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Brutal honesty with staff: Does it make staff more productive or demoralizes them?

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When a business owner is brutally honest with staff, calling out their inefficiencies without seeming to sound nice, does it make the staff to step up and do better?

Or it demoralizes them and causes them to slump even further in their performances on the job?
 
It depends on the staff, some can become more productive than before while some can be affected negatively. I think the best thing to do will be to honest but be gentle about it.
 
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