Sure, and most (not all) consider that a horrible practice that encourages backstabbing politics. And it's definitely bad for morale. And the people that defend the idea say it's nice to cut the flak once a year, but it's obviously better to just fire people for being bad as needed rather than create this constant annual layoff. The main reason it's done it's because it's so much easier than managing companies correctly.

It creates perverse incentives for managers to hire one sacrificial goat per year so they don't have to cut into their otherwise effective team.

A lot of this is just managers that don't want to be confrontational and firing the guy who just isn't working out but seems perfectly happy to just keep sucking at his job. These 10% haircuts give them the excuse they need to do their job.

It's to keep fear of lay offs high thus making people work harder. this is especially effective with H1Bs.

However, some well qualified engineers won't be bullied by such routines: they'll simply go work somewhere they're appreciated.

That's one of the policies that destroyed Microsoft's reputation for years.

You could argue that they did it in the stupidest way though.