Cutting the bottom 10% is ultimately a stupid and short sighted practice.
For one thing, human performance varies considerably for each individual year over year. A great employee will go through a rough patch. A total slacker ends up in the right place and time and looks like a genius.
Beyond that, it is a documented, observed fact that cutting the bottom performers causes top performers (who can easily land another job) to re-evaluate their own jobs. It creates the perception among all workers that their jobs are temporary prompting them too seek a more permanent position. The top performers seldom recognize how good they are because of the Dunnig-Krueger effect.
Finally, it simply does nothing to improve the overall quality of the workforce. You are always needing to hire to replace the 10% you just fired. The ones you fired knew your products, procedures, office politics,etc. Quite often the new folks will be worse performers than the bottom 10% you had just because of the deficit in knowledge and experience.
On top of that, people looking for a job will know there is a 10% chance they will be fired in any given year. A job offer from almost anyone else will always be more attractive so the only people who will go to work for those companies in the first place are the people who can’t get any other job offers in the first place.
Those who perceive themselves not to be near the bottom 10% aren’t so worried and those who do are less likely to apply, but I agree—it creates a toxic work environment.