Now, I'm the first to say that I might be wrong, but my feeling, from the original story, is that this guy simply doesn't know how to manage in a way that would help those 5 people work more effectively. I doubt that just upping the fear level a little would change that.
Really, I say that without any negative judgment towards the original poster or towards the employees in question... different people are capable of different kinds of management, and different people are capable of working under different kinds of management. It's quite easy to have a competent manager and a competent employee, and to have a matchup that produces zero work due to conflicts in style.