It's not about paying them off imo, it's about employer brand. They don't to that for them, they do it for the next hires opinions of them.
"even if your performance declines, you'll get a nice check before being let go" sounds a lot better to a candidate/employee than "not good enough? just leave. now."
it's nonsense to you because you just don't have the budget.
For a huge tech company, how much you pay people seems to matters a lot less than who's building the product. It's better to have a few amazing people that you pay way above market, than a bunch of crappy employees that you pay at market level or below.(for their level of "experience")
High churn rate in any dressing leads to stress. Stress often counterproductive for creativity. The expected result of the policy is a mediocre work with a lot of unproductive politicking self-selecting corresponding survivors.
This is exactly how the opening reads to the book No Rules Rules. Erin Meyer, a business professor, has that exact analysis of what "should" happen in an environment like one Netflix describes. But she interviewed dozens of Netflix employees for the book and found that the theory you state doesn't hold. The book is about figuring out why that is the case.
"even if your performance declines, you'll get a nice check before being let go" sounds a lot better to a candidate/employee than "not good enough? just leave. now."
it's nonsense to you because you just don't have the budget.
For a huge tech company, how much you pay people seems to matters a lot less than who's building the product. It's better to have a few amazing people that you pay way above market, than a bunch of crappy employees that you pay at market level or below.(for their level of "experience")