AnalysisAnxiety-free working environment

How psychological safety can benefit companies

In financial institutions in particular, strict management structures based on seniority often still prevail, making transparency, creativity and an open exchange of opinions difficult. Consultants ZEB explain the benefits of psychological security.

How psychological safety can benefit companies

If employees hold back on ideas, suggestions for improvement and their potential in general, financial organisations not only lose knowledge, innovative ability and potential earnings. They also risk losing these employees altogether, due to a lack of psychological security.

This can be summarised as fear-free interaction. Where open and respectful behaviour prevails, employees dare to express their opinions, ask questions and admit mistakes, confident that none of this will be used against them. Information is exchanged and not held back, and conflicts are resolved constructively – at least the theory goes.

In an interview with Börsen-Zeitung, Christian von Schirach, Senior Manager at consultancy firm ZEB, recalls a case that he views as a prime example of a lack of psychological security. As an external consultant, he accompanied a project team at a large insurance company that was dealing with the topic of agile working. He describes the half-dozen or so employees as highly motivated and resourceful.

However, despite their creativity, enthusiasm and wealth of ideas, this team did not dare to make suggestions for improvement outside of the protected project space. „The fear of the managers was so great that the team only really brought forward a fraction of the possibilities,“ says von Schirach. None of that team is still working at the company. They all resigned within 18 months of the project.

The fear of the managers was so great that the team only really brought forward a fraction of the possibilities.

Christian von Schirach, Senior Manager ZEB

Success factors fizzle out

According to the Senior Manager, what happened in this particular company is not an isolated case: In the financial sector, which tends to be characterised by seniority, conservative mindsets and structures, such fears are more likely to flourish than in a working environment with fewer hierarchies. According to Schirach and his colleague, Senior Manager Christina Block, psychological security is the basis for the performance of any company. Without it, other success factors such as quality, structure, a sense of responsibility and motivation would fall flat.

We now know that the best performing organisations are those with a high level of psychological security.

Christina Block, Senior Manager ZEB

Companies might try to establish a high-performance organisation by means of processes, a sense of purpose, and clarity of objectives. „But something was always missing, and nobody really understood what the problem was,“ Block reports from her experience. „We now know that the best-performing organizations are those with a high level of psychological security– where good collaboration, satisfaction and motivation are paramount.“

In her opinion, the often-cited purpose, the meaning of work, is far from sufficient to satisfy, attract and retain employees, and to form companies into efficient and practical units. Rather, it is about questions such as: „How do I deal with conflicts? Am I learning in the organization? Am I having fun with my colleagues? Do I enjoy my job? Am I motivated? Can I develop further? All of this is reflected in psychological security.“

If I'm dealing with an organisation that is completely overstretched, I can't just throw new issues in there, because I'm just adding to the problem.

Christina Block, Senior Manager ZEB

In Block's experience, this is generally difficult to recognise. She reports a case in which employees at a bank felt overworked. Interviews revealed that psychological safety was also not in good shape. While the management's original aim was to promote the ability to change, willingness to learn and personal development among the workforce, this ultimately took a back seat. „If I'm dealing with an organization that is completely overstretched, I can't just throw new issues in there, because I'm just adding to the problem,“ says Block. „But nobody dared to say that. Because a feel good culture typical of regional banks prevailed.“

High workload

Finally, sticking points that were on everyone's mind but that no one had dared to address initially, such as the high workload, were openly discussed with the approval of the Executive Board. „That was difficult, but for many, it was a real relief,“ recalls Block.

A doesn't know what B is doing. C knows, but doesn't say because he's afraid of getting a slap on the wrist or because it's not his area of responsibility.

Christina Block, Senior Manager ZEB

She notes that people usually feel relief when unsatisfactory work situations are finally discussed. „Sometimes four people are doing the same thing, and nobody knows about each other. Or they are afraid of the manager. These are not very specific things, we encounter them all the time. A doesn't know what B is doing. C knows, but doesn't say because he's afraid of getting a slap on the wrist or because it's not his area of responsibility.“

Overcoming resistance

To avoid falling into the old rut, processes need to be stabilised and institutionalised. Employees talk in fixed formats about everything that is bothering them and seems unfair to them, and the results of surveys are discussed with managers right up to the Management Board. Resistance had to be overcome, says Block. „That also hurt.“ It is not about naming culprits or putting pressure on managers but about improving things in the team approach.

The members of the Executive Board are also required to complete tasks, or throw them in the bin. And that's what they do. Situations sometimes arise that previously seemed unthinkable. Bosses admit to being overloaded and ask for support. „And suddenly we're in support mode,“ reports Block. „This creates a completely different kind of collaboration.“

As von Schirach emphasises: „We don't assess people, we interpret and discuss results with the managers. And we try to be as objective as possible by using benchmarks.“

We calculate an average of 46,000 euros in staff replacement costs for financial services providers.

Christian von Schirach, Senior Manager ZEB

A working environment in which psychological safety is guaranteed also pays off in business terms. Less fluctuation means less expenditure. „We calculate an average of 46,000 euros in staff replacement costs for financial services providers,“ says von Schirach. With a fluctuation rate of 1% in a workforce of 3,000 people, this alone would add up to almost 1.4 million euros per year. Above all, however, such a working environment produces happier, more creative and more efficient employees and, according to Block, helps to channel capacities in the right direction, instead of into nonsensical projects.

Christian von Schirach, Senior Manager ZEB
Christina Block, Senior Managerin ZEB