Prioritizing the bottom line over people in a crisis: How leader behavior affects employee psychological distress under economic threat

Aim: This study examines the impact of direct supervisors’ leadership on employee psychological distress during crises. Specifically, it explores the relationship between people-oriented and bottom-line-mentality informed leader behaviors and employee psychological distress. The study further hypothesizes that employees’ sense of control functions as a psychological mechanism in this relationship and that this indirect effect is moderated by personal and national economic threat, both of which are particularly salient during crises. Method: A quantitative survey was conducted in three waves among 854 employees across Europe (Germany, Italy, the Netherlands and Spain) during the COVID-19 pandemic, a highly salient global crisis. Results: Findings indicate that employees with people-oriented leaders report lower psychological distress, mediated by an enhanced sense of control. In contrast, bottom-line-mentality informed leadership is associated with a diminished sense of control, and further with greater psychological distress. These effects are exacerbated under higher personal and national economic threat. Conclusion: This study advances understanding of how constructive and destructive leadership behaviors influence employees’ psychological well-being during crises, particularly under economic strain. The findings provide actionable insights for leaders, organizations, and policymakers on mitigating employee psychological distress through leadership strategies that foster a sense of control.