It looks better on the books when people churn "organically" over the course of a year.

Is it better or worse for morale than a lay-off? Hard to say. Depends on how transparent with salaries your company is.

One "advantage" is that it's somewhat-reversible. If 2 quarters into this plan, the board finds that they don't need to cut back on spending as much as they originally believed, they can hand out raises to whatever fraction of employees remain, and give themselves a pat on the back.

Bottom line, it's a symptom of a poorly-planned hiring system, IMO, and a painful situation with no painless way out. Employee X may prefer to be told directly that the company wants them gone next month, Employee Y prefers to save face. Your CEO is, in all likelihood, very upset about the situation, too, for what it's worth.

I worked for a large company that was perpetually being (and being prepared to be) sold. Three acquisitions in three years, each preceded by a company-wide dictate to increase the company's cash value by lowering costs.

My director told me their most powerful cost-cutting lever by far was to lower headcount. So that's what they did. Then after the sale they'd be desperate to hire and train new engineers. The churn killed productivity for years afterward, due to the technical nature of the work. After a year there I still wasn't up to speed.

Sometimes the folks in charge are just shortsighted and incompetent.