Knowledge@Wharton staff
Presented here for discussion is an excerpt of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
Research shows that, as tools for motivating workers, fear and intimidation come with a lot of risk and have been largely discredited for some time. And yet the use of fear as a motivator persists.
“Fear is a normal human emotion, and — when held in check — can sometimes be a functional or even necessary way to ensure that people do not become complacent,” said Wharton management professor Andrew Carton. “But when fear becomes an entrenched marker of an organization’s culture, it can have toxic effects over the long run. In addition to stifling creativity, it can inhibit collaboration and lead to burnout.”
Burnout may be of little concern for some employers, especially in certain high-growth industries. Netflix has been praised for its progressive company culture — offering perks such as a high level of employee autonomy, making sure business decisions are transparent to all employees and generally adhering to a philosophy the company calls “freedom and responsibility.”
The pressure to perform, though, is high. Netflix has a culture that is quick to fire employees and makes a public exercise out of it. When a worker is let go, an e-mail is sent out to potentially hundreds of other employees explaining what the ex-employee did wrong.
Netflix also uses a kind of keeper test. Managers continually go through the mental exercise of asking themselves whether they would want to keep workers if another company made them an offer. If the employee doesn’t measure up, they’re fired.
Beyond anxiety and depression, fear-based work environments have been found to inhibit learning, drive workers to become rigid and less creative, and impact team cohesiveness. But current and former Netflix employees have attributed the distributive decision-making power supported by its culture to the streaming-service’s ability to spur change.
“I think the Netflix culture is something a lot of people have admired,” said Shalini Ramachandran, a Wall Street Journal reporter who wrote an article on Netflix’s tough corporate culture, on the Knowledge@Wharton radio show. “While it can be at its worst ruthless and demoralizing, at its best it can allow the company to transform itself multiple times and overturn entire industries”