In our ongoing exploration of building Dynamic Organizations for an ever-evolving world, we’ve touched on the importance of Vision and Purpose as the guiding stars of resilient companies (see overview article here: Detail | Santiago – Top-Management Beratung für Strategie und Organisation (santiago-advisors.com); see article on Vision and Purpose here: Detail | Santiago – Top-Management Beratung für Strategie und Organisation (santiago-advisors.com)). Now, let's delve into a facet that underpins the success of Dynamic Organizations and is especially critical in the innovation age – Psychological Safety. 

Psychological Safety’s Crucial Role for Organizations 

Psychological Safety, once a term known to only a select few, is now echoing through the corridors of forward-thinking organizations. In a world where change is the constant and innovation is the lifeline, creating an environment where employees feel safe to express their ideas, voice concerns, and take calculated risks is not just beneficial—it's essential. 

In essence, Psychological Safety is the belief that one can speak up without fear of retaliation or ridicule. It’s the comfort of knowing that your opinions are valued and that your contribution matters. It’s an environment where every member of the team, from entry-level to top executives, feels empowered to share their thoughts and take initiatives. 

By now a large number of studies have been able to prove various positive effects of Psychological Safety. Probably the best known study on this topic is the google re:work study, which found Psychological Safety emerged as the most decisive factor of the google-teams studied. Psychological Safety not only determines success. It has a positive influence on the process quality of a company¹ as well as a particularly strong influence on employee satisfaction and thus ultimately on fluctuation². It has even been proven that Psychological Safety helps to significantly reduce fluctuation of women in male-dominated professions³. Just to name some of the benefits of a Psychological Safe environment. 

Anyone who wants to delve deeper into the subject is advised to start their research with Amy C. Edmondson and pay attention to the researchers who quoted her. You will quickly come to the conclusion that Psychological Safety is indispensable. 

Prerequisite for Innovation 

What is nice to have in all organizations is success critical in innovation driven organizations. For pharmaceutical companies in particular, the pressure to innovate is already enormous, with the trend continuing to rise. On the one hand, innovations mean for researchers that they can help patients better, faster, with fewer side effects, or at all. On the other hand, the pressure to innovate increases, because the competition is enormous. In some cases, a few weeks can decide whether a new drug is brought to market by the own company or by the competitors. As hard as it sounds, the 250 billion U.S. dollars that pharmaceutical companies spend worldwide on research and development within one year⁴ must be refinanced. Every company is striving to become faster and more innovative, which for all of them means that they must not lose touch. 

These much-needed innovations happen significantly more often in the work environment that provides Psychologically Safety. That is because innovation demands creative thinking, a willingness to challenge the status quo, and the courage to explore uncharted territories. All of this becomes possible when individuals feel safe, both emotionally and professionally. 

In the realm of innovation, the need for Psychological Safety takes center stage. Teams that feel safe to propose groundbreaking ideas and address harsh realities are more likely to innovate. On the other hand, a lack of Psychological Safety leads to a disconnect from the reality of the environment, employees do not dare to contradict or correct their managers. Given the inherent complexity of innovation processes and the dynamic nature of the market, lack of psychologically safety creates a slow, stiff and risk averse company. 

Leadership Bottleneck 

A very similar picture is currently being seen in companies all over the world. Overheated managers with bursting schedules, additional tasks on the table and many unanswered emails from employees asking for feedback on this or that. This shows that the speed of today's processes simply does not allow us to think and act in old roles. Even if we leave aside the advantages of Psychological Safety, it is not possible to do without it for reasons of efficiency alone. Let me draw a picture of this: 

The manager who maintains the "old" leadership style fosters an environment that is more competitive and command and control oriented. In this environment with corresponding learning experiences, the employees of this manager will sooner or later all fall into hedging behavior. Every result and every intermediate result are best coordinated with the manager several times, and before that they involve their best three work colleagues so that these confirm that he can now coordinate this result with the manager. The manager, who wants to do justice to his role, always finds something that can be done better or differently and so the employees gradually stop thinking - "The boss will tell me how it is right anyway". After some time, all the manager's employees have gotten used to how the hare runs. The manager is involved in every decision, no matter how small. The manager feels important, but no longer has time to take care of his or her actual tasks and has difficulty keeping up with the employees' requests. In the end, everything slows down and finally comes to a standstill. 

The role of leadership must undergo a profound transformation, and in some companies it has already undergone it. The traditional command-and-control style of leadership is no longer effective. Instead, leaders need to foster an environment of openness, trust, and psychological safety. 

Failure to prioritize psychological safety can lead to a leadership bottleneck. In an environment where employees feel constrained or reluctant to share their insights, decision-making processes slow down and the organization's ability to adapt to change is compromised. The consequences are far-reaching - missed opportunities, increased risk aversion and stagnation. 

Cultivating Psychological Safety: Practical Steps 

So, how can organizations cultivate Psychological Safety? 

Leadership Modeling: It begins with leadership. Executives must lead by example, demonstrating vulnerability and openness. When leaders admit their mistakes, seek feedback, and encourage others to voice their opinions, they set the tone for Psychological Safety. 

Effective Communication: Establish clear channels for communication, where employees can comfortably express their thoughts. Regular feedback sessions, town halls, or suggestion boxes can be effective tools. 

Feedback Culture: Encourage a culture of constructive feedback. Emphasize that feedback is not criticism but an avenue for growth. When employees know, their input is used to improve processes or products, they're more likely to speak up. 

Reward Risk-Taking: Recognize and reward innovative thinking and calculated risk-taking. Celebrate failures as opportunities to learn and grow, reinforcing the idea that experimentation is valued. 

Training and Education: Invest in training programs that build emotional intelligence, active listening skills, and conflict resolution capabilities. These skills foster a more empathetic and understanding workplace. 

The take aways 

Psychological Safety is the invisible thread weaving through the fabric of Dynamic Organizations. In the innovation era, it's the catalyst that propels ideas into actions and actions into progress. To navigate the modern world and avoid the leadership bottleneck, organizations must prioritize and nurture Psychological Safety. It's not just a competitive advantage; it's a survival imperative. 

Building psychological safety always starts with the leadership of the company and setting the right individual framework for this endeavor. In addition, patience is a must; building trust and changing a culture only happens over time. But it will be worth it. 

In the coming weeks, stay tuned as we delve deeper into each of the nine factors that shape the Dynamic Organizations of today and tomorrow. We'll provide practical insights, advantages, and disadvantages to empower you on your journey to building a resilient and innovative organization. 

As always, we invite you to reach out to Santiago to explore our expertise and references in this area. 

¹ Moormann, J. & Grau, C. (2014). Unternehmenskultur und Prozessqualität. Die Bank. (113) 45-47.

² Sobaih, A.E.E., Gharbi, H. & Abu Elnasr, A.E. (2022). Do You Feel Safe here? The Role of Psychological Safety in the Relationship between Transformational Leadership and Turnover Intention Amid COVID-19 Pandemic. J. Risk Financial Management.

³ Halliday, C.S., Paustian-Underdahl, S.C., Stride, C. & Zhang, H. (2022). Retaining Women in Male-Dominated Occupations across Cultures: The Role of Supervisor Support and Psychological Safety. Human Performance, (35:3-4), 156-177.

⁴ Evaluate (2022). Weltweite Forschungs- und Entwicklungsausgaben führender Pharmaunternehmen in den Jahren von 2014 bis 2028 (in Milliarden US-Dollar). In Statista. Zugriff am 29. September 2023.