Layoffs and Tradeoffs: Production, Quality, and Safety Demands Under the Threat of Job Loss

Employees often face a conflict between production targets, quality assurance, and adherence to safety policies. In a time when layoffs are on the rise, it is important to understand the effects of employee job insecurity on these potentially competing demands. A laboratory experiment manipulated the threat of layoffs in a simulated organization and assessed its effect on employee productivity, product quality, and adherence to safety policies. Results suggest that student participants faced with the threat of layoffs were more productive, yet violated more safety rules and produced lower quality outputs, than participants in the control condition. Implications for organizations contemplating layoffs and directions for future research are discussed.