What is the impact of creating a ‘psychologically empowered’ organisation?

Being part of a global organisation offers a variety of opportunities, including the ability to work with clients across several sectors and regions, each with their own distinctive organisational cultures. One of the biggest challenges we’ve seen financial services firms facing is creating an innovative and high-performing culture in a heavily regulated sector.

Risk management is understandably a priority, especially in times of high-profile breaches or failures, resulting in greater scrutiny from regulators, shareholders, and customers. As a result, the first instinct of firms is often to apply additional layers of process and controls to manage risks out.

However, this doesn’t demonstrate a mature risk culture, typically characterized by widespread understanding of risk management roles. We also see open communication about risks is not only valued but integrated into decision-making and strategies. And businesses actively foster a learning culture, embracing change, and effectively balances risk avoidance and strategic risk-taking.

So, a mature risk culture needn’t stifle growth or shackle innovation. Quite the opposite; it should empower colleagues to break down barriers, share information and seek exciting ways to improve performance.

Driving performance in a mature risk culture

You may well have heard of psychological safety and even be familiar with Timothy Clark’s 2020 model (below), outlining the various levels of psychological safety that many leaders continue to strive for within their business cultures. With the ultimate aim of achieving challenge safety, leaders aspire to create an environment where people feel safe to contribute their ideas and challenge others, without fear of being punished or shamed. Essentially, creating a speak up culture.

‘Psychological empowerment’ goes a step further; encouraging greater autonomy to help individuals build the confidence to take ownership of their own decisions. It also helps create a sense of meaning in their work – emphasising that their efforts matter and have a visible impact on organisational performance.

Creating psychological empowerment

So, how can leaders foster psychological empowerment? A key step is setting clear expectations and helping colleagues to understand how they contribute to overall business objectives. By expressing confidence in teams’ abilities, and recognising and rewarding efforts, leaders can increase team motivation – celebrating what people do and how they do it, instead of just the end result. It’s also vital to promote ongoing skills development, supporting personal and professional competence and growth.

But why is this important? Where we see firms creating psychological empowerment, their people are often more engaged in their work, ultimately driving greater productivity. We have also seen that individuals with greater autonomy are more in tune with potential risks, as they’re conscious of and – perhaps more importantly – are accountable for, the implications of their decisions.

And in a blame-free organisation, where it’s natural to share ideas and offer constructive feedback, innovation rises as people learn to ‘fail safely’. By confidently taking calculated risks and exploring better outcomes without jeopardising the overall risk framework, people and teams strike the right balance between risk and performance.

How leaders can balance risk and performance

Leaders that successfully empower their workforce do so by:

1. Encouraging learning and development – regular training and opportunities for growth help individuals feel more competent and invested in their roles.
2. Recognising and rewarding behaviours – acknowledging the efforts of a team throughout the process, not just the outcomes, to build morale, affirm individuals’ views of their impact, and boost team motivation.
3. Encouraging autonomy – delegating responsibility of their work areas to team members and letting them plan and execute tasks in their own ways. This is vital in helping to create a sense of independence and ownership.

As leaders in mature risk cultures, we should ensure that risk practices enable, rather than impede growth. When your teams have sufficient capability and space to embrace innovative thinking in a psychologically empowering environment, then strong performance and effective risk management should follow.

How are you enabling and empowering your team to not only perform, but thrive?

Some critical questions to consider are:

1.??? When delegating tasks, do team members feel confident to make decisions with a sense of ownership and influence, while also feeling supported?

2.??? How can you recognise more than just positive outcomes?

3.??? What is your organisation’s cultural approach to failure? Does it feel like defeat, or an opportunity to learn?

4.??? What role are you playing in ensuring your risk management approach enables innovation and autonomy?

If you would like to understand more about the critical role a leader plays in embedding psychological empowerment, please get in touch.

Disclaimer: The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organisation or its member firms.

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