Why Most Companies Fail at Psychological Safety (and What to Do Differently)

Psychological safety isn’t just a buzzword, it’s quickly become a board-level imperative for every Australian business. But while executives may proudly claim their workplace is “open” and “safe,” research shows a stark reality gap: nearly 93% of leaders think they foster psychological safety, but less than half of their employees agree.

As new legal requirements and community expectations land squarely on the shoulders of boards and executives, the stakes have never been higher. Why do so many well-intentioned organisations still get psychological safety wrong and what actually works to build a resilient, high-performing culture?

Drawing on the lived expertise of workplace trainer Maureen Riordan and neuroscience-informed coach Evin Brannigan, let’s unpack the biggest myths, reveal what the law really demands, and offer a practical, evidence-backed framework to help your organisation move from compliance to true engagement.

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2. Myth-Busting: What Psychological Safety Is Not

Myth 1: “It’s about being nice or avoiding conflict.”
Many leaders worry that focusing on psychological safety means lowering standards, being “too soft,” or skirting hard conversations. But as Evin Brannigan explains, this is a fundamental misunderstanding. Psychological safety isn’t about coddling employees or avoiding accountability. It’s about creating an environment where people feel safe enough to speak up, challenge ideas, and admit mistakes without fear. Neuroscience shows that when people sense threat (even subtle social threat), the brain’s survival systems kick in, leading to withdrawal, avoidance, and “quiet quitting.” Real safety is built through honest, sometimes tough dialogue, handled with empathy and authenticity, not through avoidance or empty niceties.

Myth 2: “It’s just an HR issue.”
This is one of the most dangerous misconceptions, especially for boards and executives. As Maureen Riordan emphasised in the panel, managing psychosocial hazards is not just a “nice to have” or a project for the HR department. It’s now a clear legal obligation for business leaders under Australian Work Health and Safety laws. Ignoring psychological safety exposes directors and boards to compliance breaches, reputational risk, and most importantly, real harm for their people. Boards must treat psychological safety as a governance and risk issue, woven into core business strategy.

Myth 3: “We already do enough. Tick-box training is enough.”
Annual training modules and engagement surveys can tick a compliance box, but they rarely move the needle on real culture. Both Evin and Maureen highlighted that most employees struggle to recall the content of mandatory training just weeks later. Annual surveys often gather dust, with feedback never acted on. When leaders rely on surface-level initiatives instead of meaningful, ongoing conversations and visible follow-through, trust erodes. As Maureen put it, “Systems fail, not people.” True psychological safety requires ongoing feedback loops and commitment, not just “set and forget” programs.

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3. The Legal Landscape: What Boards Must Know in 2025

A New Era of Accountability for Psychosocial Risk

The rules have changed. In 2025, Australian boards and executives face stricter Work Health and Safety (WHS) laws, making psychosocial risk management a core part of governance, not a “nice to have.” Regulators are crystal clear: companies must actively prevent harm to mental health and wellbeing, just as they do for physical safety. This isn’t a vague ideal. It’s a compliance requirement, with real penalties for falling short.

What’s Actually Required? (Maureen’s Perspective)

As Maureen Riordan emphasised, leaders must move beyond policies gathering dust. The law demands a living, breathing process of:

• Consultation: Boards and executives must actively involve employees in identifying psychosocial hazards (e.g. bullying, poor job design, excessive demands), and seek regular feedback, not just once a year.
  
  
• Risk Management: Employers must systematically identify, assess, control, and review risks to psychological health, just as they do for physical hazards.
  
  
• Ongoing Accountability: The duty doesn’t end after a training session. Boards are expected to monitor trends (e.g. absenteeism, turnover, feedback), review incidents, and take visible action when issues arise.

These requirements aren’t limited to the HR team. They apply at all levels, right up to the boardroom.

“I Didn’t Know” Is Not a Defence

Gone are the days when leaders could plead ignorance. The law now expects directors and executives to be proactive, not reactive. If a board isn’t monitoring psychosocial risks, or has no consultation or feedback process, it’s no longer just a cultural weakness, it’s a legal breach.

As Maureen put it, “If people aren’t aware that they have to manage psychosocial safety, they’re in breach of the legislation. The other misconception is that people think it’s too hard, so they put it off. But that’s not an excuse under the law.”

Put simply: “I didn’t know” won’t protect a company or its leaders from scrutiny, regulatory investigation, or reputational fallout.

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4. The Neuroscience of Safety: Why Brains (and Behaviours) Don’t Lie

The Brain’s Built-in Alarm System

Evin Brannigan explains it simply: psychological safety isn’t about warm feelings, it’s about how our brains respond to threat. When people don’t feel safe at work, the “fight or flight” response kicks in. That means stress hormones rise, critical thinking drops, and our brains focus on survival, not creativity or collaboration. The cost? More sick days, burnout, disengagement, and higher turnover as people “escape” unsafe environments.

“It’s a matter of survival. If people don’t feel safe within an organisation, they get sick, they call in sick to avoid conflict, or they move on until they find safety elsewhere.” — Evin

The Invisible Threats That Hurt Performance

Teams missing psychological safety don’t just “feel a bit flat”, they lose their edge. Early warning signs include:

• Rising absenteeism and stress leave
• “Quiet quitting” and low energy
• Avoidance of tough conversations (problems go unspoken)
• Innovation stalls as people play it safe
• Toxic patterns emerge (blame, finger-pointing, or gossip)

It’s not that staff don’t care; their brains are simply protecting them.

Real Examples from the Panel

In the panel, Evin and Maureen shared vivid stories:

• The construction sector: Teams with daily “pre-start” check-ins stay connected and spot issues before they grow.
  
  
• The remote worker: When people lack support and rest, even mandatory “right to disconnect” laws aren’t enough, they need safe leaders and real flexibility.
  
  
• Leadership gaps: As Roland noted, executives may believe their culture is safe, but data shows the gap: “93% of executives think they have a psychologically safe culture, but only 44% of employees agree.” The real signals aren’t found in lagging KPIs, they’re in the lived experiences of staff.

Why Boards Can’t Afford to Ignore the Science

Neuroscience has made it clear: environments that trigger chronic stress or fear sap organisational performance. Psychological safety isn’t “soft”, it’s a leading indicator of business health and risk. If ignored, the damage isn’t just hidden in HR files. It shows up in productivity, engagement, reputation, and, eventually, the bottom line.

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5. The 5 Most Common Failure Points (and What to Do Differently)

1. Leadership Misconceptions: The Culture Perception Gap

Problem: Executives often believe their culture is psychologically safe. Roland cited that 93% of leaders think so, yet only 44% of employees agree.

What to Measure Instead: Don’t rely solely on annual engagement surveys or compliance metrics. Instead, track real-time signals: absenteeism, stress leave, “quiet quitting,” and direct feedback from regular check-ins. Ask: “Do people actually feel safe to speak up?” and make it easy for them to answer honestly.

2. Lack of Consultation: Top-Down Doesn’t Build Trust

Problem: Many organisations still default to top-down policies, missing the power of genuine consultation. Maureen noted: “If people aren’t heard and given ownership of the process, systems fail. Human error is not an excuse.”

How to Fix It: Build robust feedback loops. Invite staff into the design, review, and monitoring of policies, not just compliance. Act on what you hear, and report back. Consultation is now a legal requirement, but it’s also the foundation for trust and engagement.

3. Inconsistent Role Clarity: Job Confusion Fuels Burnout

Problem: Ambiguous or outdated job descriptions are a hidden risk. When people don’t know what’s expected (or quietly take on too much), stress and burnout soar.

What Works: Make role clarity a living, breathing practice, not just a line in a contract. Use regular one-on-ones and team check-ins to clarify expectations, redistribute responsibilities, and keep job design up to date with real needs.

4. One-Off Training: Why “Set and Forget” Fails

Problem: Tick-box training and annual workshops don’t stick. As the panel shared, people often complete compliance modules but can’t recall the hazards or actions they’re meant to manage.

What to Do Differently: Make psychological safety part of the weekly rhythm, through team check-ins, real-world scenario workshops, and dynamic conversations. Create safe spaces where people can practice, give feedback, and see leaders role-model vulnerability and empathy.

5. Ignoring Warning Signs: Spotting Trouble Early

Problem: Most organisations wait for major incidents before taking action. But the real warning signs, declining morale, increased turnover, conflict avoidance, and poor communication start much earlier.

How to Respond: Establish early detection systems. Encourage managers and peers to surface issues quickly and frame “small” problems as chances to learn, not blame. When warning signs emerge, act promptly and transparently to rebuild trust.

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6. The Step-By-Step Framework: Building Real Psychological Safety

Ready to move from theory to action? Here’s a practical, five-step roadmap, distilled from Maureen and Evin’s panel advice:

Step 1: Start with Self-Awareness and Leadership Modelling

Change begins at the top. Leaders must first look inward, acknowledge blind spots, ask for feedback, and model the vulnerability and curiosity they wish to see. As Evin noted, “You don’t need to be perfect. You just have to show up honestly.” Leaders set the tone: when they show self-awareness and humility, psychological safety ripples through the team.

Step 2: Open the Feedback Loop - Meaningful Consultation, Not Just Surveys

Maureen stressed that real consultation goes far beyond anonymous surveys. Invite employees into genuine dialogue: ask what’s working, what isn’t, and what could be improved. Make it routine, not a crisis intervention. And crucially, act on what you hear, then close the loop by sharing back what’s changed as a result.

Step 3: Embed Psychological Safety in Day-to-Day Rituals

Don’t wait for annual reviews. Bring safety and engagement into daily life with regular pre-start meetings, informal check-ins, and end-of-week debriefs. These rituals give people multiple chances to be heard, build trust, and spot risks before they escalate. Small, consistent practices beat big, one-off events every time.

Step 4: Measure What Matters - Shift from Lagging to Leading Indicators

Move beyond lagging indicators like turnover or compliance breaches. Start tracking leading signals: absenteeism spikes, team energy, engagement in meetings, and feedback trends. Make these metrics visible to leadership and staff alike; transparency drives improvement and shared accountability.

Step 5: Review and Adapt - Continuous Improvement, Not Compliance Theatre

Real psychological safety is never “done.” Build in regular reviews to revisit what’s working and where new risks are emerging. Celebrate progress, acknowledge setbacks, and adapt your approach. When feedback and learning are constant, culture becomes resilient and compliance takes care of itself.

Psychological safety is both a process and a practice. Boards and leaders who embrace this framework create workplaces where people thrive and risks are surfaced before they become headlines.

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7. Why the Stakes Are Higher Than Ever

The risks of getting psychological safety wrong have never been higher. As regulatory scrutiny tightens and new standards put culture and wellbeing squarely on the board agenda, the cost of “good enough” is now real; fines, legal exposure, reputational damage, and, most importantly, the loss of your best people.

But the upside is just as real. Companies that get psychological safety right see better performance, faster innovation, and a workforce that thrives through change. The difference isn’t more compliance or superficial training. It’s embedding trust, dialogue, and continuous improvement into the fabric of daily work.

Don’t wait for a compliance crisis or a toxic culture story to make change urgent. Take action now to build a workplace where everyone feels safe to speak up, grow, and contribute.

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