The surprising truth about low performers
Kiersten Essenpreis for BI
For America's managers, 2025 is shaping up to be the Year of the Low Performer.
When Mark Zuckerberg laid off some 4,000 employees last month, he said the goal was to "move out low-performers" and "make sure we have the best people on our teams." Around the same time, Microsoft axed scores of employees with low performance ratings. And Elon Musk has been firing thousands of federal workers he claims have failed to meet performance standards. Never mind that many of the targeted employees turned out to have high ratings. Bosses all across the country are sending the same message: Raise your performance, or you're next.
"They're trying to create more accountability," says Adam Grant, an organizational psychologist and professor of management at the Wharton School. "They're worried that people are a little too comfortable and complacent. They're hoping that some people will even opt out, because they realize they can't live up to the performance standard."
There's only one problem with cracking down on low performers: It doesn't work.
As decades of rigorous research have demonstrated, aggressive efforts to "raise the bar" on performance, as Zuckerberg put it, tend to backfire with remarkable consistency. CEOs may think they're creating a meritocracy, but in reality they're marching their companies straight into a trap of sunken morale, high turnover, depressed profits, and reduced innovation.
"In the short run, you might be creating some heightened performance standards and some accountability," says Grant, who serves as the chief work-life expert at Glassdoor. "In the long run, you may be shooting your organization in the foot." The evidence on making employees fear for their jobs, he adds, is clear: "They're very shortsighted decisions."
What motivates workers to do their best? It's a question managers have been wrestling with for as long as managers have been around. Back when America was first industrializing, the prevailing belief was that the best tool for driving employees was fear. The influential management theorist Frederick Taylor argued that workers were inherently lazy and in need of constant supervision. Swooping into factories, he set brutally high productivity standards — and summarily fired anyone who fell short. Everyone else had no choice but to buckle down and grind, no matter how unsafe the new standards might be, or how much misery they provoked.
As Taylorism swept the country, it made things worse rather than better, contributing to a wave of strikes that left factories idle for long stretches. By the 1950s, many companies were trying out a kinder, gentler philosophy of management. Instead of using fear to drive workers, they drew on a host of other motivating forces identified by organizational psychologists: a sense of connection and community, interesting and varied tasks, the desire to be useful. But in the early 1980s, as globalization began to erode American competitiveness, management by fear came roaring back. At General Electric, Jack Welch famously ordered his managers to rank 20% of their employees as A players, 70% as B players — and the remaining 10%, many of whom were fired for low performance, as C players. The practice, which came to be known as "rank and yank," spread throughout corporate America.
As a management philosophy, it proved to be a disaster. Take what happened at Microsoft, where the rank-and-yank system was known by another name: stack ranking. By the early 2010s, the once dominant company had watched its market cap plunge by more than 50%. One of the primary culprits? Its Welchian management system, which treated performance as a zero-sum game. If you wanted to succeed, someone else had to fail.
"Staffers were rewarded not just for doing well but for making sure that their colleagues failed," the journalist Kurt Eichenwald found. "As a result, the company was consumed by an endless series of internal knife fights. Potential market-busting businesses — such as e-book and smartphone technology — were killed, derailed, or delayed amid bickering and power plays." By 2013, when Microsoft finally abandoned stack ranking, much of corporate America had as well — including GE, where it all started.
The long history of management by fear has given scholars a lot of data to scrutinize. So what has all the research found? For starters, using terror to motivate your staff works in the short run: When their jobs are hanging in the balance, employees work harder and faster. But the initial surge in productivity, studies have shown, comes at the expense of quality. As workers rush to keep up, their output is inevitably shoddier, and riddled with mistakes.
What's more, work in the performance pressure cooker becomes less innovative. Take a study that took place in the 1990s, at a Fortune 500 tech company with more than 30,000 employees. After a series of layoffs, the remaining high performers became less creative and generated fewer new ideas for inventions. Organizational psychologists call this a "threat-rigidity response" — our tendency to respond to fear by clinging to the familiar. The anxiety generated by job insecurity becomes so overwhelming, studies suggest, that it actually impairs people's cognitive functioning. That might not matter so much when you're completing routine tasks, but it's debilitating when it comes to problem-solving.
"People focus very narrowly on protecting their jobs," says Grant. "They stop taking risks and thinking creatively and innovating, which is exactly what you need them to do in a turbulent environment."
The more you slash your low performers, the fewer high performers you'll wind up with.
Making employees fear for their job security also causes them to flee: One study estimated that laying off just 1% of a workforce would, on average, lead to a 31% spike in voluntary turnover. That might not sound so terrible for a company that's trimming its head count, but the departures aren't random. High performers, who have the most options, leave in far larger numbers than mediocre employees. Creating a culture of fear also makes it harder to recruit high performers. In one study, businesses that conducted layoffs slid in Fortune's rankings of the most admired companies. The more you slash your low performers, the fewer high performers you'll wind up with.
Pretty much every study that has ever crunched the numbers has found the same thing: Contrary to what leaders like Zuckerberg and Musk believe, instilling fear in employees actually hurts a company's profitability in the long run. That effect is particularly large in R&D-intensive, high-growth industries like tech. The feelings of uncertainty that job cuts engender end up paralyzing businesses instead of turbocharging them.
"It's a destructive practice," says Sandra Sucher, a professor at Harvard Business School who studies layoffs. "If Mark Zuckerberg thinks that this is inspiring to people to do a better job, he needs a primer on how it is that people are motivated. Most people aren't sufficiently motivated by fear to actually do better."
That's not to say that CEOs should run their companies like Montessori preschools. There were a lot of things that Taylor got right a century ago: setting high standards, monitoring employee output, rewarding people who do well. Those remain the cornerstones of good management today. During the pandemic, some companies may have swung a little too far to the gentle side, suspending performance reviews altogether. It was an expression of empathy that recognized the extraordinary stresses of the crisis — but it left some managers with no idea what their employees were doing, let alone how well they were doing it. High performers weren't getting recognized and rewarded, and low performers weren't getting the help they needed. Many bosses blamed the chaos on remote work, and ordered everyone back to the office. But the real problem was the lack of a properly functioning system of performance management.
"There's a big difference between being demanding and being demeaning," says Grant. "Demanding is about saying: 'Look, we have extremely high expectations. We hired you because we believe you're capable of meeting them. Here are your goals. Let's talk through what I can do to help you achieve them.' Then, if somebody is not pulling their weight, you give them feedback — you let them know what they need to change. If they're not willing or able to change it, yes, of course, at some point you let them go."
The demeaning way? It's basically the approach being taken by Zuckerberg and Musk. Setting arbitrary quotas of the number of employees who should get cut. Forcing managers to fire people who were consistently told they were meeting and exceeding expectations. Publicly labeling them as "low performers," which hurts their chances of landing a new job. And above all, failing to recognize that an employee who isn't working out isn't just a failure of the individual. It's also a failure of management.
"Unfortunately," Grant says, "what seems to be in vogue right now is a more demeaning approach to leadership."
Given the overwhelming evidence against management by fear, it's puzzling why Silicon Valley is trying to revive it. The tech industry, after all, was founded on the belief that everything should be dictated by data. Grant blames ignorance. "When I talk with CEOs, many of them are just unaware of the evidence," he says. "They haven't thought through the unintended consequences of their decisions."
Surely, though, it shouldn't be difficult for a company like Microsoft to remember just how poorly things went the last time it went after low performers — and how much better it did once it replaced stack ranking with Satya Nadella's softer approach of "model, coach, care." Microsoft post-2013 is one of the great success stories of the past decade — an ailing giant that actually managed to become relevant again. The tech industry boomed, in no small part, because starry-eyed startups motivated their coders and product managers and salespeople with the promise that they were changing the world. Eager millennials were happy to devote their nights and weekends to make that mission a reality, and they turned their underdog employers into some of the largest businesses in history.
"It's hugely frustrating, because we become smart for a while and then we become stupid," says Sucher, the Harvard Business School professor. "But if you've been in business for a long time, which I have now, you get used to the fact that it goes in cycles like this."
Perhaps using performance-based cuts to instill fear in their employees is just the CEO version of a threat-rigidity response. In the 1980s, the threat was global competition. Today, it's the winner-takes-all war over AI. Under siege, history teaches us, bosses behave the same way employees do: They keep reverting to the same tired methods that just don't work, no matter how many times they try it.
Even the famously cutthroat Jack Welch, toward the end of his life, repudiated the rank-and-yank phrase that had become synonymous with his name. Low performers, he said, should never be surprised when the conversation turns to dismissal. And they should never be "summarily shown the door." Instead, he said, their managers should "help them find their next job with compassion and respect." Today's low performers, it turns out, may not be the employees who are being laid off, but the CEOs who are firing them based on an outdated — and counterproductive — system of management.
Aki Ito is a chief correspondent at Business Insider.
