Psychological Safety Is a Growth Strategy
I’m finishing my master’s in Strategic Leadership this May, and one of the most fascinating themes we keep circling back to is this: toxic leadership is not dramatic gossip. It is not personality conflict or “just how high performers are.” It is a measurable, structural risk to an organization.
In one of our recent case studies, we examined the rise and fall of Away Travel. This was not a struggling company. It was a breakout direct-to-consumer brand that generated $12 million in revenue within its first year, raised significant venture capital, and reached a $1.4 billion valuation in just a few years. The brand positioned itself as inclusive, ethical, and community-driven.
And yet internally, something very different was happening.
Slack was used as a public stage for reprimands. In one widely reported message, the CEO referred to an employee as “brain dead” over a monogramming mistake. Paid time off was framed as a betrayal of company values. Managers were told that if customer queues were not cleared, PTO would not be approved. Employees were required to respond to random manager calls for six consecutive days in order to “earn” flexibility. The language was wrapped in empowerment and accountability, but the lived experience felt like surveillance and coercion.
When leadership creates fear instead of clarity, people do not perform better. They perform safer and stop challenging ideas which stifles growth. They also stop raising red flags early. Innovation slows down long before revenue does and by the time financials dip, the cultural damage has usually been compounding for a while.
In the case, employees described Slack reprimands as feeling like “having your pants pulled down in front of the whole company.” A Slack channel created by LGBTQIA employees and employees of color to discuss their experiences of marginalization resulted in those members being terminated.
What’s striking is how often companies with strong brands and strong products still implode internally. If employees feel humiliated, dismissed, or constantly on edge, the internal cost begins to outweigh the external wins with retention dropping and those who held your company up leaving.
In this case, sales reportedly dropped by 90% after the scandal broke, during a moment that already required resilience and stability. Executive turnover followed rapidly. Instability compounded distrust. The outside world eventually caught up to what the inside had been experiencing for months.
Psychological safety does not mean low standards. It means high standards delivered with dignity. It means feedback that sharpens people instead of shames them and it curates leaders who can regulate themselves under pressure. The research is clear that teams who feel safe to speak up outperform teams who operate in fear, not because they are softer, but because they surface problems faster and solve them smarter.
A sharp comment in a ten-person company feels uncomfortable. In a hundred-person company, it becomes culture. In a thousand-person company, it becomes reputation. The tone at the top does not stay at the top - it cascades down.
The part that keeps standing out to me is how expensive it is to rebuild trust once it is broken. You can redesign a product. Away proved that when airlines banned lithium batteries and the company mobilized quickly to fix the issue. But once employees stop believing leadership is safe or consistent, every initiative becomes harder. Every message is filtered through doubt.
Toxic leadership absolutely stifles growth. Not immediately, and not always loudly, but steadily. We talk constantly about scaling revenue, scaling teams, and scaling systems. Very few leaders talk about scaling emotional maturity, yet this case made something clear to me: emotional maturity is not optional at scale. It’s a must
The companies that last are not just the ones that move fast. They are the ones that mature and evolve their culture to be one with immense psychological safety.
