Because low-performers are nearly impossible to identify, at least from a CEO level. There are two things one can be doing in a job:
1) Their job
2) Signalling to everyone around how much they're doing, and how hard it is
Universally, as you shift from camp 1 to camp 2, your job security goes up. There is no such thing as perfect transparency, and especially in careers like programming, it's hard to estimate how hard something is (or is going to be).
You can also do things like 360 reviews, which reward people who are good at making friends.
You can look at lines of code, which rewards 1000 lines doing the job of 10.
Every IC has their direct manager: team lead or something like that. Every decent manager knows who is underperforming in their team and secretly dreams about firing the slacker and hiring someone better instead, but rarely has such freedom. Now, the layoff is suddenly breaking. It's a no-brainer to jump the train and finally make it for the sake of the entire team.
Layoffs are coming. You're a manager. You have ten employees:
- Grumpy. Grumpy doesn't like you, and you don't like Grumpy. He doesn't keep you updated, and seems to sit in an office with a closed door. He complains a bit.
- Happy. Happy is your best friend, and tells everyone what a great manager you are. If all your employees were like Happy, you'd have perfect job security!
- Cheery. Cheery goes out and showcases all the great work he's doing to everyone. Everyone believes Cheery is the heart of the team.
- Praisy. Praisy is a good friend, you have kids in the same school, and you go to the same church. Firing Praisy would ruin a lot of relationships.
- Toss in six more caricature personas.
You cycle positions every 2-3 years in the company, and so no one can really tell how good a job you're doing from output except by signalling.
Your boss tells you that you need to fire 20% of your team. Whom do you fire? Whom do you keep?
If, as a CEO, you could count on every line manager and tech lead representing you, this might work. In practice, line managers and tech leads want to keep their jobs, signal the work they're doing, and keep their friends. They might also not be following their reports' work directly, and might not know whether Grumpy is the heart of the project (where this post started), or is in fact just playing video games.
I am a manager indeed. I more or less familiar with whereabouts of my reports, I know a lot about their performance and performance of their teams (some of them are team leads). I also know who is looking at the market for opportunities, who recently became parent, who is interested in relocation from their current country. I know who is safe to lay off from their teams, who is underperforming and who is currently vulnerable and it would be ethical to let them stay.
I really doubt this. Unless I'm working pretty directly with someone (that is, on the same specific project), it's hard for me to know how much they're really contributing. On my team of 8, I really only know how hard 2 or 3 of my teammates work.
I have doubts that a manager would be able to do this that much better.
Manager should deliver on time and budget in order to keep their job. It is easier to do having performing team. Performing team consists of performing ICs. Easy as that.
On the whole, though, it's easiest to do that with low expectation setting. If I can convince management that what my team is doing is Very Hard and Very Important, my team will be perceived as high-performing. Unless the CEO is sitting in on sprints, except for extreme cases, they won't know better.
If you're in a large corporation, and your team does more with less, but your director constantly sees the output of another team, who gets laid off at the next layoffs? As a manager, how are the incentives split between managing your reports, and managing your director, the CEO, and the rest of the org?
This problem isn't specific to management. It's any time you've set up incentive structures, from teaching-to-the-test at schools, to how we select the CEO themselves.
Why not do some extra homework and really cut the lowest performers, while we are here anyway?