Stressful exit of B2B executives and their impact on firm performance: Contingent effects of erosion of status, diminished social support and cohesiveness

Abstract

Being fired is stressful. While unpleasant for all concerned, what if the person being sacked is a high-level B2B executive and a poor performer? What kind of impact does this exit have on co-workers, customers—and ultimately on a firm's performance? This research examines all these aspects, and introduces three moderators of C-suite dynamics in one framework. These are erosion of status, diminished social support, and group cohesiveness. And by applying job demands-resources theory, we are able to explain organizational stress. Our results show that when poor-performing executives are permanently let go, companies actually see a sacking sales bump of up to 6.3%. Results also show that upper echelon firings improve Tobin's Q, conditional on erosion in status (decreased by −5.9%), and cohesiveness (increased by +3.8%). To substantiate, we undertake over two dozen robustness checks. We also compare the implications when an executive's departure is forced or voluntary.