Development: The education, experience, networking, as well as mindset and skills that help a person to become prepared for future work.
Protean Career: A career determined by the individual with the purpose of gaining psychological success in the course of their work. Psychological success refers to feeling of pride and accomplishment in regard to one's work. This is related to the concept of a psychological contract. This is an unspoken agreement between the employers and the employed about the expectations the two parties have about one another. The employee generally feels as if psychological success should be a reasonable expectation within their job as part of a protean career.
Assessment: This refers to the measurement and feedback of employees initiated by employers regarding various aspects of their performance. This can include things such as behavior, performance and customer relations.
Job Rotation: Refers to companies giving employees the opportunity to work in an area that they do not normally. This can help employees gain an understanding of the overall operations of the organization instead of just their usual work. This can come in the form of an externship.
Externship: Refers to companies allowing employees to take on a regular position within another organization for the purposes of gaining meaningful experience. These are sometimes done in the form of a job rotation.
Mentoring: Is when an experienced employee takes a less experienced employee as a protege in order to transfer some of their experience into knowledge for the protege. This can have benefits for both the mentor and the protege. The protege can benefit from both career and psychological support from the arrangement.
Career Support: Refers to the coaching, training and providing of assignments that can occur from a mentoring relationship.
Psychosocial Support: This can be friendship, emotional support and modeling adaptive work behaviors that can result from a mentoring relationship.

Chp. 10: Employment-at-will doctrine, procedural and interactional justice, organizational commitment, negative affectivity, employee assistance programs, job involvement
DQ 2 on page 490
Turnover is considered a negative outcome for several reasons. Widespread turnover generally causes morale issues with employees. Another reason is that the processes of hiring and training replacements can require a lot of time and resources to complete. Also company performance is correlated with turnover rates indicating that employee performance and satisfaction is related to customer or investor satisfaction.
If there are truly poor performers who are not leaving a company, it may indicate to me as an investor that the organization in question does not have a solid system in place to identify and either remove or retrain these individuals. In some cases, particularly those involving strong unions or cultural factors related to employee treatment (such as in Europe) it may indicate a weakness in management in negotiation.
However, the performance distribution may not be normal relative to other companies. If the hiring and training is successful to begin with, then it should be skewed to the top. If the lowest 'graded' employees would be 'C' employees elsewhere, then I don't see the problem with keeping them. If you always use 'curved' grades, then you will always have 'F' employees no matter how many you get rid of and that just causes morale issues with employees who may see their former co-workers' treatment as being unfair. There would be almost no benefit to doing this after the true bad performers are removed. Using your MSA example, would you give out an F just to give one out if all students do satisfactory work? The true 'F' students would have never gotten that far to begin with.
One important consideration to make once the decision has been made to involuntarily terminate an employee is a wrongful discharge lawsuit.