The recent pronouncements from American tech leaders like Elon Musk and Mark Zuckerberg, suggesting the potential for firing low-performing employees, have sparked concern among experts. These specialists, who have long studied corporate operations, warn that this approach—historically a counterproductive response to increased competition in US businesses—can backfire by stifling innovation and driving away high performers.

Human resource professionals consistently caution against fear as a management tool. A Business Insider article traces the origins of such practices to industrialization, where motivating employees through fear was initially believed effective. This led to the widespread adoption of Taylorism’s emphasis on efficiency and standardization; however, it ultimately resulted in strikes and prolonged factory shutdowns. In the 1950s, companies began experimenting with more positive management philosophies based on organizational psychologists' findings—incentives such as a sense of connection, engaging tasks, purposefulness, etc.—rather than fear-based tactics.

However, globalization’s impact on American competitiveness in the early 1980s led to a resurgence of fear-driven management strategies. General Electric implemented a “rank and yank” system that was subsequently adopted by other US businesses, including Microsoft. At Microsoft, this approach fostered zero-sum performance evaluations where one person's success meant another’s failure, contributing significantly to the company’s market value decline in the early 2010s. By 2013, Microsoft abandoned employee rankings and embraced a more supportive model—focused on mentoring, modeling positive behavior, and demonstrating care—which coincided with its most successful decade.

Business management studies corroborate these observations. A study conducted in the 1990s within a Fortune 500 tech company employing over 30,000 individuals found that repeated layoffs led to decreased creativity and fewer new invention ideas among remaining high-performing staff.

The impact of job insecurity on creativity is explained by organizational psychologists as “threat rigidity response,” where people cling to familiar approaches out of self-preservation. Research demonstrates that anxiety stemming from potential termination can significantly impair cognitive functions.

While fear may provide short-term productivity gains, experts argue it’s not a sustainable motivator; employees work harder and faster when jobs are at stake, but this often comes at the expense of quality.

Layoffs also accelerate the departure of high performers: one study estimates that firing just 1% of the workforce can increase voluntary resignation rates by an average of 31%, with top talent disproportionately leaving compared to less effective workers. A culture rooted in fear hinders recruitment efforts, meaning companies lose valuable employees as they eliminate low-performers—ultimately harming long-term profitability, particularly within research-intensive and rapidly evolving industries like technology.

While demanding excellence is essential for success, it differs significantly from belittling or intimidating employees; most individuals do not perform better under duress but neither does a completely hands-off approach work best.

One former Meta employee, fired after two years despite never receiving negative performance reviews, described leadership’s increasingly hostile behavior towards staff—a stark contrast to earlier interactions where Mark Zuckerberg was perceived as warm and engaging.

Employing pay cuts based on poor performance is essentially the CEO equivalent of “threat rigidity response.” While global competition drove fear in the 1980s, today's anxieties stem from advancements in artificial intelligence, creating a competitive landscape that feels like a zero-sum game. As one Harvard Business School professor observes, history demonstrates cyclical patterns of human behavior—alternating between periods of ingenuity and shortsightedness.

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