The interdependency of psychological safety, tacit knowledge and business success

A psychologically safe workplace is designed to protect employees from mental harm and promote mental health. In these workplace cultures, employees are comfortable speaking up without fear of retribution or career risk. They feel they belong, are valued, and are typically more confident and comfortable in their roles.

They are also more likely to share tacit knowledge. Unlike explicit knowledge, tacit knowledge is subjective, informal, and based on individual experiences. It is difficult to express or extract and can be more challenging to transfer to others, but it is also one of an organization's most critical strategic assets. 

In this article, Rebeca Isaksson, former director of knowledge management at Microsoft explains, "You can write a document that explains how to change a bike tire but only someone who's done it before will know that if you're not careful when you take the tire off there's a risk that you nip the hose inside."

When tacit knowledge is shared within an organization it can help employees avoid costly, preventable mistakes and amplify innovation, creativity, and idea generation. It can also help you retain valued employees who understand the intricacies of your business operations.

Avoid significant costs and lost productivity 

When an employee leaves, their employer also loses their tacit knowledge. It has been reported that the average U.S. enterprise-size company could lose up to $4.5 million in productivity annually by failing to share and preserve information. 

Psychologically safe employees are more likely to report to work with energy to operate at full potential (e.g., high discretionary effort), which drives engagement, productivity and knowledge sharing and can reduce the chance that they will take disability or quit.

Losing talent and knowledge is costly and can put the organization's viability at risk. Depending on the role, it can take an employee three to 12 months to acquire tacit knowledge. 

To get a sense of the impact of this, consider a four-member team in a function that typically takes about six months to learn. If two members were to quit and two new people came on board, the team would be operating at 50% capacity for approximately six months—assuming the right hiring choice is made.

Bradford Smart, the author of Topgrading, 3rd Edition: The Proven Hiring and Promoting Method That Turbocharges Company Performance, found the cost of one manager mis-hire at a salary of $100,000/year is $1.5 million. 

A people-first approach is crucial 

This HBR article based on research published in the Journal of Organizational Behavior, highlights that "knowledge sharing is more likely when employees are autonomously motivated (for example, they'd agree with the statements "It's important to share what I know with colleagues" or "It's fun to talk about things I know"). In contrast, people are more likely to hide their knowledge when their motivation is driven by external pressures ("I don't want to be criticized" or "I could lose my job").

To avoid this risk and promote vital knowledge sharing, psychological health and safety must be considered a non-negotiable. When you invest in psychological health and safety and it is woven into organizational culture, it has a positive impact on the employee experience and lowers the risk of losing critical expertise. 

Research shows that organizations that take a traditional command-and-control approach suffer from higher employee turnover, disability claims, and presenteeism. In these organizations, employees typically have high levels of fear and stress and are less willing to share knowledge than engaged employees.

BCG's findings underscore the urgency of prioritizing psychological safety. They reported that leadership and culture play a crucial role in fostering psychological safety, and 12% of employees with the lowest psychological safety levels expressed their intention to quit within a year. In contrast, when psychological safety is high, only 3% of employees are at risk of quitting. 

People and the tacit knowledge they possess are still critical to success

AI may change how work is organized and replace people in many functions; however, it cannot replace human instincts, judgment, problem-solving and decision-making that evolve through tangible and intangible factors that become tacit knowledge. 

Leaders must ensure that employees feel safe so they are confident sharing what they know and have what they need to succeed in their roles. 

Get to know the authors - Dr. Bill Howatt