How Do Managers Fire Employees? A Theoretical Model of Termination Decision Making

2020. In Academy of Management Proceedings . Business, Management and Accounting. (Vol. 2020, No. 1, p. 11785)

Lyonel Laulié, Boram Do and Gabriel Ignacio Briceño

Abstract:

In spite of the theoretical and practical importance of understanding involuntary turnover in organizations, few studies have explored termination decisions from a managerial perspective, with the vast majority of research focusing on the effects of involuntary turnover on terminated or remaining employees. Drawing from the theory of performance and the model of repeated decision making, we propose and test a theoretical model that explains how individual managers decide to terminate other individuals within organizations. Using a policy capturing method with a sample of 3,300 termination decisions about 30 termination scenarios from 110 participants, we found evidence that perceptions of task performance, contextual performance, and termination costs are significant determinants of a termination decision. We also found individual-level cross-level effects, such that individuals with previous termination experience put a higher weight on task performance when making termination decisions. Theoretical and practical implications are then discussed.

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