Why CFOs need people to speak up: The business case for psychological safety

Psychologically safe does not mean conflict-free

People sometimes perceive psychological safety as promoting a ‘soft’ or comfortable environment, in which argument or even robust discussion is discouraged. However, a safe team does not avoid conflict. Rather, it allows people to express sometimes profound disagreements. Team members should still be able to challenge weak ideas and address poor performance. The most effective teams combine candor with accountability. People can speak honestly but remain responsible for the quality of their work.

This distinction matters because openness and high performance often depend on each other. A meeting in which everyone quickly agrees on the path forward may seem highly efficient. But it may also reflect an unwillingness to give time to dissenting views, leading to weaker decision-making.

Better decisions require better information

The business case for psychological safety is straightforward: it increases the range and quality of information available to decision-makers. When conditions are uncertain and the risks are high, this is crucial. In those circumstances, leaders depend on the honest observations and expertise of others, including junior team members.

My long-standing research into psychological safety and team interaction examines how teams behave in uncertain and high-stakes settings. The pattern is consistent: performance improves when people can contribute and question freely. In aviation, for example, a first officer may notice something a captain has missed. That observation is useful only if it is voiced and taken seriously. The most senior person does not always have the most important or urgent information.

This principle applies to teams developing and refining solutions. New ideas rarely arrive as finished proposals. They improve through a process of challenge and refinement. In one study of dynamic interactions within problem-solving teams, my co-authors and I found that teams displaying more positive behavior received stronger managerial performance ratings.

We also found that solution-focused exchanges and contributions from a broader range of speakers helped generate further positive interaction. In other words, psychological safety helps sustain this productive cycle by making it easier for team members to question, build on, and improve one another’s ideas without fear of interpersonal consequences. Decision-making within the finance function, such as assessing investment cases and determining how to deploy capital, also benefit from a similar environment. For example, a forecast may look watertight, but it may depend on misguided assumptions that some employees spot but feel unable to raise. Likewise, a failing project can continue consuming capital because team members fear the potential repercussions of raising concerns.