Playing it safe: The business impact of psychological safety at work

There’s very little that can impact our lives as much as work. We rely on it financially, for the majority of our social interactions, and for a sense of accomplishment. Our jobs have a critical role to play in our overall happiness. But that’s not where it ends — happiness is also a positive influence on how well we work. It’s a two-way street.

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That’s why so many businesses have embarked on campaigns to improve their employees’ wellbeing, happiness, and satisfaction, and psychological safety has become an important category of the work organisations invest into the wellbeing of their employees. With only 26% of businesses qualified as ‘psychologically safe’, what is psychological safety? And why should businesses care?

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What is psychological safety?

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In her 1999 article, ‘Psychological Safety and Learning Behavior in Work Teams’, Professor of Leadership and Management at Harvard Business School, Amy Edmondson, coined the term ‘psychological safety’. She defined it as:

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"The belief that one will not be punished or humiliated for speaking up with ideas, questions, concerns, or mistakes, and that the team is safe for interpersonal risk taking."

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Later, she shortened the definition to the ‘absence of interpersonal fear’.

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In other words, it’s a culture in which individuals don’t feel ashamed or worried about (or like they’re going to get punished for) taking a risk — be it asking a question, raising a concern, suggesting an idea, or admitting a mistake.

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What is psychological safety at work?

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The term ‘psychological safety’ originates from a study about working teams, so it inherently is concerned with the workplace. This is significant, because Edmondson’s main point is that it’s not individuals who decide whether they open up and feel comfortable — but rather the group. While psychological traits can help someone feel more comfortable, the team structure and culture will have the foremost impact on whether members feel safe to take necessary risks.

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Psychological safety at work doesn’t mean that everyone is constantly nice. It means that the atmosphere allows people to feel free to be themselves at work: brainstorm, voice thoughts (even the half-baked ones), challenge coworkers and managers, give truthful feedback, and work through disagreements.

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As you can imagine, low psychological safety negatively impacts employee wellbeing, including stress, burnout, and turnover, as well as the overall performance of the organisation. This is because psychological unsafety stems from the same brain mechanism as the ‘fight-or-flight’ response: when an employee is provoked (for example, by a hostile boss, harsh colleague, or dismissive subordinate), the brain processes this as a life-or-death situation. The amygdala, which is responsible for processing emotions, triggers the fight-or-flight response, causing the brain to shut down other functions such as perspective, analytical thinking, or reasoning. Which, of course, is not conducive to most jobs!

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Further reading: How to create psychological safety

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Why is psychological safety important in the workplace? 

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A few years ago, the people team at Google tried to answer the million dollar question: What makes a team effective?

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This plan was later named Project Aristotle, and became a pivotal study into the significance of psychological safety. They utilised over 30 statistical models and hundreds of variables, confirming that who was on a team mattered less than how the team worked together. The results? “Of the five key dynamics of effective teams that the researchers identified, psychological safety was by far the most important.”

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If a Google-backed study isn’t enough to highlight the significance of psychological safety to the workplace, the University of North Carolina has also found that positive emotions — for example, trust, confidence, curiosity — encourage people to become more resilient, motivated, and open-minded. In response, solution-finding and divergent thinking grows, impacting work-related traits insurmountably.

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Time and time again, psychological safety has been named as the star of the show when it comes to strong workplaces and successful businesses. It is a driver of high-quality decision making, healthy group dynamics, interpersonal relationships, innovation, and effectiveness.

To make things easier, we’ve laid out seven reasons why you should invest in psychological safety.

1. Better performance

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Every business cares about one thing above all else — the bottom line. That’s why we’re starting with performance, to which psychological safety contributes immensely. Think about it: when you’re happy and content, when you feel comfortable, when you know your efforts are going to be appreciated even if you’re not perfect — you’re likely to be more productive and perform better. In fact, studies have shown that teams with higher levels of psychological safety had better performance and lower interpersonal conflict, with one going as far as to call psychological safety ‘the engine of performance’.

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2. Better engagement

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Engagement has become one of the most difficult challenges for businesses today: only 23% of employees are engaged, which means businesses are struggling to make their staff care about the workplace and the job they do. This obviously has terrible consequences for the company, from higher turnover rates to lower productivity. When workers feel like their contributions matter and are able to speak their minds freely, they are more likely to be engaged.

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3. Better diversity

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Although it’s become a buzzword, diversity is vital, both in business and outside of it. However, while diversity is key, inclusion is what really brings out the benefit of it to an organisation. That’s why companies with a higher degree of psychological safety are more likely to benefit from diversity. The connection between the two might seem indirect, but when you think about it, it makes a lot of sense.

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With neurodivergent people, the value is glaring — a comfortable atmosphere that allows for better communication is immediately helpful. But even with other marginalised groups, psychological safety can be invaluable to the goal of diversity. Take the gender gap, for example. When you consider that almost half of female business leaders struggle to speak up in virtual meetings, and that 1 in 5 feel overlooked or ignored during video calls, the importance of psychological safety to diversity becomes crystal clear.

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4. Better creativity

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Probably the biggest benefit of psychological safety is increased creativity. When thinking about the term, what pops into your head? Large, colourful brush strokes? A crazy genius experiencing a eureka moment? Flawless pointillist paintings of fruit?

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More often than not, creativity in the workplace looks more like a small, stuffy room filled with a borderline-exhausted team trying to use their last drops of energy to brainstorm something out of nothing. This isn’t surprising: Gallup found that just 3 out of 10 employees strongly agreed that their opinions count at work. It may not be that your team isn't creative — they might be that they’re afraid to raise new ideas for fear of repercussions. It’s no wonder, then, that studies show that psychological safety increases behaviours that contribute to creativity.

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In psychologically safe working environments, workmates are more willing to take risks such as asking questions, sharing reservations, or disagreeing with a superior. By definition, this leads to a more dynamic and innovative culture. This is particularly true for jobs where individuals need to use their discretion.

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5. Better learning

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Being around curious people who are always looking for new, interesting things to learn is incredibly inspiring. When a workplace has a learning culture like that it immediately motivates employees to learn more and support their self-development. Alternatively, coming into a workplace where you are often humiliated by sharing your ideas will stop you from trying to think out of the box, but also to develop your own knowledge and ways of thinking. That’s why psychological safety encourages workers to continuously learn and progress, as well as learn from others’ mistakes as a team.

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6. Better retention

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Another costly problem for businesses today is low retention rates. Companies are spending an enormous amount of money, time, and effort on hiring a new employee, only for them to leave quickly. This problem, which costs organisations a whopping $1.8 trillion every year, is the reason why so many companies have been reconsidering their priorities and investing so much in employee happiness and wellbeing. Once again, psychological safety can be a key player in this — 1 in 4 companies argue that psychological safety is the top driver of employee retention. If employees don’t feel stressed about being themselves at work, they usually stay for longer.

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7. Better hybrid work

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The post-COVID world is a strange one. If you haven’t heard this enough in the past few years, the trend of moving towards flexible, and especially hybrid, work, is not going away even if masks are a thing of the past and our last lateral flow test has choked us long ago. In this new context, psychological safety is more important than ever. The merging of home and work means that business leaders must interact with issues they had no jurisdiction in previously — for example, an employee’s personal circumstances, from their housing situation to their relationship and family status, are now part and parcel of decisions regarding staffing, scheduling, and coordination of work activities.

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Terrifyingly, it means that for the first time in the job market, managers have to contend regularly with matters that are deeply seated into the personal lives of employees, from their identity, to their values and choices. In organisations that embraced hybrid work, psychological safety is even more crucial than ever before.

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If you’re looking for ways to improve your company’s psychological safety, book a demo with us to learn more about how the Thrive platform can help.

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