Safety in Numbers: Considering the Rationale for and ROI of Psychological Safety

"Doing the right thing, in every aspect of business, leads not only to success, but fosters excellence and creates industry leaders."

- Peter Georgescu

A Modest Introduction

A Flare for the Dramatic

In 2017, Peter Georgescu published "Doing The Right Thing is Just as Profitable," an article in Forbes that detailed how "the most ethical and just American companies have also proven themselves to be the most profitable. They lead their industries over the long term." Based on research conducted by JUST Capital, a remarkable non-profit whose purpose is to “transform the way America does business", the article drilled down into "recently released studies that demonstrate how the Just 100 - the hundred most ethical and enlightened companies in the nation — consistently outperform their industry competitors continuously, by one to four percentage points."(1)

For many the research and findings were noteworthy, more evidence to support the burgeoning claim that “good” had a place in business. For others still, it never made it atop the fold. The evidence was there to change behavior, to change strategies and business practices and to do better by people and their world. But behavior change isn't based on facts; it goes far deeper, takes far more than some are willing to give.

My hope is that this article will do more than pique interest. After all, according to Gallup, “only 32% of U.S. employees overall were engaged in 2022,”(2) a figure that is not wholly dissimilar from “just three in 10 U.S. workers strongly agree that at work, their opinions seem to count”(3) back in 2017. These figures are stark and dramatic – and far from aberrant (as the rest of this article will attest).

Thus, for all those that are actually interested in delivering better outcomes for their organizations, that seek to improve the bottom line, to make more money, to deliver services better, to innovate products faster: that they will take pause, consider, read again, research more, and ultimately change their practices. This should be an explosion, an unmistakable burst of light.

After all, any business practices that can nearly double engagement (and similarly reduce stress), as well as improve performance, innovation, and retention by more than half, shouldn’t just be contemplated; it should be pursued to the ends of the Earth. And for those that know this, who are already hooked on dramatic promise of these practices and data, that they will use this article as a tool to bring the rest along. Now.

Introducing Our Star

Psychological Safety is defined by its modern-day messiah Harvard Professor Amy Edmondson as " A shared belief held by members of a team that 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.”(4)

She is quick to point out that the idea was, "First explored by pioneering organizational scholars <namely Edgar Schein and Warren Bennis> in the 1960s," before acknowledging the explosive interest in the subject 30 years later where, "psychological safety experienced a renaissance starting in the 1990s and continuing to the present.. “(5)

But it’s Google's research as part of their project Aristotle focusing on Edmondson's work to date that really exploded onto the scene. "In 2012, the company embarked on an initiative — code-named Project Aristotle — to study hundreds of Google’s teams and figure out why some stumbled while others soared." Despite all their resources, the teams couldn't quite land on the solution, until Edmondson's work came to the forefront. "When Rozovsky and her Google colleagues encountered the concept of psychological safety in academic papers, it was as if everything suddenly fell into place."(6)

Many others in the field built alongside this work, such as Daniel Coyle, in The Culture Code, which in parallel corroborated much of Edmondson's and thus Google’s findings. He argued that, Psychological Safety was, “The idea that a high performing team culture provides the conditions in which its members feel safe to put themselves forward.”(7) Dan Radecki added, "In a psychologically safe climate, team members are not afraid to express themselves; they feel accepted and respected. Their openness creates a fertile environment for thinking, creativity, innovation, and growth…"(8)

Simon Sinek, amongst others, added that for teams to be this cohesive, effective, and vulnerable, true leadership is required: "Psychological Safety refers to a leader's responsibility to create an environment in which their team feels psychologically safe."(9) And according to Dr. Timothy Clark, this includes specific steps, “where team members progress through stages of Inclusion, Learner, Contributor, and Challenger Safety.”(10)

Regardless of who coined the term, originated the concept or best advanced the idea, there is clear consensus. At its heart, “Psychological Safety is an approach to team management that implicitly supports its members, embraces mistakes as learning opportunities, encourages active participation and vulnerability to achieve better outcomes. And that's an important point: psychological safety "isn't about being nice" but instead "It’s about giving candid feedback, openly admitting mistakes, and learning from each other" to strive for and achieve excellence.(4)

And lest there be any doubt, employees know what Psychological Safety is. According to a recent study by McKinsey, "Employees believe that psychological safety in the workplace is essential. In fact 89% say it's essential compared to 9% who say it is important and only 2% that say it is not important."(11)

Further, employees don't just understand psychological safety as some buzz word or ethereal concept without practical or relevant application. They know what it looks and feels like on their teams and what it feels like when it is noticeably absent. In fact, in a review of 36,000 employees conducted by the Ecsell Institute - the largest ever study on psychological safety to date – they concluded, "When employees are asked to rate their manager…Psychological Safety correlated directly with managerial effectiveness. Managers rating 9 or 10 in Manager skills corresponded to average of 84% on psychological safety compared with those managers rating 6 or below in manager skills averaging 36% in psychological safety."(12) Employees know when leaders act to foster safety as well as when they don't. And they see this as essential to good leadership.

The ROI – Safety, in numbers

"So, why should I care?" may not be the most emotionally intelligent or empathetic question to ask next, but it is likely the most human. An certainly the most corporate. And since time is valuable, perhaps the most relevant question is, "If you have limited resources including time and money, what should you invest in as a strategic approach to managing your teams and organization."

Let's take a look at the numbers then. Let's see what Google saw and break it down into hard data and logic. While there are countless metrics to observe when referencing what leaders should care about in terms of their people, I will offer these four as foundational to any conversation:

Engagement (Motivation)
Performance (Productivity)
Innovation (Problem-Solving)
Retention

Employee Engagement

First, Engagement aka Employee Engagement is congruous with Employee Experience and Motivation for our purposes. Thus, the better the experience an employee has on the team, the more motivated they are and likely to release discretionary effort. A typically unengaged employee for any number of reasons (e.g., boredom, disempowerment) will give less to their work, which some estimate on average approximately 80% of their true effort - that is for the full hours they ought to be working, they are truly working about 80% of the time - the rest may be spent staring out the window, surfing the web, lamenting their life choices and so forth.

However, an engaged employee may give much more (some estimated as high as 140% of their effort), referred to as "discretionary effort" because as Aubrey Daniels, Ph.D. says it is, "The level of effort people could give if they wanted to, but above and beyond the minimum required."(13) We most often know this as "going the extra mile…" and "While the word ‘discretionary’ may lead some to think it describes a worker’s ‘choice’, it really reflects more about the employee’s perseverance and commitment to completing the work."(11)

In a study of 50,000 employees across multiple organizations, the Corporate Leadership Council (CEB) found that a positive engagement determined both a rational and emotional commitment." In this case Rational Commitment meant "the extent to which employees feel financial, developmental, or professional growth within their role" while Emotional Commitment pertained to "the extent the employees feel pride, happiness, creativity, inspiration, or meaning from their work."(14, 15)

In fact, increased engagement had the following impacts to the employee's Discretionary Effort11 (by type):

Emotional Commitment vs Rational Commitment

No alt text provided for this image — Increasing employee engagemet has significant impacts on the type of commitments employees feel. These in turn influence "going that extra mile."

Consider what type of organizational or team strategy could possibly incur any of these results, much less all of them. Psychological Safety, after all, creates the safety net where employees feel emotionally supported by one another, where employees can be who they are, fail fast, get up quicker, and thus have the intellectual room to take pride in their team and company.

Considering the data, Psychological Safety, when present on a team, can decrease sick days by 13% and burnout by 40%20, and not surprisingly increase Employee Engagement and Motivation (thereby unlocking this "bonus" effort) by up to 76%.(16) The goal of every manager should be to unlock this additional effort, not simply because it clearly has a profound effect on productivity, but because team members want to give it. It is our natural state to do so. Psychological Safety is a direct means to create the trust, appreciation, and drive where employees do so.

Performance (Productivity)

It should come as little surprise why Performance and Productivity find themselves atop the list of metrics leaders should concern themselves with. They are closely related and in their role as talent metrics can be used somewhat synonymously pertaining to how well and consistently the employee delivered on expected work (performance) and the effectiveness and efficiency of the effort (productivity) as measured in terms of the rate of output per unit of input (as applicable).

If you are following closely, you may have noticed that what the above Engagement story proves is that engaged people (and particularly emotionally engaged people) work harder, that is they give more of their discretionary effort. But does that actually impact performance? I thought you'd never ask. That same CEB study, "Also found a correlation between general engagement levels performance with an increase of 20 percentile points in overall performance when the employees applied a commitment to their work". So just engaging people more effectively, motivating them to perform better actually has impact on that productivity and performance.

But engagement isn't the only factor that impacts performance. In fact, as performance and productivity concern themselves primarily with the quality and efficiency of work product, it is no leap of logic that conclude that employees would need to be quite skilled in their roles to deliver consistently high performance and productivity.(21, 22, 23)

Leaders will be happy to note that psychological safety, when applied to teams, results in an increase in Skills Preparedness by up to 26% followed by an increase in the likelihood of learned skills application by up to 67%. (17, 18) With this in mind, Erin Eatough, PhD delivers some good (and not surprising) news about psychological safety and performance/productivity stating that,"According to our research, work cultures with a high sense of belonging experience a 56% increase in job performance and a 50% reduction in the risk of employee turnover…In other words, psychological safety helps people feel connected to their colleagues and excited about the possibilities of their work."(17, 18)

And if we recall the Ecsell Institute study that correlated perception of manager skills with psychological safety, their next observation brings the performance point home: "Managers who rate highly in areas like psychological safety lead teams who bring in an average of $4.3 million more per year.”(12) Accenture, the global management consultancy, further supports these findings asserting, "Leading companies—Google, Gartner and Microsoft—have already identified psychological safety as the key element to unlocking team potential. Our own Accenture research shows that when employees are net better off, they are 5 times more likely to experience increased performance at work. And when performance is high, innovation follows."(16, 19, 20)

Innovation (Problem-Solving)

That bears repeating: "When performance is high, innovation follows." While the term "problem-solving" may not take much brain power to figure out, its connection to innovation drives a deeper and more important meaning for teams and organizations. Tim Kastell, an Associate Professor at The University of Queensland, defines innovation this way: “Not just having an idea – but executing it so that it creates value. That’s innovation.” And thus, “Psychological safety is the foundation of inclusion and team performance and the key to creating an innovation culture.”(24)

Ngozi Ogwo, CEO of Grant Thornton Nigeria concurs: “By celebrating differences of opinion, psychological safety sparks innovation,” she adds. “When team members are emotionally secure in the workplace, they tend to be more engaged and productive.”(25) Specifically, when performance is high due to the added power of psychological safety, teams are more focused, skilled and driven to produce but also enhance. Teams don't just consider and conceive better improvements and solutions, they are now also more likely to share them due to the safety they feel. Eccentricities transform into creative solutions and one person's idea turns into a teams' innovation.

In this environment it is no wonder that the presence of psychological safety increases likeliness to Collaborate by up to 57% and Problem-Solving (Innovation) by nearly 50%. Ogwo's colleague Aurora Sanz, legal employment partner at Grant Thornton Spain, drives the point home: “The best ideas emerge from different perspectives; a diverse team gives organizations a better understanding of customer needs and is key to unlocking ideas and accelerating the innovation process. More points of view enrich creative processes, leading to ideas that would not have emerged otherwise.”(25)

Retention

With all this in mind, there is one more metric that can't be overlooked. All these outcomes above - do they lead to those very same employees staying longer? And does this matter? Well, the truth is in the numbers. First, what is the cost of employee turnover - that is an employee quitting their job for whatever reason: According to Josh Bersin(26) there are many factors to consider including:

Estimated Costs of Replacing an Employee

According to countless sources, these costs more than add up. On the one hand "A study by the Society for Human Resource Management states that employers will need to spend the equivalent of six to nine months of an employee’s salary”. And further, "the average cost of replacing an hourly employee is $1,500. For those in technical positions, it’s 100% to 150% of their salary." This worsens with C-level positions where "the cost is higher still — up to 213% of their salary".(27,28,30)

Gallup concurs stating, "The cost of replacing an individual employee can range from one-half to two times the employee's annual salary -- and that's a conservative estimate.." with others anecdotally estimating as high as 2.5 to 3x employee salary. With this in mind and assuming a 26.3% turnover rate as reported by the Bureau of Labor Statistics (2017 - a useful pre-pandemic control) consider "a 100-person organization that provides an average salary of $50,000 could have turnover and replacement costs of approximately $660,000 to $2.6 million per year."(29)

While employee turnover is, to an extent is a fact of life, reality doesn't have to be so bleak. Consider now a brighter future where all the gains made by Psychological Safety in all those other metrics also apply here. In fact, Psychological Safety decrease Stress by up to 72% and is no wonder it has a 27% positive influence on Life Satisfaction.(16) And thus, it is no surprise that any workplace strategy that has such profound impact on engagement, performance, innovation, stress reduction/life experience, skills adoption and application wouldn't also just be a place people want to be and stay. And they do, with psychological Safety having a direct impact on retention by up to 50%.(16) Just in the example illustrated above, this could mean millions in savings for small companies and astronomical sums for enterprise.

Conclusion

To this point, our narrative establishes the following flow:

Psychological safety leads to more engaged (emotionally and rationally) employees which unlocks their discretionary effort, thereby not only inspiring them to work harder, but objectively produce better results.
This coupled with a greater tendency to pursue, acquire and retain important skills of their job greatly impacts performance, productivity and outputs in awe-inspiring ways.
This further facilitates a team’s marketplace of ideas that allows these ideas to surface and evolve without fear or favor, leading to a greater likelihood of innovative solutioning, essential for an aggressively competitive market landscape.
And using psychological safety as your foundational approach to team management reduces attrition by nearly half, not only preventing a hemorrhaging of profits (if there were even profits in the first place), but a realization of all those opportunity costs because PEOPLE STAY.

Whether you are a small business or a vast enterprise; whether you are a pioneer or corporate fat cat lounging languidly on the plains of the market savannah; whether you are an investor, considering the growth potential of your latest prize or conceiving the best way to turn distress upside down, consider this:

Safety Matters

Engagement thrives from it.

Performance requires It.

Innovation feeds off it.

People stay because of it.

Consider Safety deeply.

You really can't afford not to.

- M. Ducoing

M. Ducoing is the CEO/Founder of Ducoing Human Capital, a people-focused consultancy focused on bringing a new approach to workplace culture to the forefront.