The ROI of Trust: How Psychological Safety Creates Thriving Teams

Psychological safety. The term is frequently tossed around but not always fully understood.

Coined by Harvard Business School professor Amy Edmondson, psychological safety refers to a shared belief held by members of a team that it is safe to take interpersonal risks. This means that team members feel comfortable expressing their thoughts, asking questions, and admitting mistakes without fear of ridicule or retribution.

Psychological safety is the foundation upon which a trusting team is built. Without it, talented individuals may hold back their best ideas, leading to missed opportunities and subpar performance.

Investing in psychological safety isn’t just a feel-good practice, it delivers a measurable return on investment (ROI) by cultivating high-performing teams.

Let’s explore how.

Understanding Psychological Safety

We’ve defined psychological safety as a shared belief within a team that it’s safe to take interpersonal risks. This translates to an environment where team members feel comfortable expressing their ideas and concerns openly, asking questions freely, and even admitting mistakes without fear of negative repercussions.

It’s the feeling of being able to speak up without the threat of being shut down, ridiculed, or punished. When psychological safety is established, there are no eye rolls or dismissals. There is only openness to new ideas, constructive feedback, and collaborative conversation.

This sense of security and openness is crucial. It empowers team members to step outside their comfort zones, experiment with new ideas, and learn from inevitable missteps. When psychological safety is present, team members are more likely to share diverse perspectives, leading to more creative solutions and better decision-making.

The ROI of Psychological Safety: From Trust to Thriving Teams

The benefits of promoting psychological safety go far beyond creating a pleasant work environment. It delivers a tangible return on investment by nurturing teams that outperform their counterparts.

Let’s explore the essential areas where psychological safety translates into business success:

1. Psychological Safety Leads to Better Outcomes 

Psychological safety acts as a catalyst for innovation by encouraging diverse perspectives and creative problem-solving.

Amy Edmondson’s 1999 studies on clinical teams revealed that teams with a higher number of good outcomes actually made more mistakes than teams with fewer good outcomes. The key difference was that the high-performing teams were more open about admitting their mistakes, while the lower-performing teams tended to hide theirs. This critical finding led to the development of the concept of psychological safety as we understand it today.

2. Psychological Safety Improves Collaboration

Let’s take a look at a compelling case study from Google’s Project Aristotle, a multi-year endeavor to identify the key factors behind successful teams. Their research, which involved studying hundreds of Google teams, concluded that psychological safety was the most critical factor in determining team success.

Here’s what they discovered in regards to psychological safety and collaboration:

  • Equal Turn-Taking in Conversations: Teams with high psychological safety exhibited “equality in distribution of conversational turn-taking.” In these teams, everyone had a chance to speak, and contributions were balanced. This ensured that all voices were heard and valued, fostering a sense of inclusion and collaboration.
  • High Social Sensitivity: Successful teams displayed high “average social sensitivity,” meaning team members were adept at interpreting each other’s feelings and nonverbal cues. This empathy allowed team members to support one another effectively, enhancing teamwork and cohesion.
  • Open Admission of Mistakes: Teams with high psychological safety were more likely to admit mistakes and ask for help. This openness led to faster issue identification and collaborative problem-solving, ultimately driving innovation and performance.

3. Psychological Safety Improves Employee Retention

Psychological safety offers a powerful solution to high turnover by fostering a work environment that keeps employees engaged and reduces feelings of isolation. Employees feel valued for their contributions and supported by their team, leading to a stronger sense of belonging.

This translates into lower turnover rates, a significant cost factor for businesses. A study by Gallup found that the cost of replacing a single employee can range from one-half to twice their annual salary. By fostering psychological safety, companies can retain valuable talent, reducing these replacement costs and ensuring continuity of knowledge and expertise.

Here’s how psychological safety strengthens employee loyalty:

  • Connection to Culture: Studies show that organizations that successfully connect employees to their culture can increase employee performance by up to 37% and retention by up to 36% Psychological safety is an essential factor in fostering a strong organizational culture. It not only promotes a sense of belonging and purpose among employees but also significantly contributes to increasing employee performance by up to 37% and retention by up to 36%. Building and maintaining psychological safety within the workplace is therefore crucial for enhancing the connection between employees and the organization. . Psychological safety plays a crucial role in building a strong culture. It fosters a sense of belonging and purpose, further strengthening the connection between employees and the organization.
  • Stress Reduction: Fear of judgment and blame can be a major stressor. Psychological safety diminishes this fear. Employees feel comfortable expressing concerns and asking for help, leading to lower stress levels and improved well-being. A happier, healthier workforce translates to lower absenteeism rates and a more productive environment.
  • Learning and Growth: Psychological safety encourages a growth mindset. Employees feel comfortable taking risks and learning from mistakes, knowing they won’t be punished for failures. This fosters a culture of continuous learning and development, which keeps employees engaged and motivated. Employees who feel they have opportunities for growth are more likely to stay with the company.

Psychological safety doesn’t just feel good; it’s good for business. By cultivating trust and open communication, it unlocks a wellspring of innovation, collaboration, and employee retention – all critical ingredients for a thriving team and a successful organization.

Building the Foundation: Cultivating Psychological Safety

Psychological safety is a continuous effort that requires commitment from leadership and team members alike.

Here’s how leaders can cultivate an environment of psychological safety within their teams:

Shift Your Leadership Mindset:

Leaders set the tone. By prioritizing psychological safety, you signal its importance to the entire team. Here are some actionable steps:

  • Embrace Active Listening: Pay close attention to what team members are saying, both verbally and nonverbally. Ask clarifying questions and demonstrate genuine interest in their ideas and concerns.
  • Reframe Mistakes as Learning Opportunities: When mistakes occur, view them as opportunities for growth. Encourage open discussion about what went wrong and how to prevent it in the future.
  • Lead by Example: Be vulnerable and transparent yourself. Admit your own mistakes and openly discuss what you’ve learned from them. This shows your team it’s safe to do the same.

Promote Open Communication:

Psychological safety thrives on open dialogue and the free flow of ideas. Encourage open communication within your team through:

  • Regular Team Meetings: Schedule regular team meetings where everyone feels comfortable sharing their thoughts and concerns.
  • Embrace Multiple Communication Channels: Offer various avenues for communication, including one-on-one meetings, online collaboration tools, and even anonymous feedback channels. This caters to different communication styles and allows team members to feel comfortable expressing themselves.
  • Encourage Questions: Leaders should actively encourage questions from team members. This demonstrates openness to different perspectives and creates a learning environment.

Celebrate Learning and Growth:

Psychological safety isn’t just about feeling comfortable speaking up; it’s also about feeling safe to take risks and learn from mistakes. Leaders can promote this by celebrating learning and growth:

  • Recognize Improvement: Acknowledge the progress your team members make, not just the end result.
  • Celebrate “Aha” Moments: Highlight moments of learning and discovery within the team, big or small. This can be done through team meetings, company newsletters, or even a simple shout-out during a team huddle.

By implementing these strategies, leaders can build a psychologically safe environment where team members feel comfortable taking risks, sharing ideas, and learning from mistakes. This, in turn, allows a team to perform at its highest potential, leading to innovation, collaboration, and ultimately, a thriving organization.

Why Psychological Safety Matters Now More Than Ever

The future of work belongs to those who prioritize trust and psychological safety. This isn’t just about creating a feel-good environment; it’s a strategic advantage that translates into a happier, more engaged workforce and a significant return on investment.

Reduced turnover, improved performance, and fostered innovation – these are the hallmarks of psychologically safe teams. Organizations that prioritize this will be well-positioned to attract and retain top talent, navigate future challenges, and thrive.

Let Arden Coaching be your partner in building a thriving organization. 

At Arden Coaching, we specialize in empowering leaders to build high-performing, psychologically safe teams. Our comprehensive suite of services, including executive coaching, our Arden Leadership Academy, and team dynamics workshops, can equip you with the tools and strategies you need to cultivate a prosperous work environment.

Let’s create a future of work built on trust, together. Contact Arden Coaching today!