I've made some screenshots to illustrate how the HA setting Performance degradation VMs tolerate works.
I’ve created an HA/DRS cluster with 2 hosts and 4 virtual machines.
I've set the percentage for the Performance degradation VMs tolerate to 0%.
This setting determines what percentage of performance degradation the VMs in the cluster are allowed to tolerate during a failure.
The virtual machines are running a CPU busy script and the resources utilized can’t be covered in case of a host failure.
Now you can clearly see that there’s a configuration issue saying: Running VMs utilization cannot satisfy the configured failover resources on the cluster.