Though it does sound somewhat similar to the concept of "stack ranking", which a few companies (such as MS) are notable for having used as part of their annual review process in the past.
Stack ranking has always sounded to me like an absolutely poisonous thing to implement in an otherwise healthy office. But if the organization knows that it needs to implement a reduction in force regardless, then I guess it might make sense if management does not have a feel for who their best engineers are.