A theoretical assessment of dismissal rates and unit performance, with empirical evidence

Unit-level dismissal rates have rarely been studied, but utility analysis suggests that increasing dismissal rates can improve performance by increasing the contribution of a unit's workers. This proposition comports with other theory around dismissals but contradicts substantial empirical evidence. We extend the staffing utility framework, taking a multilevel perspective and attending to both within- and between-unit effects of dismissal rate practices. We test our theory in monthly observations from 1,047 retail locations over almost 3 years. Our results explain how between-unit associations between workforce contribution and unit performance can mask the within-unit benefit of increasing dismissal rates. This insight reconciles theory with prior evidence, although some researchers have interpreted them to be at odds. A better understanding of the complex causes and consequences of dismissal rates has the potential to open new avenues of research and inform practice in ways that promote unit effectiveness. (PsycInfo Database Record (c) 2020 APA, all rights reserved).