The leader’s compass: How psychological safety guides leadership in downsizing and upscaling organizations

Abstract

The success or failure of organizational change hinges on a leader’s ability to manage the psychological climate. Psychological safety—the shared belief that interpersonal risk-taking won’t lead to negative consequences—is recognized as a key factor in team learning and performance. However, its strategic function during organizational restructuring remains underexplored. This qualitative study integrates Edmondson’s theory of psychological safety with Lewin’s change model to examine how Dutch leaders perceive and apply psychological safety in their decision-making. Data were collected through semi-structured interviews with a purposive sample of six senior leaders, all engaged in sectors undergoing significant upscaling or downsizing. Thematic analysis revealed psychological safety as an essential leadership tool in navigating restructuring and legitimizing difficult decisions, such as workforce reductions. Practices such as transparent communication, modeling vulnerability, and adaptive leadership were identified as central to managing psychological safety. However, leaders also noted trade-offs such as emotional burdens and occasional reductions in operational efficiency. Overall, these findings extend psychological safety theory by showing its proactive role in executive decisions. This contributes to change management literature and policy by explaining how relational climates support complex transformations.