For example, a company with 5,000 employees might have about 500 positions that could actually be eliminated via automation, improved processes, and removing net negative contributors. If the average fully loaded cost is $100k/year (many old companies still have people not comped as high as Silicon Valley folks), you’re looking at roughly $50 million in dollar savings, not to mention the top performers aren’t distracted by the under-performers.

If I’m at the C-level, it’d be completely reasonable to pitch making this move, pocket an extra $500k for myself, and give $5 million worth of bonuses to the remaining 4,500 people ($1k minimum each), and you’ve still saved roughly $45 million to the company’s bottom line for savings or growth investment or higher comp for top performers. These are all rough numbers, but you get the point.

I suspect companies don’t do this more often because 1) they have a hard time, from the upper management vantage point, knowing where to cut/identifying the poor performers who try to hide, 2) scared to accidentally cut someone actually important, and 3) like managing a “big” company, even at the expense of their own potential executive comp.