I know of one surefire way to destroy the morale of a group of engineers. That is to take away their ability to finish things. There are a number of root causes that can lead to this, but the proximate cause is usually a lack of vision, focus, or courage in the people responsible for setting priorities.
A lot of developers got into this gig because of an intrinsic motivation rooted in the feeling of accomplishment derived from completing the construction of a useful thing. When you tell these folks to solve a problem and let them pour their focus and effort into it, then stop them and say "actually, that's not so important, work on this other problem instead," you rob them of their intrinsic reward for good work.
Jerking a group of developers around like this is a good way to end up with sad and bitter employees. And that's the best case. More likely you'll end up with ones that feel betrayed and act belligerent, or even disloyal. Developers don't like thrash. They don't all react the same, but very few handle it well. One thing is for sure: it's no way to get people to do their best.