I’ve been told this several times when I’ve asked what I could do to get a higher rating or promotion. It always meant that there was some tenure element to the rankings. I think from the manager’s perspective they are being both honest and reassuring, but from the report’s perspective, it’s very frustrating knowing your progress is being limited, and hard work wasted, due to some bureaucratic limitation. And knowing that in practice it’s possible for exceptions to be made and it’s possible your manager isn’t advocating strongly enough for you.

At my company it wasn't a tenure thing, although I think that played an informal role as to why I was picked vs someone else. When a manager picks someone for the highest rating some departments require the manager to also pick someone as an FDN to "balance it out".

In this case I know the guy that got the high rating. As weird as it is to say, and even when the wound was fresh, I was/am happy for him and he deserved it. He's a nice guy and he had nothing to do with the rating I recieved. He's now a manager several levels up.

Ah, I didn’t realize “FDN” was a bad review

Yep, it shows up on your record for 3 years when posting for a new position or promotion, maybe longer for management positions.

What's an FDN rating?

Further development needed, aka you're not successfully meeting expectations for your role.