Stress and pressure seems to be a way of life for software teams. A manager I once knew liked to say, "Shit rolls downhill." (He was a crappy manager in general.) Crunch mode is so common we have a name for it. Programmer folklore is full of testonerone-fueled races to the finish.
And yet, software development is an immensely complex task, one that takes careful concentration and consideration of myriad details. Pressure can't help. In fact, a 2005 study found that putting smart people under pressure reduced their capability substantially. The pressure eliminated their abilty to use their working (short-term) memory, reducing their performance to that of people without high working-memory capacity.
Let me say that again: pressure eliminates people's ability to keep complex scenarios in their heads. In essence, it turns smart people into ordinary people, eliminating their performance advantage.
Interestingly, the pressure used in the study was laughably mild compared to what programmers typically face. According to the linked article, the participants, who were students at Michigan State University, "were told that they were part of a 'team effort' and an improved score would earn the team a cash reward. They were also told their performance was being evaluated by math professors."
Even under this mild pressure, participants lost their working memory. So it's not hard to imagine that programmers experience the same effect. It's pretty intuitive: pressure might help someone run faster, or fight harder, but it's hard to imagine someone thinking better under pressure.
So, what can you do?
As much as you can, shield your team from the pressure. A sensible approach to estimating and planning (such as the one I describe in the book) can help enormously here; the pressure I see most often is schedule pressure. And if that doesn't work and shit does roll downhill, let it stop with you. That may not be as much fun as taking out your frustrations on your employees, but it's a lot healthier.
Pressure may be a way of life for software teams, but it doesn't have to be a way of life for your team. Work faster and better by taking pressure out of the equation.