The voting on your post implies people disagree, but the method you mention is the way the vast majority of companies try to operate because it intuitively makes sense.
Even in a cut-throat industry like sports, athletes aren't cut or traded the instant they enter a slump (if they still have future potential).
As mentioned below, Netflix has the philosophy "we're a professional sports team". Yet they don't pay people millions of dollars like an athlete. If you really want to be cut throat, great, pay people like an athlete then. Otherwise quit the BS.
They may not pay millions (as far as I know), but I've heard a senior engineer at Netflix can make upwards of $400k/year which is a lot relative to a similar position in other companies.
Some make far more than that. They pay 100% cash and let employees decide how much appetite for (equity) risk they want to take on. It's a refreshing model for those who've seen their significant equity stakes (on paper) become worthless, or those who prefer to know exactly what compensation they'll be getting upfront, etc.
Is your point that because an average software engineer makes 5-10x what a minor league baseball player makes, that a "major league" software engineer should also make 5-10x what an MLB player makes?
The original claim is that Netflix runs more like a professional sports team in terms of demanding performance. The argument against was that they don't pay like one.
My argument is that they pay somewhere between a minor and major league team, both of which have a "perform or get out" mentality.
Sports teams don't actually pay market rates. Every sport that I can think of limits pay in one way or another especially for stars, ostensibly so that small market teams can compete with big market teams.
In English and European club football (soccer) there are no salary caps.
"In English sport, there’s no draft; there’s no salary cap; there’s no revenue sharing, no parity. In the Premier League, it’s every team for themselves." [1]
Most professional athletes don't earn big money. Rather like music, a very few make it in the big leagues. Of the rest, some find steady work in minor teams; many, many others struggle to get by combining their passion with casual day jobs.
If your sport isn't one of the few that can command massive advertising dollars, then there may be no pay at all. The value chain is very clear: all high athlete salaries are ultimately funded by advertisers wanting access to consumer eyeballs.
Overlay all this with the very short effective career, the near-absence of post-athletic marketable skills, and the devastating effect of injuries, and you'll find athletes are statistically underpaid over their lifetimes.
I don't know for sure, but I don't think Netflix cuts people right away either. I am sure they are looking for future potential before making a rash decision. If not there would be hardly anyone left and I know several that people that have worked there for many years.
Even in a cut-throat industry like sports, athletes aren't cut or traded the instant they enter a slump (if they still have future potential).