This is a personal anecdote - my dad used to run a company that sorted second hand clothing. He had a huge warehouse, where people would stand in one place and literally pick clothes out of one basket and then sort them into several smaller ones, by colour or type. The atmosphere in the warehouse wasn't exactly perfect,but employees could talk to each other and they had a radio playing music. Based on some observations, he introduced a complete ban on casual talking and he took away the radio. Sure, for the employees it must have been much worse. But the productivity increased by 50% - an average amount sorted per day per employee was 400kg, after the change it went up to 600kg, which in the scale of things made a HUGE difference at the end of the month. The company could process a lot more with the same number of people. And yes, sure - people would get unhappy and leave, but it being rather easy manual labour - there were always 50 other people willing to take the position.
I'm not defending my father, I think the way he ran the company was horrible for the employees, but it's just the personal anecdote showing that working in a nice/friendly environment doesn't necessarily make you more efficient. They could chat, so they spent time chatting,not doing what they were paid to do.
You can get away with treating your employees like that if they only need to do menial work. But still, I wonder how sustainable was the increase in productivity? Because one explanation for that increase could be the fact that the employees felt they were being punished and were afraid to lose their only source of income, thus having to show work. Otherwise they would have left immediately under those conditions.
Another question is, could your father had had the same increase in productivity, or even more, if he had used other strategies, like productivity bonuses for the team?
Being nice and respectful is not something that you try to do despite the relentless market competition. It's something that you must do precisely because of that competition. The reason being, unless you can have a good working culture, you'll end up with a group of desperate people that have no where else to go. Good luck trying to come up with any creative work or idea with a company full of desperate people.
Did they get a raise as a consequence of the higher output ?
Since we are social animals then preventing talking between us make things harder for us at some points, ie the job gets harder, so that could be an argument for higher wage.
This seems like an ideal situation for pay by the piece, which would have probably increased productivity per hour (not necessarily per dollar of pay) even more. Also it would have rewarded specialists and reduced the turnover implied by 50 people in line. I wonder why that wasn't attempted.
