I imagine this sort of move makes some of the top people leave along with the worst people. If I was in a company that cut 25% of the workforce I'd look for the door regardless of how good I was. Nothing happens in isolation.
But at the same time, these are probably the same companies that say "competitive work environment" somewhere on the job application so maybe employees should expect it
Anecdotally, I've seen touchy feely corporate tone along with this strategy, and would suspect that is a fairly common combination. What you describe certainly exists, but it's not always so obvious.