Please read the Yahoo case below and briefly answer the following two questions:

1). Which performance management system should Yahoo use?

2). What are some potential contamination, rater errors, or biases?

A Yahoo Employee-Ranking System Favored by Marissa Mayer Is Challenged in Court

By VINDU GOEL FEB. 1, 2016, New York Times

SAN FRANCISCO One of Marissa Mayers signature policies as chief executive of Yahoo has been the quarterly performance review, in which every employee at the company is ranked on a scale of 1 to 5. The ratings have been used to fire hundreds of employees since Ms. Mayer joined the company in mid-2012.

Now, as Ms. Mayer prepares to announce a streamlining plan on Tuesday that is likely to involve even more job cuts, one former manager who lost his job is challenging the entire system as discriminatory and a violation of federal and California laws governing mass layoffs. In a lawsuit filed in Federal District Court in San Jose, Calif., on Monday, Gregory Anderson, an editor who oversaw Yahoos autos, homes, shopping, small business and travel sites in Sunnyvale, Calif., until he was fired in November 2014, alleges that the companys senior managers routinely manipulated the rating system to fire hundreds of people without just cause to achieve the companys financial goals.

Mr. Anderson said the cuts, including what his boss said was the firing of about 600 other low-performing Yahoo employees at the time of his termination, amounted to illegal mass layoffs. Under California law, the layoff of more than 50 employees within 30 days at a single location like Yahoos Sunnyvale headquarters requires an employer to give workers 60 days of advance notice. A similar federal law, known as the Worker Adjustment and Retraining Notification Act, requires advance notice for a layoff of 500 or more employees. Yahoo has never provided such notices. But it did cut 1,100 employees over a period of months in late 2014 and early 2015, ostensibly for performance reasons.

If the court finds that Yahoo violated either law, it could be forced to pay each affected employee $500 a day plus back pay and benefits for each day of advance notice it failed to provide. The California Department of Fair Employment and Housing is also investigating the use of ratings in the firing of another Yahoo employee, according to Jon R. Parsons, Mr. Andersons lawyer. Fahizah Alim, a spokeswoman for the California agency, confirmed that such an inquiry was underway, but said she could not provide further information because of confidentiality rules. In a statement, Yahoo defended its rating system. "Our performance review process also allows for high performers to engage in increasingly larger opportunities at our company, as well as for low performers to be transitioned out," the company said.

Yahoo also said that Mr. Andersons specific claims had no merit and that he had sought a $5 million settlement from the company just before filing the suit. Ms. Mayer has steadfastly refused to use the word layoff to describe the thousands of jobs eliminated since she joined the company. She even forbade her managers from uttering what she called the L-word, instructing them to use the term remix instead.

The lawsuit comes as Yahoo morale hits new lows. More than one-third of the companys work force has left voluntarily or involuntarily over the last year. Ms. Mayer, who has presided over a continued decline in Yahoos financial performance, faces pressure from activist investors to sell the companys Internet businesses or otherwise radically restructure the business. She has promised to unveil a new strategy on Tuesday, when Yahoo reports its financial results for the fourth quarter of 2015, although people with knowledge of her thinking say that the changes she will announce will be modest.

Mr. Andersons suit provides a peek inside Yahoos controversial quarterly performance review system, which Ms. Mayer adopted on the recommendation of McKinsey & Company, a management consulting company. Similar systems were once widely used in corporate America, and companies like Amazon.com still employ analogous methods. But others, like General Electric and Microsoft, have dropped such rankings as a tool for routine firings because of their corrosive effect on productivity and employee morale.

At Yahoo, the program, known internally as Q.P.R., has been a sore spot among managers and employees since it began. The court filing said that managers were forced to give poor rankings to a certain percentage of their team, regardless of actual performance. Ratings given by front-line managers were arbitrarily changed by higher-level executives who often had no direct knowledge of the employees work. And employees were never told their exact rating and had no effective avenue of appeal.

The Q.P.R. process was opaque and the employees did not know who was making the final decisions, what numbers were being assigned by whom along the way, or why those numbers were being changed, the lawsuit says. This manipulation of the Q.P.R. process permitted employment decisions, including terminations, to be made on the basis of personal biases and stereotyping.

Mr. Anderson said that in his case, he had received high ratings and a promotion before taking a leave of absence in the summer of 2014 to study at the University of Michigan on a Knight-Wallace Fellowship. Although the fellowship leave was approved by two top Yahoo executives, Kathy Savitt and Jackie Reses, who have since left the company, Mr. Anderson said that his bosss boss, Megan Liberman, called him on Nov. 10 to inform him that he was in the bottom 5 percent of the companys work force, all of whom were being fired.

In the suit, Mr. Anderson said he was fired for several reasons unrelated to performance. He said he had complained to management about the impact of the Q.P.R. process on the people he supervised and had reported an attempted bribe by one employee who wanted him to reduce another employees rating. He also alleged gender discrimination, claiming that the media group, which was overseen by Ms. Savitt and Ms. Liberman, systematically favored women in hiring, promotions and layoffs. Mr. Anderson, who had worked at Yahoos headquarters, said he was stranded in Michigan with his family because of the firing.