Less cynically, it also increases the odds of finding good employees. A "bottom 5%" worker is statistically less likely to suddenly rise to the top of the pack than a new hire is to produce at that level initially. And, more cynically, that remains true even if there's significant measurement error in identifying that 5%.
That's true if the performance ratings are cost-free and fairly accurate. A company where firing is based on misconduct and promotion is based on achievement, rather than basing both on quarterly reviews, might actually have a better chance of finding good employees, and perhaps more importantly, retaining them.
