If I read correctly, they rank yet do not have quotas. Someone performing well doesn't mean someone got scored low. In this system, a low performing person can become average by improving skills.

With this in mind, it makes sense to grade the manager. If a manager has a lot of poor performers, they might not be giving staff the training, support, and feedback that is necessary to improve. If they all get high scores, they might be grading too easily. I'm guessing they have controls to help lessen this.