This gives greater freedom to lay people off, in the sense that there is no documentary basis for a lawsuit of wrongful termination.
In an at-will state like California, you can be laid off for any business reason, such as "the work in this area is closing up." So, justifying a layoff (to the satisfaction of a court) is not a major constraint.
But if there is documentation stating that the employee's work is great, that future opportunities abound, etc., then that justification begins to look suspect.
On the other hand, in the absence of documentation, the at-will rules give great freedom to the employer.
I don't want to seem like a conspiracy theorist. There was probably no one over-riding reason for ditching the written report. But I think the above was a big factor.