For managers in America, the landscape of 2025 is beginning to resemble the Year of the Underperformer. Recently, when Mark Zuckerberg announced the dismissal of 4,000 employees, he stated the intent was to “eliminate low-performers” and “ensure our teams consist of the best talent.” Simultaneously, Microsoft executed layoffs of employees with low performance ratings, and Elon Musk has been terminating thousands of federal employees he deems unsatisfactory. Ironically, some of the employees targeted had received commendable performance evaluations. Leaders across various sectors are conveying a unified message: Improve your performance, or risk losing your job.
“They’re attempting to foster more accountability,” remarks Adam Grant, an organizational psychologist and management professor at the Wharton School. “There’s a concern that individuals are growing too comfortable and complacent. They’re hoping that some will voluntarily opt out as they realize they can’t meet the new standards of performance.”
However, the push to eliminate low performers presents a significant challenge: it often backfires. Research spanning decades shows that aggressive attempts to “raise the bar” on performance, as Zuckerberg described it, consistently lead to adverse outcomes. While CEOs may believe they are forging meritocracies, they often propel their companies into conditions characterized by low morale, high turnover, diminished profits, and stifled innovation.
“In the short term, you might witness some enhanced performance expectations and accountability,” Grant, who also serves as the chief work-life expert at Glassdoor, explains. “In the long term, though, you may be inadvertently sabotaging your organization.” The conclusion drawn from evidence on inducing job insecurity is unequivocal: these are shortsighted decisions.
What truly drives employees to give their best? This has been a conundrum for managers for years. Historically, during America’s initial industrialization, fear was perceived as a primary motivator for workers. Frederick Taylor, a prominent management theorist, contended that workers were naturally lazy and needed constant oversight. He instituted punishing productivity standards and terminated those who couldn’t meet them. As Taylorism spread, the approach proved counterproductive, prompting numerous strikes and factory shutdowns.
By the 1950s, companies began adopting a more compassionate management philosophy that focused on alternative motivators identified by organizational psychologists: community connection, the appeal of engaging work, and the innate desire to contribute. However, the advent of globalization in the early 1980s saw a resurgence of fear-based management. Jack Welch at General Electric famously instituted a policy where 20% of employees were classified as “A players,” 70% as “B players,” and the remaining 10% — often dismissed for low performance — as “C players.” This method, dubbed “rank-and-yank,” proliferated throughout Corporate America.
Ultimately, this management strategy proved detrimental. A notable example is Microsoft, which utilized “stack ranking” as a version of the rank-and-yank system. By the early 2010s, Microsoft had witnessed its market value plummet by over 50%, a consequence of this management style that treated performance as a competitive game – where one person’s success necessitated another’s failure. Journalist Kurt Eichenwald noted, “Staff were rewarded not just for excellence but for ensuring their peers failed,” leading to disarray and internal conflicts that sabotaged promising projects. Microsoft finally phased out stack ranking in 2013, a shift echoed throughout many corporations, including GE.
The extensive history of fear-based management offers scholars a wealth of data for analysis. What does this research reveal? Initially, utilizing fear as a motivational tool may yield short-term results: when employees feel their jobs are at stake, their productivity can spike. Nevertheless, this initial productivity surge often compromises quality. As workers scramble to meet demands, their work may become subpar and error-prone.
Moreover, work environments steeped in performance pressure can stifle innovation. A study from the 1990s at a Fortune 500 tech company with a workforce exceeding 30,000 found that after layoffs, the remaining top performers exhibited decreased creativity and produced fewer groundbreaking ideas. This reaction, termed the “threat-rigid response,” occurs when fear compels individuals to cling to familiar patterns. The anxiety stemming from job insecurity can overwhelm employees, hampering their problem-solving abilities and inhibiting creative thinking – precisely what organizations need in turbulent times.
“When employees are primarily focused on job preservation,” states Grant, “they become less willing to take risks and think imaginatively, which are essential in adapting to challenges.” The irony is stark: the more companies target low performers, the fewer high performers they retain. This culture of fear often triggers attrition, with one study suggesting that even a 1% reduction in workforce can lead to a 31% increase in voluntary turnover. This might not appear problematic for a business executing layoffs, but the departures often skew towards high performers, who possess the greatest job mobility. Furthermore, a climate of fear can deter potential talent; studies indicate businesses that execute layoffs generally fall in Fortune’s rankings for desirability as employers.
Almost universally, analyses confirm that contrary to the beliefs held by leaders like Zuckerberg and Musk, instilling fear undermines a company’s long-term profitability — a trend especially pronounced in R&D-driven, high-growth sectors like technology. The uncertainty and anxiety created by layoffs can hinder rather than enhance business agility.
“It’s a detrimental approach,” asserts Sandra Sucher, a Harvard Business School professor studying layoffs. “If Mark Zuckerberg believes this inspires employees to enhance their performance, he may need to revisit fundamental motivations that drive employee effort.”
Not to suggest that CEOs should foster a workplace akin to a Montessori preschool. There are valuable lessons from Taylor’s methodology: establishing high standards, monitoring performance, and rewarding excellence remain foundational to effective management. Yet, during the pandemic, some firms swung excessively towards leniency, even suspending performance reviews entirely. This good-willed response to the crisis ended up leaving managers uncertain about employee contributions and performance, leading to unrecognized high achievers and unassisted low performers.
Many executives attributed the ensuing chaos to remote work, prompting mandates to return to the office. The more pressing issue, however, was the absence of a functional performance management system. “It’s crucial to differentiate between setting high expectations and demeaning staff,” notes Grant. “High expectations demonstrate belief in an employee’s capabilities. You set goals and collaborate with them to achieve those objectives. If someone fails to meet the standards despite guidance, the time may come for termination.” Conversely, the current approach taken by figures like Zuckerberg and Musk involves arbitrary quotas for employee cuts, pressuring managers to fire individuals who had consistently received positive performance feedback.
