Lack of psychological safety could cost companies up to $15 million a year

There are rules and regulations that protect employees' physical safety while at work, but psychological safety often doesn't get the same level of attention.   

Eighty-four percent of employees agreed that psychological safety — which is defined as a belief that no one will be punished or humiliated for speaking up with ideas, questions, concerns or mistakes — was the quality they valued most out of the workplace, according to a 2023 study conducted by Oyster HR. It beat out both higher pay and flexible work, making it a worthy investment for employers. 

"Perhaps the best way to describe the present state of psychological safety in the workplace is hopeful," says Bryan Stallings, chief evangelist at collaboration platform, Lucid. "Of course, people's perceptions about the consequences of taking interpersonal risks in the workplace do not shift overnight. This shift is an ongoing process that requires commitment at all levels of a company." 

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Ninety-three percent of executives report feeling mostly or completely psychologically safe at work, according to a 2023 study from publishing company Wiley, yet only 86% of individual contributors and managers feel the same, saying they feel less safe speaking up and less valued for their contributions. While the difference between the two perceptions may seem small, in this case every percentage point counts, according to Stallings. 

"Organizations that lack psychological safety incur tangible and intangible costs which can have significant implications for their overall performance, culture and bottom line," he says. "Some of the costs associated with a lack of psychological safety include decreased employee engagement, reduced creativity, failure to innovate, high turnover rates, decreased productivity, and legal and compliance risks." 

In a survey by Boston Consulting Group, only 3% of employee respondents who reported high levels of psychological safety said they were likely to quit their job within a year. In contrast, of those who put themselves in the category of lowest psychological safety, 12% said they were likely to leave their company in the same timeframe. The cost of that attrition, a survey from Emerald Insight Publishing found, could cost a large corporation of around 100,000 employees upward of $15 million per year. 

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A good example of the consequences of poor psychological safety can be found in recent news about billion dollar aircraft manufacturer Boeing, whose CEO announced his plans to step down at the end of 2024 amid allegations that the company prioritized business results over flight safety. As the investigation progressed, it was revealed that many employees had significant safety concerns over the course of the last few years, but they didn't feel safe voicing them due to fear of retaliation. 

"If team members fear reprisals, they hesitate to speak up and voice concerns when there is an issue," Stallings says. "As a result the issue goes unaddressed or the inefficient practices persist, and time and resources continue to go wasted. This can yield significant implications for overall performance." 

For Boeing, the organization narrowed its fourth-quarter loss to around $30 million and refused to disclose their fiscal forecast for 2024 in their financial disclosures to media, a potential indication that they estimate losses to to grow, and a cautionary tale to companies that don't already prioritize culture. Employers should make sure their focus on psychological safety is continuous, including regular training for their workforce, Stallings says.

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"There is no quick fix here, and making real progress means going beyond curating generic content or a one-time event," he says. "A holistic psychological safety development program, tailored to the unique context and culture of the workplace, can significantly improve employee understanding and retention." 

The first thing employers should be doing is explicitly outlining psychological safety as a core value. Then, Stallings says, management has to back up that sentiment by leading by example, which means practicing inclusive leadership and demonstrating behaviors that foster psychological safety, like being open to feedback and valuing diverse perspectives. It's also important to provide clear expectations by establishing transparent guidelines and norms for communication, conflict resolution and risk-taking within their teams.

"Employees who operate in a psychologically safe environment feel comfortable taking risks, [and] if we didn't take risks, some of the biggest and largest companies we all know and love would not be here today," Stallings says. "It is critical that executives don't stop until psychological safety becomes a lived reality for every team member."