Why traditional leadership doesn’t work in values-driven organisations

Originally published for HRM Online / AHRI

What does effective leadership look like in an organisation where employees aren’t driven by pay and progression alone?

When employees choose your organisation because they believe in the mission, they’re operating under a fundamentally different psychological contract than those motivated primarily by pay and progression. 

Applying copy/paste leadership strategies risks breaking this contract because those approaches weren’t designed for employees who expect genuine transparency, authentic decision-making and psychological safety.

A different psychological contract

Values-driven organisations operate on fundamentally different premises than profit-maximising ones. Healthcare workers, teachers, nonprofit employees, social enterprise teams, purpose-driven startup staff, public sector employees and athletes representing their nation amongst many others aren’t primarily motivated by advancement or financial reward. They’re often there because the work aligns with their core identity and beliefs.

This difference is a different psychological contract – the agreement between employer and employee about what they owe each other. Traditional psychological contracts are straightforward exchanges: deliver what’s expected, get paid accordingly, and perform well for promotion.

Values-driven contexts demand something deeper: meaningful work that honours shared values. When you use leadership approaches designed for traditional exchanges, you risk setting the scene to break this contract and damage both people and performance in the process.

The escalating crisis

These employee motivations aren’t new, but two trends are amplifying the problem. First, increasing numbers of employees across all sectors – particularly Millennials and Gen Z – now prioritise purpose over traditional rewards. Second, external pressures are creating more circumstances where organisations default to approaches that violate the psychological contract.

Multiple pressures are converging on many organisations simultaneously: budget constraints, staffing shortages, technological disruptions and more – many of which demand legitimate operational responses – restructuring, resource reallocation, streamlined processes etc. 

But when boards and organisational leadership require or implement these changes using approaches designed for traditional employment relationships – such as top-down approaches or unilateral restructuring – without the transparency, consultation and values alignment their workforce expects, trust breaks down regardless of whether the decisions themselves are sound.

When values-driven employees experience misalignment, employees  don’t just become dissatisfied. They actively withdraw. They reduce discretionary effort, share negative experiences with each other and potential recruits and they disengage from collaborative projects. 

These counterproductive behaviours occur 2.5 times more frequently than among employees motivated primarily by traditional rewards. Value incongruence directly correlates with both turnover intention and burnout.

Rebuilding this trust across teams and organisations takes years and significant resources that most organisations simply can’t afford.

Trust as the operational foundation

Trust is the first casualty – and in values-driven organisations it’s the foundation that everything else depends on: authenticity, relational decision-making, social learning opportunities and capacity building all suffer when it falls.  

This principle comes directly from polyvagal theory, which recognises that threat responses shut down the neural pathways needed for complex thinking and collaboration. Google’s Project Aristotle arrived at the same conclusion from a team performance perspective, identifying psychological safety as the primary predictor of high-performing teams, proving that what feels safe neurobiologically also drives operational excellence.

In the environments where people have chosen to align their identity with their work, trust means believing the organisation will honour the values that brought them there. When that trust erodes, through big missteps (or many small ones) it’s difficult to build back. 

“Trauma-informed and authentic leadership approaches are no longer optional extras but fundamental requirements for creating the psychosocial safety these employees expect.”

The trauma-informed alternative

Recent advances in psychology, neurobiology and trauma research (Lloyd, 2024, Porges, 2025, Wyatt, 2025) reveal why traditional approaches fail: they ignore how people’s nervous systems actually respond to leadership behaviours. 

Understanding chronic stress, neurodiversity and the somatic reality of feeling safe or threatened at work provides the foundation for more effective approaches.

Embodied, trauma-informed leadership takes these realities into account, and recognises that people’s bodies respond to leadership before their minds do. When leaders are inconsistent, unpredictable, or act against stated values, people’s nervous systems register threat. Stressed people can’t collaborate, innovate, or perform at their best.

“When values-driven employees experience misalignment, employees  don’t just become dissatisfied. They actively withdraw.”

This approach acknowledges that chronic stress and environments that trigger fight, flight, freeze and fawn responses don’t just affect people’s emotions – they alter their ability to make good decisions, access creativity, problem-solving and collaborate with others. 

This isn’t something individual leaders can fix alone through professional development. In values-driven organisations, embodied leadership must be supported systemically, through policies, structures, supervision and organisational norms that reinforce rather than undermine these approaches. The goal becomes creating leadership practices and organisational systems that help people access their optimal nervous system states for the work that matters most.

Making hard decisions with values alignment

The copy-paste leadership strategies that pervade organisational life – from performance management to structural design – weren’t designed for environments where expectations are of genuine transparency, authentic decision-making and psychological safety being prioritised by all parties. 

As purpose-driven workers become the majority across sectors, trauma-informed and authentic leadership approaches are no longer optional extras but fundamental requirements for creating the psychosocial safety these employees expect.

The question for leaders and HR professionals becomes: where are we perpetuating copy-paste approaches that break rather than build trust? Are there opportunities in upcoming policy reviews, strategic planning processes or system redesigns to embed trauma-informed principles? How might finance communicate budget decisions differently, or investigations be conducted with psychological safety in mind?

Every organisational function either strengthens or undermines the psychological contract. The organisations that recognise this reality – and act on it – will be the ones that retain and engage the workforce that increasingly defines professional success by meaning, not just money.