This policy of Welch's undoubtedly helped fuel GE's massive profit growth while he was there, by removing a lot of the dead employee weight. (It's outlined in "Straight from the Gut", which is a decent read, if a little too conversational in tone.). However, I've always thought that there approaches a point where this is counter-productive. You're assuming that you can replace those 10% with workers better than they were. But, after you do this long enough, your bottom 10% are probably at least average, or above average, and it may be a better business decision to keep those on instead of hiring and training unknown candidates. At some point there's got to be reduced returns.

One side effect is that no one has any incentive to let their coworkers take credit for anything. Instead, the incentive is to make your coworkers look bad whenever possible. They become your competition.