Here's how it would work. Students would have to compete to get into my program: I would accept the top ten students that applied. I would also have the option of dropping an underperforming student. I would coach the students to compile a portfolio of materials.
Some judges I do not know would judge, blindly, what my students have accompished against students at other universities. My teaching effectiveness would be judged solely by what I was able to make the students do.
Students' grades would also be determined by the same criterion. Their incentive is to come out on top as well. Student learning and faculty evaluation would be identical. The consumerist model of how well I am liked would fall by the wayside. I would be more like the basketball coach, recruiting students who will do well and cutting those who can't hack it.
Suppose all ten of my students place in the top 10%. Then they all get A's and I do too. If my class average is a C, then I get that as my evaluation too.
The problem here is that it gives the professor too much incentive to cheat, helping the students too much. I suppose the students would have to sit for an examination proctored by a third party.
Another problem is that my university might not have great students in the first place: how could I compete against the Ivies with what I have to work with?