know much about an individual engineer's performance. If a team is flat-out better than other team and all of their engineers deserved to be ranked higher, that can be very difficult to defend in a meeting in front of a VP.