(Pt.4) The Impact of Psychological Safety on Engagement and Retention

‍0:00:02.1 Producer: Welcome back, Culture by Design listeners. It's Freddy, one of the producers of the podcast, and today is part four on our five-part series on what's causing demand for psychological safety. Today's episode will focus on the impact of psychological safety on engagement and retention time, junior will share a lot of stats and data in this episode on a topic that we could probably do an entire series on... I'm confident you'll enjoy it. Speaking of impactful data, you can now go to leader factor dot com and request a free pilot survey to measure your team's level of psychological safety across the four stages, really include links to that survey and all of the data in this episode. Show notes at leaderfactor.com/podcast. Thanks again for listening and enjoy today's episode on the impact of psychological safety on and retention.

‍

0:00:58.0 Junior: Welcome back, everyone to culture by design. I'm here with Dr. Tim Clark, and today we're going to be discussing engagement and retention as a driver for psychological safety. Tim, how are you? How are things.

‍

0:01:06.5 Tim: Doing? Great, happy new year.

‍

0:01:08.5 Junior: Happy New Year. We're recording this in the new year, it may be a few weeks until you all hear it, but it's a relatively new year for us, and Happy New Year to all of you, and welcome back to the podcast, New Year, we're about 40-some odd episodes in and it's been an interesting very... So far.

‍

0:01:28.7 Tim: 40-something, it's hard to believe.

‍

0:01:31.0 Junior: Or a year where you're in... And we've enjoyed it very much. At least from my part, I've enjoyed talking with you, Tim, and these have been fascinating episodes, we've learned a tremendous amount and we're getting a really good response from the listeners, so thank you to all of you who listen and engage, and if you have feedback for us as we enter this new year, questions, topics that you'd like us to treat. Please let us know. Yeah, we're always open to that feedback... Yeah.

‍

0:01:54.5 Tim: I'd love to hear from you.

‍

0:01:55.9 Junior: Today's episode is part of our series, what's driving the demand for psychological safety, that episode has done incredibly well so far, so you all of you who have listened to it and share it, if you haven't had a chance to listen to that episode, we would highly encourage it, if you haven't listened to the previous episodes, we're talking about the drivers for demand and psychological safety, today is just one of those drivers, we've talked about innovation, we've talked about inclusion, and we've got several more on the docket, so stay tuned for those episodes that are forthcoming. So to set the stage today, we're gonna talk about the fact that organizations are made up of people, and that may seem obvious, that may seem simplistic, but it's important for today's topic, those people that make up the organizations have skills that we need to build things to execute and to innovate for the future, we want good people, we want talented people, we want them to join us and we want them to stay, and when we can, and when they do join us and they do stay and they're actively engaged. It's a wonderful thing, but often they leave and before they leave, they disengage, and that's problematic, it's problematic and costly, it's costly in dollars, and it's costly in a whole bunch of intangibles like cultural impact, and this cost, this problem is driving demand for psychological safety and is one of the primary drivers that we as an organization have seen over the last couple of years, and why is that that's what we're going to be discussing today, and we're gonna take you along for the journey as we unpack it, psychological safety, as it relates to employee engagement retention.

‍

0:03:36.4 Tim: Hey, Junior, let's go back though to what you said, you said you made a very good point, which is people normally... Often, they'll disengage. Before they leave an organization. It's true. The other thing that's true is that they disengage and stay true in the organization, both of those things are harmful, both of those things are costly, and so that's why... This topic matter so much, I just wanna point that out.

‍

0:04:06.5 Junior: I appreciate that. Because that can be even more dangerous. And sometimes that's more sinister, is a massively disengaged workforce. What is engagement? Let's define some terms before we jump in, the concept of employee engagement, as you've mentioned here to relates to an employee's overall commitment, connection and contribution to an organization, why do you use those three words.

‍

0:04:30.7 Tim: Those are the three Cs of engagement and employee engagement is... Let's go back in history. Before we measured employee engagement in... Before we paid attention to employee engagement, do you know what we were measuring and paying attention to employee satisfaction, but that was not the right measure because what we learned is that in some cases, employees could be very satisfied but not productive, so... Do you know what we call that? We call that happy dead weight, employees who are satisfied, they're not productive, so that's not the right measure, so we went... We graduated from employee satisfaction to a new metric that we call employee engagement, it's a composite variable includes, as you just said, junior commitment, so commitment as part of IT, connection is part of it, and finally, contribution is part of it. The three Cs. So it combines these three things into this variable that we call employee engagement, it's a much better measure, then employee satisfaction was an historically, when we used to focus on that.

‍

0:05:53.9 Junior: So why does employee engagement matter? We probably don't need to make this case to our listenership, it may be preaching to the choir, but the business case for engagement is beyond debate, we've been looking at this closely for years and years now, and the empirical studies very much link employee engagement to productivity and retention as far as the employees are concerned. But I don't have it doesn't have everything to do with employees, it has to do with customers and shareholders as well, and so that's one of the consequences that's important to call out as we enter this episode, is the relationship between employees and things that are downstream, not least of which is customers and shareholders, so it has a ripple effect all the way from the top, if there's engagement that ripples down in a positive way, if there's disengagement, that ripples down in negative ways, so employee engagement affect customers and their satisfaction, their propensity to refer business, it affects the business and shareholder return, so engagement as the upstream variable affects performance, and then the way that it lands, the impact that it has varies across the audience that we're talking about, but for employees, they're gonna disengage and leave for customers, they're gonna have a poor customer experience because of the disengagement of the employee and the shareholders are not gonna get the return that they want, the bottom line will be impacted as well.

‍

0:07:24.9 Junior: That's right. So Gartner research, here's an interesting quote for you, high employee engagement correlates with higher average revenue growth, net profit margin, customer satisfaction and Ernest per share, so there you go, in a nutshell, that's what the research is telling us.

‍

0:07:39.0 Tim: That's why it gets everybody's attention, right, Junior.

‍

0:07:41.4 Junior: Well, and the amount of money that organization spend on engagement is astounding, I should go grab some numbers, but it's astounding. So if we're spending all of this money in this time and our attention on employee engagement, how well are we doing, let's talk about some of the recent numbers, 32% of the workforce is considered engaged, 52%... Considered just showing up and 16% are actively disengaged. Now, these numbers change a little bit every year as we get new data, but they tend to hover around here the last few years, these numbers have stayed relatively constant, and I think that that's important to double-click on, so just let those numbers sink in for a second, 52% of the workforce, just showing up and 16% actively disengaged. So that's 68% of our workforce. Two-thirds.

‍

0:08:37.4 Tim: Junior, just think of normal bell-shaped distribution curve, and then think about the 52% just showing up, so the 52% is your big kind of frozen middle, that's the bell, that's the top. And then the 16% actively disengaged, those are those that are on the far end of that frozen middle, that's a massive percentage of the total population... That's huge of employees. It's incredible.

‍

0:09:09.6 Junior: And those numbers feed into the attrition numbers and all of the turnover that we're going to be talking about next, so that's engagement, and now we're gonna move into retention for a second, now it's one thing to attract these employees, it's another to try and keep them engaged if you don't do that successfully, many will leave the organization, and we'll talk about just how many and how quickly they do when they enter a new organization that they're repelled from for a variety of reasons, but in the last year, somewhere in the ballpark of 50 million employees have quit just in the US in the last year, and the data just came in from November of 2022, and guess what? The quitting numbers were... So voluntary resignations, think about a number in your head, you may have seen some of these metrics in the past, whatever your guess is, it's probably low. The actual number was 59 million in November of 2022 domestic to United States. To extrapolate that number out, we're at 72 million annually for reference, there are 265 million workers in the workforce, domestically, 72 million of those are posed to quit in the next year.

‍

0:10:30.2 Junior: That's incredible.

‍

0:10:31.2 Tim: It's incredible. And where are these data coming from junior... The.

‍

0:10:34.9 Junior: LSA, Bureau of Labor Statistics.

‍

0:10:37.0 Tim: Bear of labor statistics. So these are federally calculated numbers. Okay, so.

‍

0:10:44.5 Junior: Best source of data that you can get, we've never seen these numbers ever, and we'll talk about some more of those numbers a little bit later, we're waiting on December 2022, those numbers should come out in the next few weeks, and then we'll be able to look at 2022, the entire 12-month period, the whole year, and those numbers are gonna be really interesting because a lot of the comparisons are done annually, but certainly 20-22 is the most quit that we've had a... Quiz is just a category that informed some of the turnover numbers, you also have layoffs, you have retirements and a few other things, but 59 million just in quits, November 2022. So is this a problem? That's one of the questions. Again, may seem fairly obvious. But yes, this is a problem. Turnover is very expensive. So let me give you some numbers to help orient us as to how expensive this is in the US, it takes an average of 42 days to fill an open position, it's a long time, six to eight months to reach full productivity. So you're not even up to parity for six to eight months after the month and a half you spent filling that position, so you're ballpark nine months in month in getting that person up to speed and depending on...

‍

0:12:00.6 Junior: And maybe we're just talking averages, but if you talk about the average knowledge worker, that may be even more depending on the specificity and expertise in the role...

‍

0:12:11.5 Tim: We'll hang on Junior. Let's also point out that some positions, you're not able to fill that quickly, so many positions, they remain open. So we have to think about the long-term impact. And nine months is a long. That's average. So think about what's on the other side of average, think about how long that can become amazing.

‍

0:12:36.0 Junior: As many of you may be thinking, there can be substantial differences between the person that turned over and the person that you're able to find to fill that position based on contextual understanding based on temperament, cultural fit, a whole bunch of other variables that are really difficult to account for, experience, knowledge, skill, and so it's not as easy as just a one-to-one trade. Someone leaves the organization. You go find someone else to fill it. It's more nuanced than that. So you've got your training in your onboarding costs as well, once that new employee is hired, so here's gallop estimate that the cost of replacing an employee is one half to two times the employee's annual salary, one... Half to two times their salary. That's amazing.

‍

0:13:25.0 Tim: I don't think people really take time to internalize that and let it distill a half to two times annual salary to replace someone... Think about that.

‍

0:13:39.6 Junior: So we're spending billions, billions and billions and billions of dollars on turnover... Let's think about this math fires, I can do some examples, 'cause I think this helps drive it home, so the overall turnover rate in the US hours around 25%, based on the Bureau of Labor Statistics, about 25%, and a large portion of that's voluntary. Now, if the cost ranges from half to two times the salary, and half is pretty conservative, and by estimation, if you take a 1000-person organization that provides an average for easy numbers, let's call it 50k, a 50000 salary could have turnover and replacement costs based on those numbers between 625 million to 25 million a year. So you could be upwards of 25 million per year, just in turnover costs for an organization with 101000 people.

‍

0:14:34.7 Tim: Well, in Junior, I think if anything, your assumption is on a conservative side with an average salary of 50K plus... What about benefits? What about health care? What about the entire package, right? Absolutely, so I think you're on the conservative end.

‍

0:14:48.6 Junior: Yeah, you double... You say 100 grand all in, you're 125 million to 50 million, a thousand person organization.

‍

0:14:57.0 Tim: It's an unbelievable number is.

‍

0:15:00.7 Junior: Unbelievable. And then there are many of these costs that don't register in the P and L, so what other costs are you bearing... You have what you might call winners leaving the organization, innovators problem solvers, cultural advocates, morale boosters, these types of people that have effects farther and deeper than just the bottom line. Retention is a big deal.

‍

0:15:24.0 Tim: Junior, let's acknowledge that there's a certain amount of turnover that you want in an organization that keeps it vibrant, that keeps it strong, that it needs to renew itself, and there are people that do need to go... They're not productive, they're not a good fit. They're not contributing, they're not happy, they're not engaged, but this goes way beyond that, we're talking about regrettable losses, all these categories that you just named for people that walk out the door, the winners, the innovators, the other categories that you just mentioned, these are regrettable losses, so the question that you may want to ask yourselves for your listeners is what regrettable losses are we sustaining right now, who's walking out the door that we don't want to walk out the door. That's what we're talking about. That's why this is important, right? Exactly.

‍

0:16:25.5 Junior: And we're dealing with tremendous amounts of turnover, a tremendous amounts of regrettable loss, and this is where it really hits home for me, so we have a tremendous amount of turnover and then the employees that we do keep, that we manage to keep 52% of them are just showing up and 16% are actively disengaged. So 25% total turnover, and then those engagement numbers paint a... Sorry, picture.

‍

0:16:53.7 Tim: At 68%. So that's a little bit more than two out of three that are left after your 25% turnover on average every year. Right, so there's the churn, that the churn of 25%... Let's just say that again, so that it sinks in, the folks that are left, 68% of them are not actively engaged... That's right, it's more than two out of three. So there's the snapshot, right, Junior.

‍

0:17:22.3 Junior: And if you lay on the cultural variable, this is where it becomes incredibly interesting, so let's say that you have a toxic culture, and you look at the three categories that you talk about, actively disengaged, actively engaged and just showing up, which ones are gonna turn over, the most talented are the ones who are at least going to put up with a toxic culture because they have options, those that are just showing up, they may be in different... Those who are actively disengaged, it may not matter to them is not always true, but you're going to experience inevitably a high turnover in that category of people that you would like to keep, that regrettable loss becomes even more impactful, so that's where you bleed the most... That's where you bleed. That's right. So I wanna share some more numbers, so for those of you who love to hear the data, you'll probably like some of these numbers, and you may not like them, but... They'll drive the point home, so 59 million people quit their jobs. In November 2022, let's look at this, historically, that's up from 45 million in November of 21, so that's one year later, the voluntary quits have gone up 14 million, which is an increase of about 25% for easy math.

‍

0:18:31.8 Tim: So Junior... Hang on and say, We gotta look at this. Let's think about this, remember the great resignation during the pandemic, the numbers have gone up. So that wasn't just an isolated phenomenon that we have, that we have gotten past that... Right, we just gotta put this in perspective, because we talked a lot about it as if it's in the rear view mirror, as if that was a historical fact... No, we're going forward with voluntary quits at an order of magnitude that we have never seen before... That's right. That's what we're talking about.

‍

0:19:07.8 Junior: In another comparison, that's even more stark is the 45 million from November of 2021 was a record-breaking month, all the way back to the year 2000, so 20, 21... We broke the record, that had been the record for 21 years, and one year later we break the record again by 25%, so this is truly unprecedented, and again, this comes directly from B dot C, So if you wanna go double check the numbers, I would encourage you to do that, it's very important to look at these things directly, so let's add some more numbers, SHRM says over 40% of employees say that they're actively seeking for a new job or shortly planned to do so, 40% right now, ey says millennials are more than twice as likely to quit as baby boomers, Slack came out with a report from their future for... I'm saying, here's an interesting one, we're gonna start to get into culture in site safety, people of color are higher turnover risk, 66% of Hispanic, 64% of black employees and 63% of Asian employees indicate the interest in finding new opportunities compared to the white population, in the 50%.

‍

0:20:18.6 Junior: So that's an interesting piece of data for you.

‍

0:20:21.4 Tim: Elevated risk of attrition. Exactly.

‍

0:20:25.8 Junior: Yeah, a couple episodes back, we talked about a few of the statistics regarding why people quit from work institutes retention, a report, and this is 2020 data is pretty recent. I won't go through all of these, but 15%, I'll touch on the relevant ones, 15% are quitting for work-life balance-related issues, 78% are quitting for manager-related issues, 77% are quitting because of environment, physical and cultural surroundings. You look at those, that point directly to culture and psychological safety, and there's 20%, 25% of the motivation for people quitting right there. It's amazing. Yeah, and I think that it's important to understand that, and we called this out in the prior episode, Compensation and Benefits ranked as the least important consideration for voluntary termination, the least... The least you talk about measuring employee satisfaction, a lot of those things that we were measuring, including compensation and benefits, we now often call hygiene factors, it's par for the course, people are not quitting for those reasons, which is so ironic to me because that's the very variable that we were measuring for so many years and thought well, naturally, compensation and benefits, if people are leaving, it's probably because of that turns out it's the least important variable of the ones measured, so above that we've got environment manager, job-related, do we enjoy and have ownership in manageable work, there are all of these other variables that are more important than compensation benefits, so here's another wrinkle that I wanna throw in, this remote work, we just got some interesting data, so between February in October 2022, so a few months ago, remote job listings, fell from 20 to 14% of all listings on LinkedIn, so now there's this interesting dynamic of employers wanting people to come back into the office, now here's another stat to add to that from monster, so monster sent out a survey in September, they found that 40% of workers would quit that are remote, so the server remote workers, 40% of them said they would quit if they had to come into the office even one day a week, and even one day...

‍

0:22:55.4 Junior: Even one day a week.

‍

0:22:56.6 Tim: I'm surprised by that. No joke.

‍

0:23:00.1 Junior: Now, let me add to that. Something from Gallup. So according to a recent Gallup poll, 34% of remote capable workers want to work from home permanently, and just 3% want to work in the office full-time, remote-capable. So if you're remote capable, you're saying there are 3% of you wanna work in the office full-time, and yet the job listings for virtual work dropped 6% over that about six month period. Collision course.

‍

0:23:27.7 Tim: Is that where you're saying Junior?

‍

0:23:29.2 Junior: Collision course is pretty interesting. It's pretty interesting, it really is. Just a couple of other numbers that don't wanna toss in here to spice it up, Gallup also said, teams with low engagement levels see employee turnover rates 18 to 43% higher than teams with high engagement levels, if you start to add all of these stats together, you put them all on a paper, this is important to do, in my opinion, you look at all of these things and you start to look at some of the connections, and you start to see just how small the percentages of employees at your organization statistically mind you. That are actively engaged, that are likely to be there for a long time, who are enjoying their work, they're productive, they give discretionary effort, they are happy with the work, let's say the scheduling and the location accommodations, so you start to put all of these things layered on top of each other, and you can see the landscape. And it's very, very interesting. Well, respond to that real quick. And what do you think about that?

‍

0:24:40.9 Tim: Well, it makes me think of a study that we did a while back where we asked people about their concept of career, and we asked them to capture their concept of career in a word, it... So if you could capture what your career means to you in one word, what would it be... And some people said, I guess they gave traditional answers that we might expect, well, it's my job, it's my... Some people are a little bit more aspirational. And they said, it's my calling. It's my cause. And then we got to some more interesting conceptions of career and a different perception of the employer employee compact, and people said, It's a gig. It's a run. Here was an interesting one, someone said, I'm a water bug, I skate from opportunity to opportunity, a water water bug, they said the best word that I can confine to capture what I think my career is. Water bug, I thought, wow, that's fascinating, okay. So why is this important? Because of the way that people conceive of their work life, the way that they think about their career, there are different conceptions, so I think that plays into this...

‍

0:26:21.5 Tim: It's fascinating. So then what are we faced with, we're faced with the prospect of how do we retain and engage our people, particularly our best people, this is becoming a bigger challenge.

‍

0:26:37.5 Junior: It is, and for those listening, if you think we're painting a bleak picture, don't worry, the future is not bleak, it is bright, and so we're gonna get to there, but here's another step for you, this one is one of the most important, I think we're gonna share around 40% of the employee turnover occurs within the employee's first year with the organization. 40% of Trupanion mark their junior... That's right. Underlying yellow neon flashing lights, 40% within the first year. This is from the Work Institute report, 40% in the first year. So let's take that 59 million from November. You take 40% of that number, it was within the first 12 months of those employees tenure. So what does that tell us? As we were talking about this time, you mentioned the distinction between two things, attraction and repulsion. Tell us about that.

‍

0:27:38.4 Tim: Right, so think about this. When employees leave an organization, I want you to think about two different kinds of motivation. When they leave, it may be that the primary motivation is attraction, meaning that they are pulled to something better, so there's an attraction force, they're moving towards something better, and that's the primary force at work on them, that convinces them that they need to leave the other four is not... Motivation towards something better. It's motivation away from something that you don't like, motivation away from something... We could call it repulsion, so we have attraction. Motivation towards something. We have repulsion motivation away from something. So if 40% of employee turnover occurs within the employee's first year, well, a big part of that, a big chunk of that 40% is attributable to motivation away from something that they don't like, so there's something in the organization that is repelling them and is pushing them out during that first year, and this is happening to millions of people, and so this is an all important clue about what's happening and about the opportunity that we have to do better.

‍

0:29:10.6 Junior: As you were talking, it made me think about psychological safety and its definition and the nature of the first year of an employees tenure, so the definition of psychological safety, we define it as a culture of rewarded vulnerability, now, when's the most vulnerable state of the employee... During their tenure year? One year on those first 12 months. And so why is that? Well, you're in a new place, there's new material to learn, there are new people to learn, you gotta learn everything around you, you've gotta learn the job itself, the technical requirements, you've gotta get up to speed in terms of competence and skill set, you've gotta understand the culture that surrounds you, both institutionally and at the level of your team, you've got new peers, you may have new direct reports, you may have a new boss, and what do you need to do in order to get up to speed? You need to make mistakes, you need to ask questions, and so tremendous amount of vulnerable activity happening in those first 12 months, so what happens if that vulnerability is punished, repulsion. I'm out of here.

‍

0:30:24.4 Tim: Yeah, I think we can look at this within the framework of the four stages of psychological safety, because during the first year as a new employee, you're going to make a series of determinations and you're at least going to make four determinations. Now, you may not be going about it systematically or methodically as an individual, but you're gonna be doing this nevertheless... Number one, am I connecting here? Can I be myself here? You're gonna make a determination about the number two... Am I learning here? Am I growing here? Am I getting better here? That's determination. Number two determination number three is, am I contributing here? Am I doing meaningful work here, do I have an appropriate level of autonomy here, that's number three, and the last determination that you're going to make during that first year is, can I safely and confidently challenge the status quo here? Can I help make things better? Can I take aim at the way things are done, can I... Is descent productive, constructive descent? Is that allowed? Can I do that? That's the last determination that you're going to make during that first year, now that's an informal process, and we do it is, we work in the organization with our colleagues every day, but little by little, we come to conclusions in each of those four areas.

‍

0:32:03.2 Tim: Can I be myself? Can I learn and grow? Can I contribute meaningfully? Can I challenge the status quo? If you can do those things, there's a high chance you're going to stay in that organization because that organization is a place where you can meet your deeply-held human needs, you can satisfy those needs. If you can't, there's a big likelihood that you're going to bounce... You're not gonna stick around.

‍

0:32:33.2 Junior: I think about that, and I think about the fact that the four stages encompass every aspect of your professional experience, so there's nothing that falls as far as I can tell, outside the purview of those four stages. So if something's not satisfactory in your experience, it has to do with one of those four stages, inclusion learning, contribution, and challenging or improvement, and so your acts of vulnerability inside those four stages, it would seem have to be punished in some way or another. For you to leave during that first 12-month period, and so we'll get to this a little bit more, but imagine a world in which those four stages are there in high measure, and you have psychological safety across those four, and your vulnerability is rewarded as it falls into each of those four categories, the likelihood that you leave in that first 12 month period, or the likelihood that you leave at all goes significantly down... That's right. The silver lining to all of this is the fact that these resignations are voluntary, and so what does voluntary mean? It means that they can voluntarily choose to stay and that it's based on the situation that they are a part of, and so if you can change those conditions, you can change the environment, then you can change that person's volition to leave...

‍

0:34:01.5 Junior: Into volition to stay. So a few more numbers that I think are fascinating when it comes to turnover, 52% of voluntarily exiting employees, say their manager or organization could have done something to prevent them from leaving their job.

‍

0:34:18.5 Tim: Junior, that's not even a clue that we need to uncover. Yeah.

‍

0:34:22.7 Junior: This is not mysterious.

‍

0:34:23.9 Tim: Not is, they're telling me, they're telling us, you could have kept me. A 52% are saying, Oh, I would have stayed. That's... There you go.

‍

0:34:36.3 Junior: Now, here's another one, 51% say that in the three months before they left, neither their manager nor any other leader spoke with them about their job satisfaction or future with the organization, more than half, so the employees... And by the way, where do we gather this information in the exit interviews when it's too... It's too late, and so we have this massive population telling us, Hey, you could have kept me, but too little too late, I'm out the door already, but just so you know, you could have kept me and all show by the way, in the last quarter... No one talked to me about how I'm doing at work, no one talked to me about my prospects inside of the organization, what the path could look like for me, and I'm filling in some of the blanks here, but no one asked me about how I'm doing personally, no one asked me about how I could continue to develop my skill set, become more valuable, no one asked me X, Y, and Z, but they're saying, you could have kept me and you didn't ask. Right.

‍

0:35:40.9 Tim: And so now we're waving goodbye and we're shaking our heads and we're saying another regrettable loss. Yeah, that's what's happening.

‍

0:35:48.9 Junior: So those are... That 52% of voluntarily exiting employees, this is for the different one from war Institute. They think that around 75% of employees who quit could have been retained... Wow, that's even an additional portion that aren't telling us that they could have been retained, but that we think you could have... You may not tell us, three out of four, three out of four. And as we mentioned in the beginning, you don't want to retain all employees and there's a healthy amount of turnover, you do it, you turn were zero, but that's a big number, it's a huge number. And here's another not an easy win, but something that people are pointing to that's worth noting, this is from glass door, 67% of job seekers say that inclusion and diversity are important when deciding where to work... You just think about that. Staff for a second, 67% say that. That's important. So what happens if you're not doing anything as an organization in the realm of inclusion and diversity, guess what, 67% of your applicants can't check that box when it comes to you as an organization, and they're saying that it's important to...

‍

0:37:04.7 Junior: That it's a driver. Yeah.

‍

0:37:07.1 Tim: It's one of the decision criteria that 67% most people use now in making that decision... Two-thirds.

‍

0:37:18.0 Junior: Yeah, it's amazing. So here's another one. Sure, 90% of employees who believe their company's culture is poor, and now we're getting into culture, we're getting a psychological safety, who believe their companies cultures poor have considered quitting compared with 32% of employees who believe the company's culture is good.

‍

0:37:37.0 Tim: Now, that's one, we've got an internalized Junior, we've gotta let that settle upon us.

‍

0:37:42.0 Junior: We'll get the swing, 60% different.

‍

0:37:45.0 Tim: 60% swing. It's unbelievable. Let's just say that again, 90% of employees who believe their company culture is poor, have thought about leaving 90%... If your culture is great, if it's strong, if it's fiber, and if it's inclusive, only 32% have considered walking out the door.

‍

0:38:09.9 Junior: And who decides whether the culture is good, the organization or the employees...

‍

0:38:14.1 Tim: Who's the boss? Who's the boss here? Not the organization.

‍

0:38:17.9 Junior: That doesn't matter what the organization thinks to some extent, no, the people, they're saying, our culture is poor, I might bounce.

‍

0:38:26.1 Tim: To get the last word.

‍

0:38:27.5 Junior: Compared with 32%, so 60%, fewer people consider quitting if the company's culture is good in their minds, that's right. And what is the heart? Acute psychological safety, psychological safety is the heart of culture because it dictates the conditions and the environment, so what would happen to all of these statistics if psychological safety were high, which variables that we've talked about today, would we influence... I would venture to say with not much skepticism at all on the contrary, quite a bit of confidence that we would affect every single one of the variables that we've talked about today in a positive way.

‍

0:39:12.4 Tim: But why is that Junior? And hopefully, this is becoming very clear to listeners, so we started by saying that the increasing, even exploding demand for psychological safety is driven in part by employee engagement, to desire for employee engagement and a desire for retention. Well, where does psychological safety come in? It's upstream. So can we talk about that a little bit junior?

‍

0:39:42.0 Junior: Absolutely, and it's important to note that this isn't our view of the world per se, this is what our prospects and clients are telling us, they're coming to the front door saying, We want psychological safety to solve this problem, and so institutions are coming to this conclusion themselves, before we even have a chance to talk to them. Because they're seeing the links. Now, here's a big swing that I wanna point out in the last several years, you mentioned the move from employee satisfaction to employee engagement. Now I'm gonna look into my crystal ball and tell you that we're gonna see another move what is it for employee engagement to psychological safety, why look at all of the variables that affect both, which one comes first, what's the causal chain is psychological safety a function of an employee's engagement, or is that employee's psychological safety or engagement a function of psychological safety... Very, very clearly, you can see that engagement as an outcome, engagement is a lag measure, it's not an input, it's way downstream from some of these other things that we're talking about.

‍

0:41:02.5 Tim: But Junior, we've been treating it as an input, as a lead measure, because we could see the cosmetic relationship between engagement, employee engagement and various outcomes, right. But now we're seeing things even more clearly, and the research is showing us that, Oh, we've gotta go upstream again, take another step, go upstream again, because in fact, employee engagement is an outcome, as you said, of psychological safety. That's right. So where does it start? We gotta keep going upstream to psychological safety, why? Because psychological safety relates to the basic terms of engagement that we have in the organization, the basic conditions, the way we interact, and if the way we interact is dictated by a norm that says We're going to consistently model and reward vulnerability, think of all the things that flow from that. So there's a whole train of consequences, so think about the first order, the second order, the third order consequences that come from psychological safety, think about the set of outcomes that you talked about, junior, you have to pay attention to that and you have to ask yourself, wow. We better go upstream. And we better focus on this. There's so much writing on this, again, let's just go back to the statistic, if you don't have a healthy culture, 90% of the employees are thinking about walking out the door, 90%, it's stagger.

‍

0:42:46.8 Junior: Another pattern that I've observed has been in light into me is that organizations will come to us with their engagement data, and inevitably, we end up breaking it down to figure out what's actually going on anyway, if engagement were the lead indicator, we wouldn't be breaking it down, we would act directly on the engagement data itself, instead, what's happening is they're coming to us with their engagement data, and for those who have added some sort of cultural component or psychological safety or environmental item, they're pointing to those because those are often the lower... Some of the lowest scoring, if not the lowest, and they're saying, We've got a real problem here, and the psychological safety is affecting our overall engagement score... Exactly, it's implicit in that very pattern that psychological safety is upstream, and so I think that that's very interesting. So let's talk about some of the impact that psychological safety has based on some of the variables that we've talked about, so direct supervisor, What happens if we apply psychological safety and assume that that increases at the level of the manager, what happens... The relationship becomes better. They're creating the conditions on a daily basis for all of their people, so what happens if those conditions in aggregate improve because management is becoming more psychologically safe, it improves, it improves.

‍

0:44:15.4 Junior: Everything around it, belonging, ness, fixed Stage One, inclusion safety, environment-related attrition, you solve all of that because you solve for all of the cultural components that affect the environment, and guess what percentage we solve for just with environment related to the Triton, 10%. 10%, there you go. You just solve 10% of your attrition problem right there, aeration problem, and if you go back to just how costly the attrition is, and we talked about that example of the thousand-person organization, 100000 salary. That was somewhere it was 125 million dollars to 50 million. So let's say that it's on the high end of that, it's two times salary, and you solve for 10% of that, you just saved yourself 5 million in a year of attrition because you solve for the 10% that we're leaving because of environment-related issues, and now you saw for a few more of those, and it's not outside the realm of reason that you saw for a quarter of your attrition over the course of a year, and you just saved yourself 10 to 15 million in that scenario. Now, let's say you're a large multi-national that's doing, let's say 10 billion and you've got 25000 employees, you ratchet up all of those numbers and it becomes astronomical, the cost savings.

‍

0:45:44.3 Junior: And so this is one of the things that I find so interesting when I look at budget allocation, because I look at budget allocation, again, this is my crystal ball, I think a lot of the dollars are gonna move away from engagement and towards psychological safety because we can actually affect it because it's a lead measure, not a lag indicator, and so as that money starts funneling in, hopefully those budgets will get bigger, because if you look at ROI on that spend in the context of attrition, it's a no-brainer, it's an absolute no-brainer you spend a few bucks in psychological safety, you measure, you teach it, you improve it, you do that longitudinally, you're gonna get your money back on my word, 10 to 100, who knows, but the ROI is so obvious there, and then... So here's another one of the diversity issue, we're losing the diversity in our organizations, they're turning over at a faster rate...

‍

0:46:42.0 Tim: Yeah, we just talked about the statistics of... Right, exactly. And we have hard statistics, so we have empirical data to tell us that under-represented populations in many cases, the probability that they're gonna turn over is significantly higher, so we know that.

‍

0:46:58.5 Junior: Now... And do you think that that community is turning over faster because of an attraction issue or a repulsion issue?

‍

0:47:08.5 Tim: Repulsion, it has to be... Because you have to assume that all other things are equal for the employee population, you have to assume that all other things are equal, so the differentiator, the factor that's driving the higher churn, the higher turnover, has to be culture, it has to be the fact that the organization is not as inclusive, it has to be that there's no other hypothesis, There's no other theory that can explain the differences in turnover among those cohorts.

‍

0:47:46.4 Junior: So we've covered a lot of ground and we're entering that point of the conversation where we could go into an entirely new series of episodes of what to do with all of this information, but the purpose of this episode is to show why engagement and retention or drivers for psychological safety, and I hope that that is clear based on all of this data, based on the logic tree, based on the causal chain, it should be fairly obvious to us that what lies at the heart of this problem is a cultural issue that has to do with the way we interact, and whether or not we are punishing or rewarding vulnerability, that's what this boils down to. And if we can solve for that, we solve all the problems downstream, now solve is a big word, but in in theory, you would be solving everything downstream, but imagine if you just bumped it 20% in your... All of these statistics become more favorable, you save a tremendous amount of money, you have a more engaged workforce, you do everything better, everything better, because when do you interact with other people professionally... Well, every minute of every day, that's the whole premise of an organization is more than one person working towards a common goal, so if you lubricate that and the quality of the interaction becomes better, everything we talk about today becomes better.

‍

0:49:14.3 Junior: And so I hope that all of us listening and participating, we'll think about that, the quality of the interaction and the psychological safety that affects all of this.

‍

0:49:24.5 Tim: Junior, I would say in conclusion, as we're wrapping up this conversation today, I would ask the listeners in your organization, have you framed a business case for psychological safety, do you have that, and furthermore, do you think in terms of a cultural ROI, if we invest upstream to increase to elevate psychological safety. Do we understand it, cause and effect, the causal chain as we move towards certain outcomes, so I would just ask those questions to listeners, are you framing the business case for psychological safety, and do you think in terms of a cultural ROI?

‍

0:50:11.3 Junior: Fantastic, okay, there are a couple of things that I want to mention as we wrap up here, the first is that we will link almost, I think every single one of the statistics that we talked about today inside of the show notes, so we've gone ahead and compiled all of those resources for you. Go ahead and check them out. Double-check us on all of those numbers, but see you before yourself just how start those are, and then there are a couple of other resources we may choose to put in after we go through this episode, one of the ones that's top of mind for me is the state interview guide, that was a really interesting metric that we looked at that in the last quarter, we haven't talked to our people and those that are leaving want that conversation, and so that's a helpful resource that holding for you. Okay, be sure to tune in for the subsequent episodes, we have several more talking about drivers for psychological safety, and if you miss that first episode, go ahead and give that a listen, and as always, if you're enjoying the Podcast, please share it and let us know what you think, leave us a review, give us a thumbs up on whatever platform it is that you're listening to this, that really helps us see where we should be spending our time, which topics we should cover, and to continue pouring into this...

‍

0:51:26.9 Junior: This is something that's been incredibly valuable to us, we love the conversations and we have the feedback from the community, so thank you all for everything that you do personally and professionally to make the world a better place, and we are here to help you and is our mission at leader factor to influence the world for good, at scale, that's why this podcast exists, so that we can reach a broader audience and help people and organizations become better. So with that, we will go ahead and sign off. And we will see you next episode. Thank you everyone.

‍0:52:00.1 Producer: Hey, culture by design listeners, you made it to the end of today's episode. Thank you again for listening and for making culture something that you do by design and not by default. If you've enjoyed today's episode please be so kind to leave us a review it helps us reach a wider audience and accomplish our mission of influencing the world for good at scale. Today's episode show notes and other relevant resources related to today's topic can be found at leader factor dot com resources and with that we'll see you next episode.