If your employees are working harder than ever but the quality of their work isn't rising along with the longer hours and increased production levels, it may be time to admit stress is a problem.

Still experiencing lingering effects from the recession, many companies are understaffed and workers are underpaid. The importance placed on hard work and making money, and the rise of technology that enables the workload to follow you home, have driven stress levels to unprecedented heights.

In the American Psychological Association's recent Work Stress Survey, eight out of 10 people said that work is the source of their stress. The survey also found that 42 percent of adults reported their stress levels have increased over the past five years.

Hendrie Weisinger, a psychologist, business school lecturer, and executive coach, and J.P. Pawliw-Fry, a lecturer at the Kellogg School of Management and founder of the Institute for Health and Human Potential, write about the culture of stress in the U.S. in their forthcoming book, Performing Under Pressure: The Science of Doing Your Best When It Matters Most. Over the course of a few years, the duo studied 12,000 people who work under pressure. They tell Knowledge@Wharton that the notion that people perform best under pressure is a myth.

One of the worst productivity killers, Weisinger says, is when a boss imposes phony deadlines for no reason or exaggerates the need to hit goals or production levels. "It is counterintuitive, but by saying this is the only opportunity we're going to have, you are increasing the likelihood that the staff won't do their best," he tells Knowledge@Wharton. Weisinger and Pawliw-Fry add that incentive-based rewards produce stress and anxiety as well.

So what does help alleviate employees' stress?It is all about creating social mores and policies that produce positive emotions and positive work environments. Wharton management professor Sigal Barsade and George Mason University assistant professor Mandy O'Neill say that employees perform better in cultures of "compassionate love" than in cultures of stress and pressure. That may sound a little too pampering, but ultimately your employees should want to work for you, instead of being terrified to fail.

Barsade says you should "create a culture where employees treat each other with affection and compassion."  If you foster an environment that emphasizes empathy and care over invented deadlines and needlessly taxing workloads, stress levels will dip and productivity will improve.