I believe there could some some grade inflation going on. That sounds like a "D-" or "F+" situation. You're talking about the far extreme left corner of the population bell curve, whereas the stated policy is all about the far right corner.
The B guy getting fired scenario would sound a lot like "he came in late once last quarter, he was responsible for one software bug (the A level guys are perfect of course), he didn't get awarded any honorary doctorates in CS last year unlike some of the A level guys (hey, Linus has a few), he claims to be publishing a textbook on the language we use but he's behind schedule, and he only taught his coworkers one new programming paradigm last year"
Yes, been there done that. Especially - I think - in coding, there are people who put in negative performance by messing up the things theyre assigned to do so others have to come in later and clean up their bugs.
Terrible decision to let somebody go but best to cut your losses early.
Months pass, and the employee is skating slightly below to just above the point of causing you more work. You've corrected some of the recurring mistakes they made when they first started, but now new ones are coming up. You make notes of the employee's progress and give honest feedback. They continue to improve. Slowly. Improving just enough so that HR has strong reservations about starting the termination process. You're stuck with a dud employee that, yeah, they're not absolutely horrible, but you know that you'd be much better off with an employee that could at least get things right the second time instead of the 20th.
"You shouldn't have hired them," I hear you say. It's not always the case that you hire them. I've "inherited" bad employees from predecessors in the past and have even had my boss transfer employees into my department that were doing even worse in other departments.
So yeah, if our company had any kind of policy like the one at Netflix, this entire process wouldn't even be a conversation. I just send the mediocre employee off riding into the sunset and hire someone that's a better fit with none of the fuss and BS.