Psychological Safety Is More Important Than Employee Engagement

Transcript

0:00

Junior: Employee engagement numbers aren’t moving because we’re neglecting our managers. That’s the premise of today’s episode on the leader factor. Welcome back everybody. I’m Junior here with my co-host Dr. Tim Clark. Good to be with you.

0:00

Tim Clark: Hey, that’s quite a statement, quite a hypothesis, quite a premise. Are you prepared to defend that?

0:00

Junior: There’s a lot of data. It’s going to be fairly obvious what the current state of affairs is. It’s going to be a little bit less obvious what we might prescribe as the intervention. And that’s going to get into psychological safety, particularly stage four. So if you’re familiar with the four stages of psychological safety, Dr. Clark’s the author, the second edition is out. And we’re going to be talking about the relationship between employee engagement and the very particular stage four as it relates to managers, and even more specifically senior managers. So we’re going to get under a microscope today and talk a little bit about the cultural implications of psychological safety and their effect on engagement.

0:01

Tim Clark: So let’s jump into the data to kind of set the stage. Let’s do it.

0:01

Junior: US engagement was 31% in 2025.

0:01

Tim Clark: That’s overall.

0:01

Junior: Overall. 31% again in 2026. Yet manager engagement dropped almost 10%. It dropped 9% to 22% overall. So people leaders as a cohort are showing engagement that’s almost

0:01

Tim Clark: 10% less than the average at almost 10% drop over a 12 month period. So that’s that’s a precipitous fall. It is at the same time that the rest of the population is steady level. Pretty stable, right? Yeah. So something is happening right there. Yeah. Because that population is in a steep decline at the very same time that everybody else is level. So we’re going to get into why that that population in particular

0:02

Junior: is suffering a little bit. And safety is the upstream variable, particularly psychological safety. And as we’ve seen time and time again, when organizations come to us for help with their engagement data, they’ve been working on it. They’ve been working very hard on it. They have been doing this for decades, but these numbers aren’t moving. We’ve flatlined and it’s mysterious to many people as to why if we’ve been working so hard to move these metrics, why aren’t they moving? And our argument is that engagement is a lag indicator. It’s a thermometer for culture, if you will. And we’ve been trying to hit the thermometer directly to try to get it to go up. But we haven’t been focusing on the behavioral antecedents that are going to be causally affecting the actual engagement.

0:03

Tim Clark: So Junior, what you’re saying is the thermometer doesn’t fix the weather? No, it does not. I think you said that. Yeah.

0:03

Junior: So psychological safety, what do we mean by psychological safety? We mean a culture of rewarded vulnerability. The four stages are inclusion, learner, contributor, and challenger safety. Psychological safety lives and dies across those four stages. And that’s its causal mechanism is rewarding vulnerability, which is why we define it that way. So employee engagement, what do we mean by employee engagement? The emotional commitment, connection, and motivation an employee feels toward their work, team, and organization. So just laying out some terms so that we

0:03

Tim Clark: know what we’re talking about as we dive in. I’d also include contribution in that. Employee engagement is multi-dimensional. And it fuses together these aspects of connection and commitment and contribution. And we’re supportive of measuring it. So carry on with your annual or biannual employee engagement surveys. That’s fine. But as Junior said, we have to remember that you’re measuring a lag indicator. And it’s an important measure because it summarizes a whole lot of information. But you don’t fix it there. You have to go upstream. So we’ll talk more about that. So let’s share a little bit more data.

0:04

Junior: I’m not sure what non-cash rewards were this last year. The last measurement I have is $22.9 billion, which is up 27% across a two-year period. And so if we look at non-cash rewards as a mechanism for increasing employee engagement, it’s not working. It’s not causal. So something else has to be going on. Many people first look there. They look at the hygiene factors. And see if we can pull some of those to increase employee engagement.

0:05

Tim Clark: Yeah. We talk about this a lot, Junior. So if across the board we’ve plateaued out and we’ve hit a wall, and I want you to, for you viewers, think about your own organization and your employee engagement numbers. And if you’ve reached a point of diminishing returns, what do you do? What are most organizations doing? They’re retreating to gimmicks. Contests, incentives, perks, and things that are temporary. They’re very, very temporary. And you might get a blip, but then you go back to baseline. And so it’s a temporary—you’re just rearranging furniture. You’re really not doing anything fundamental. And so just ask yourself and take inventory of what you’ve done over the last while. What is the nature of your activities? Is there gimmickry in it? Is it temporary? Are there rewards tied to it? Because you’re going to go back to baseline. So you’re going to revert back to baseline. That’s what most organizations do.

0:06

Junior: Well, let’s talk about baseline. So why is this a relevant conversation today? Employee engagement has been talked about a lot. We’ve talked about engagement historically and its relationship to psych safety, but the environment today is a little bit different. And so if you look at some of the cultural chatter in the previous five-year period, you have a lot of content around thriving at work. You have a lot of content about becoming your best self. It’s very optimistic. It’s very high ceiling. It’s very bright. And we’ve really seen a lot of that go away over the last 24 months.

0:07

Tim Clark: Not reading too much about self-actualization lately.

0:07

Junior: No, we’re not. And so one of the arguments that we’ll make pretty early here is that we’ve moved away from thrive as—we’ll call it an HR aim, which is often the lens through which we’re approaching this, and to a survive frame of mind. Because of the dynamism of the environment, it’s been so rocky for organizations that they’re moving away from how do we create an environment in which people can thrive and how do we just make it to the next quarter without reducing headcount any more than we already have? How do we keep morale at least above level?

0:08

Tim Clark: And do you think that that’s mainly attributable to AI? Oh, yeah. Yeah, for sure. And then so then in the foreseeable future, are HR leaders putting up any other aspiration? I don’t see one.

0:08

Junior: No. And I’ll explain why I agree with Tim’s statement so quickly. The dynamism of the environment has increased, sure. But it’s the force of commoditization that’s really pressing on organizations. And that’s the fear mechanism that’s really entered the playing field. As commoditization has increased, people’s engagement has decreased. They feel personal threat way more than they have in recent years. And they’re also more geared toward managing their personal risk than managing risk for the institution. And so there’s this every person for themselves mentality that’s really affecting engagement. And how do we know this? We see this firsthand because of the organizations that approach us with engagement data. They may have a psychological safety item in their engagement survey, and the scores are low. And they come to us and say, “Hey, what’s going on here?” And that’s our entry point where we dive in and start to unpack.

0:09

Tim Clark: And help them move upstream and do something more than just tinkering at the margins, which is what basically most organizations seem to be doing at this point.

0:09

Junior: So let’s talk about managers. The manager engagement fell from 31 to 22, fell nine points. That’s Gallup’s global world poll. And individual contributors actually ticked up, which is kind of interesting. So the managers are still three points ahead than individual contributors. But the direction of the management curve is going the wrong way. So the span of control. So how many direct reports does the average manager have? The mean is 12.1 direct reports in 2025.

0:10

Tim Clark: I don’t know that it’s ever been higher than that.

0:10

Junior: No, I don’t know the answer to that. I don’t think so. It’s up from 10.9. And that’s US only. Gallup’s median held at five or six globally. But in the US, 12.1.

0:10

Tim Clark: Oh, that’s a lot of people to lead and coach and be responsible for.

0:10

Junior: As direct reports, I mean, this is not people underneath you in the whole cascade, right? This is your direct reports. 12.1. How can you possibly manage 12.1 direct reports really well? So global decline, there are fewer layers. There are more reports and there’s the same coaching expectation. So what happens if I take your direct reports from eight to 10 or 10 to 12 or two to seven, what happens mechanically for you as a leader?

0:11

Tim Clark: I have so much more to do, especially when it comes to coaching. So that burden has increased in a very, very significant way. If I’m a conscientious manager and I realize that I’ve got to stay close to my people, I’ve got to coach them up, that’s a big burden.

0:11

Junior: We’ve talked a lot about the execution cost decreasing with better and better AI tooling. But this is an area that personally I haven’t seen the needle move a whole lot, is in my ability to coach my own direct reports with the advent of AI. I have systems that are augmented with AI, but I can’t augment or automate my coaching one-on-one with my direct reports.

0:11

Tim Clark: Because it’s irreducibly human. That’s right. It’s part of your role that you cannot shift, delegate, transfer over to AI. It’s in the own bucket. You may be able to transfer some of it into the augment bucket in terms of capturing information and maybe helping you that way, but that’s about it. You certainly can’t automate it.

0:12

Junior: So let’s say I have five direct reports and I have a weekly one-on-one with each. Let’s say those run 30 to 45 minutes, just the conversation itself. And let’s talk just about the conversation. I can’t automate that conversation. In theory, I could. The outcome is going to be poor. And that’s a defensible point. It shouldn’t require a very sophisticated defense. You will probably feel better coached and be better coached if I spend my actual time with you, than if I send some bot to Chase After

0:12

Tim Clark: You to remind you about some framework that we talked about last week. And Junior, I just don’t think people want a synthetic experience. They want a full sensory human experience with a manager, with a human being. Yep.

0:13

Junior: So here’s October of last year from HBR. Middle managers score the lowest psychological safety in the organization. That’s interesting. So if we’re looking at the correlation between psychological safety and engagement, we’re seeing one here. Again, 72.7 for the C-suite, 72.2 for the front line.

0:13

Tim Clark: That’s pretty interesting. It is.

0:13

Junior: And then in the same data, the managers report more stress. So we see that they’re feeling increasingly stressed. They have more direct reports. We know that that’s probably attributable. Some of the stress is attributable to that increase. Their psychological safety is the lowest and their engagement is the lowest. Why do you think this is happening? Do you have any hypotheses as to why this middle management layer is being

0:14

Tim Clark: neglected by senior leadership? Well, I think all of those forces that are acting upon them, Junior, which you just mentioned, we have to understand that middle managers, by virtue of their position, are being squeezed. They’re in the middle of the sandwich. They’ve got downward pressure from the top of the organization. They’re being given directives. There’s an enormous amount of pressure. So the top of the organization pressurizes the organization. It flows down to them. And then from—and they’re in the middle. And then from the bottom of the organization, there’s a different kind of pressure, which is I need to respond to the needs of my people. I need to be able to represent them. I need to be able to coach them. I need to be able to develop them. I need to be able to hold them accountable. So they have all of these responsibilities that come—and needs coming from the bottom, pressure from the top, they’re squeezed in the middle. Now, that’s always been true if you’re a middle manager. So there’s no change in that. But these forces are being magnified and accentuated in an environment of AI where things are moving faster. But then again, just the mere fact that you’ve increased their span of control, that’s just quantifiably and objectively a bigger burden to carry in a dynamic environment. So we start with the nature of being a middle manager, and then we add to it. And I think that’s what’s happening.

0:15

Junior: I’ll add another hypothesis, which is that we’re seeing more requirement, more instance of player coaches. And so the execution expectations on middle managers is increasing, that they

0:16

Tim Clark: not be just pure management,

0:16

Junior: but that they have other skills that they use to contribute directly. We see this in our own organization where we have pretty high execution requirements of managers.

0:16

Tim Clark: True.

0:16

Junior: And that player coach role is difficult. So you’re asking them to contribute meaningfully—

0:16

Tim Clark: As an individual contributor. As an IC.

0:16

Junior: You’re asking them to manage more people. So scope has increased astronomically. And I don’t think that there’s been an explicit movement from senior leadership to equip that population with the tooling and the leadership skill and training necessary to adapt to it, to absorb all of it. So if we assume that it’s doable, then the gap is going to be skill.

0:17

Tim Clark: And I— I agree with that. Just take the case of AI. What guidance and direction are most middle managers given? Right now, if we look across organizations— Figure it out is exactly right. That’s what’s happening. And so they’re trying desperately to figure it out, but they have precious little guidance right now. Yeah.

0:17

Junior: So let’s talk about the causal chain, psychological safety and employee engagement. The causal chain that most people intuit is wrong. At least maybe not even intuit, but behaviorally, if we look at their actions and we try to reverse engineer what we think they think the causal chain is, we’re going to see that it’s broken. Because we’re investing in events.

0:17

Tim Clark: We’re investing in activities. We’re investing in non-cash comp. We’re investing in all of these hygiene factors and things that aren’t moving the needle.

0:18

Junior: And so if we’re not creating an environment of psychological safety for those leaders, we can start to see what’s going to happen in terms of the engagement. So we’re squeezing them and we’re saying, you need to execute in this new environment, and it’s going to be up to you. You’re going to have to just figure it out. If they don’t feel, or maybe I can pose this as a question, what percentage of managers do you think feel like they can raise their hand and ask for help? What percentage of managers can raise their hand and say, hey, this is a pretty foggy environment. Can I get some additional support? I’m not quite sure how this tool works. This is a fundamental re-scoping of what I’ve done for the last 20 years. No, they don’t feel the safety to raise their hand and do that. We know that because we have the challenger safety data for those cohorts in particular, and they don’t feel that way.

0:18

Tim Clark: Yeah, what percentage feels safe raising their hand or actually registering a contrary point of view, saying, hey, we need to take a different path, a different approach. I don’t think we’re doing this right, challenging the status quo, engaging in constructive dissent. That’s going even further, Jr., than raising your hand, but engaging in that active, constructive dissent that is so vital. Yeah.

0:19

Junior: So if you look at our data from PS Index, the gap between inclusion safety stage one and challenger safety stage four is over 30 points on a 100-point scale. And so that’s true across 99.5% of organizations. They follow that same pattern. And this, I would say, this population, it’s probably even more acute because what do you think they think about speaking up and asking some of those questions? Do they perceive that to be a rational choice, as we’ve been talking about in recent weeks, or as an act of courage? Right. That’s an act of courage for them.

0:20

Tim Clark: That’s true.

0:20

Junior: So let’s talk about modeling and rewarding vulnerability. So this is the causal mechanism by which psychological safety increases. And it’s something that we ask of all leaders. If middle managers aren’t doing this, then we can deduce more right more often than not that that’s not happening at senior levels of leadership. So maybe you could spend a moment on that and talk about modeling and rewarding vulnerability as a senior leader.

0:20

Tim Clark: Right. As a senior leader, your job is to create and establish the prevailing norms of the organization. You are the chief, you and the other senior leaders, you’re the chief cultural architects of the institution. Not HR. No. Did someone say HR? No. It’s never been HR. HR can never take on that responsibility. HR can assist. HR can support. HR can help us communicate and formulate and organize and perhaps bring resources. But that HR will never own that. Never ever. It is senior leadership’s job to establish the culture of the organization. They set the tone at the top. They model the way. And and then what so they’ve got to personify that they’ve got to embody that when you ask, what does a good job look like? Or what does this value look like? You have to be able to see it embodied in senior leadership. So that’s the modeling part. Their second responsibility is to reward that and others when they see that they need to be able to reward that consistently. So when a norm becomes established and then consistently rewarded, it becomes part of the culture. That’s how we embed the norms. So that is the senior leader’s job. It’s very interesting, Junior, that many, many senior leaders don’t have a very good understanding that this is embedded in their role to be a cultural architect, a senior cultural architect of the organization. But this is how they do it. This mechanism, this is the central mechanism of culture formation in all organizations model the behavior and then reward the behavior.

0:22

Junior: So the senior leader has to go first. We could infer from the data that that’s not happening in a lot of organizations. Do you think that it’s the opinion of most senior leaders that culture really is an HR responsibility? Is that why this isn’t happening?

0:22

Tim Clark: I think that’s a that’s a I think there’s a portion of them that thinks so. Like we can delegate that to HR.

0:22

Junior: That’s my question.

0:22

Tim Clark: Yeah, I think there’s I don’t know what the percentage is. I don’t know how to quantify that exactly. I think there’s a pretty sizable percentage that would say that, oh, HR, let’s take care of that. We’re going to delegate that responsibility to HR, which reflects a complete misunderstanding of culture formation and then the sustaining of a culture, right? The embedding of a culture. So I do think what percentage do you think it would be? Do you think it’s high?

0:23

Junior: I think it’s high because of what the data says. If engagement is low, psychological safety is low in middle management and we know that that’s a function of senior leadership and we know that something’s happening in senior leadership that’s causing that effect. And if we know that modeling and rewarding vulnerabilities, the mechanism by which we build psychological safety, by which we build culture, then we know that it’s not happening. I don’t think it’s a stretch to say that because of the engagement data we’re seeing, we know that senior leadership is not effectively modeling and rewarding vulnerability. So I think that there’s a paradigm shift that has to happen. Senior leaders need to understand that you cannot delegate culture formation to HR. They need to say, actually, that’s our responsibility. We need to create safety for the layers

0:24

Tim Clark: beneath us, especially in a time of dynamism and disruption.

0:24

Junior: If there is as much disruption as there is, if morale is doing what it’s doing, then we need to pay extra close attention to what we’re modeling and what we’re

0:24

Tim Clark: rewarding because it’s our responsibility

0:24

Junior: to create the environment. So I think that we can, the data bears out that that must be true. I can’t think of another reasonable alternative. It could be that it’s just hard, but I don’t think that that’s a practical explanation. Sure, the environment’s difficult. We’re being thrust into a position we’ve never been in before. We have to make sense of that and do something tomorrow. And I think that this is a reasonable path forward.

0:24

Tim Clark: I think there are a couple of skills, Junior, that are related here. When you deeply internalize the fact that you’re a chief cultural architect in your organization, you come to realize pretty quickly that there’s a couple of skills that you need to develop in order to fulfill that role. One is your powers of observation have to go to another level. You have to be, we say reading the room a lot, but you have to pay attention to group dynamics, interpersonal dynamics, and then the individual response patterns of people around you. Are they engaging in acts of vulnerability? Are they not? What are they doing? So you have to sensitize yourself to the cultural side of what’s happening wherever you are. It could be a formal meeting. It could be an informal conversation in the hallway. It doesn’t matter. So your powers of observation have to go to another level. Number two, so that’s outside of you, your powers of observation. The second skill is that your self-awareness has to go to another level. You have to be acutely aware and conscious of yourself, of your behavior, of your thinking, and the impact of that behavior on others. These are critical skills that have to be developed if you’re going to be an effective cultural architect. If you’re aloof, if you are culturally tone deaf, if you’re not paying attention as you’re interacting in all kinds of settings, you’re not going to get there. You’re not going to be able to fulfill that role very effectively. That’s a huge difference that I see in those that are effective. They really go to school. They’re students of observation. They’re students of their own self-awareness, and they’re constantly striving to improve those skills.

0:27

Junior: One of the things that comes to mind just as a language change, if you’re listening to this, let’s say you’re in HR, you’re in L&D, and you say to yourself, “Well, our leaders just aren’t

0:27

Tim Clark: doing a good job in culture.” Because of the causal chain that we’ve laid out, you could now say, “Our leaders probably aren’t doing a good job at modeling and rewarding vulnerability.” It’s really difficult to operationalize

0:27

Junior: culture if you don’t get behavioral. And so if you just say to somebody, “You just need to be better at culture. We just need to fix culture.”

0:27

Tim Clark: You take the average middle manager. If you’re on the receiving end of any kind of advice or coaching that sounds like that, you don’t know what to do typically. The reason I say that is because that’s often what people will poke at when they look at engagement numbers.

0:27

Junior: So they’ll say, “Well, it’s a cultural problem.”

0:27

Tim Clark: Go fix it.

0:27

Junior: Yeah, that’s still not enough. And so if we’re looking at engagement data and it’s not doing what we want, we can’t just say, “Fix culture.” So we have to go upstream. If we look at psychological safety, the mechanism is rewarding and modeling vulnerability. So A is B, B is C, A is C. We just got to go all the way back. So if we’re seeing those types of measurement outcomes that we’re not liking, then the highest upstream behavioral antecedent that we can point to is modeling and rewarding vulnerability. That’s a lot easier for me to come to you, explain that causal mechanism, and say, “Hey, what acts of vulnerability are people engaging in on your team?”

0:28

Tim Clark: Let me add one thought to that, Junior. We say modeling and rewarding vulnerability. The most important element of culture that the leader is responsible for is the norm. A norm is a pattern of shared behavior. So not only do you exhibit it, and you but we all exhibit this pattern of behavior. So it’s a pattern of shared behavior. That’s a norm. A leader is responsible to establish the prevailing norms. And so we talked about you’ve got to model that, and then you’ve got to reward that. But there’s another step that precedes even those two, which is you have to define that norm. Often norms are still, or we have values that we communicate in the organization. We have values, but those values have to be operationalized. They have to be turned into behaviors. And a lot of times, you can’t just give values to the organization or the team and say, “Go put these values into practice. Transfer, translate, convert these values into behaviors. Operationalize these values.” Most employees will struggle with that, and they need help and guidance. So there needs to be definition at the front end, and then you model, right? You’re showing the way. You show us what a good job looks like, and then we can do that because social learning is based on what? Observation. So everybody’s watching. And number two, imitation. We’re going to try to imitate what we see. So I just want to stress that definition part first.

0:30

Junior: I’ll give one example as we wrap up. There’s a book that I really like called What You Do Is Who You Are. It’s by Ben Horowitz. And he talks about translating values into behaviors. Let’s say that your organization has a value for fiscal responsibility or frugality. One of the ways that you might operationalize that is by saying, and this was one of the values translated in the book, if you can’t see the parking lot from your hotel room, you’re in the wrong hotel. And I love that idea of translating a value as esoteric as frugality. Like, what does that really mean when I’m booking travel to, oh, I know exactly what you mean, because now we have a norm, a behavior that’s attached to the value. And so if we can do that to all of our cultural aspirations, and then the outcomes will move, we’re convinced that if you want to get rid of that nine point decline in manager engagement, this is where you have to go. You have to get behavioral.

0:31

Tim Clark: So, Junior, I want to make a proposition that a manager, any manager, is an experienced designer. We don’t really frame it that way. No, we don’t. Tell me more. Well, think about the normal radius of an employee’s experience in an organization. They come to work every day. Who are they interacting with? Their team and their boss. Now, they may have some cross-functional exposure. They may be on some other teams that are cross-functional. But by and large, the container of their experience, the radius of their experience, is with their colleagues on the team and the manager. So the manager is very much in the business of designing that experience in that container, based on the radius of that person’s experience, professional experience, every day. Which is why we invest so much in training the managers to do this well, right? We don’t at all. But they are, and they need to understand this, they need that frame that they are experienced designers. What they do constitutes, defines, and constitutes above 90% of the experience that the members of their team will have. Okay, yeah, there’s a little, as I said, there’s a little bit of cross-functional experience and exposure, depending on your job. But by and large, your experience lives within that team. And the experience is designed either by design or by default by that manager. That’s what they do. It’s a big part of what they do. But are we talking in those terms? I don’t think so. No. Let me just mention, Junior, and this is what you just said. The psychologist Albert Bandura, who taught at Stanford for many years, he is the father of what we call social learning theory. And social learning theory helps us understand how cultures are passed down, how they’re transferred, how they’re perpetuated. And it goes back to this very simple two-part mechanism that people observe, and then they imitate. You can’t take – so let’s think about the artifacts that organizations use to capture, codify culture. So we create competency models. We write down our values. We document all of this stuff. We create other assets and artifacts to communicate that. We put these things on slides. We have town hall meetings, and we communicate it this way. We see this all the time. So the artifacts are nice, and they can be reinforcing mechanisms. They can help us remember and remind us. But ultimately, we have to see the value converted in the behavior of a leader, or it’s not real. And we never are able to lift that value off the page and give it behavioral qualities. The leader’s job is to do that very thing. So we can’t forget that. The leader is the one that lifts the value off the page, embodies it, personifies it, and then we can observe and imitate. That’s how it works.

0:35

Junior: Love it. That’s the causal mechanism. So if you’re trying to move those engagement numbers, you’ve got to look upstream. You’ve got to get behavioral. Hopefully, that was a valuable conversation. We’ve got more coming. So if you like today’s conversation, give us a like. Please share with a friend who you think might also find it valuable. Follow us, and we’ll see you in the next episode. Take care, everybody. Bye-bye.