You don’t need to dive too far into relevant business or academic literature to see there's a crisis unfolding before our eyes within Australian organisations.
In leadership, middle management and the frontline workforce. Everywhere you look, there is new data on declining employee engagement, productivity and trust in leadership, paired with increasing rates of stress, burnout and turnover, particularly among middle and senior management.
The most serious indicator of this crisis is the recent surge in psychosocial and mental health workers’ compensation claims in Australia.
Over the 10-year period to 2023-24, serious claims for mental health conditions experienced the largest change of any injury type, up by 161% and accounting for 12% of serious claims (Safe Work Australia, 2025).
In Queensland alone, there has been a 92% spike in mental health claims over a four-year period, with primary claims making up 15% of the state's total statutory claim costs in 2024-25.
In the first quarter of 2026, the TELUS Mental Health Index reported that 77% of Australian workers were considered to have a moderate or high mental health risk, and 32% say their mental health is negatively impacting their work productivity and goals. This indicates that the crisis will likely worsen without significant intervention.
So what's contributing to this crisis?
Many are pointing to the ‘always-on’ culture where employees are expected, or implicitly pressured, to remain digitally tethered to work, leading to a vicious cycle of stress and emotional depletion.
However, the research is remarkably consistent in demonstrating that the decline in workforce health is being driven less by individual factors and more by how work is designed, managed and experienced.
Across Australian and global research, unsustainable workloads, work intensity, psychologically unsafe cultures, role ambiguity and poor organisational change management rank at the top of the psychosocial hazards in the workplace.
Add to this a 2026 report on the top three priorities for senior executives in Australia, where digital transformation, increasing revenue and product innovation ranked at the top, and people and culture and investing in change and agility were at the bottom (Staffbase, 2026), and it becomes clear something has to give. It seems cliché to say ‘change is the new normal,’ but the combined forces of rapid technological shifts, economic volatility, and a diversifying workforce make it an undeniable reality for organisations today.
This new normal means employees are spending more time in survival mode, resulting in chronic stress. It’s fair to say the pace of change and transformation in the workplace has now accelerated beyond the capacity humans have to absorb it, and how organisations are managing it isn’t keeping up.
What makes this particularly difficult to address is how ‘survival mode’ spreads. When one person enters a state of threat response, it triggers the same instinct in those around them. The response cascades through teams in waves, and because each person's survival wiring is different, the behaviours that emerge look nothing alike. One person may withdraw, another may become controlling, while others do what it takes to appease and get by. Leaders often observe these responses in their teams and may not recognise the same pattern in themselves.
While individuals are often blamed, it’s the organisational systems, structures and cultures triggering them that need to be addressed.
The response from many organisations to this crisis over the last decade has been predictable. Invest in a leadership development program and coaches for the executive team. Bring in a change manager for the next transformation. Launch a psychosocial risk initiative and promote the Employee Assistance Program. Tick the boxes. Hope for the best. These aren't bad solutions, but they're being applied to symptoms, rather than the systemic causes.
Recently, I’ve been hearing a lot of
“We have employee wellbeing programs, we’ve invested in our leaders and we bring in change managers when necessary, what more can we do?”
Many executives are confident they’re doing all the right things, yet they’re feeling exasperated by declining employee engagement and their leaders not doing what they’ve been trained to do. The gap between training and action is particularly evident during times of change.
The reality is, this issue isn’t a case of leaders being unwilling to do what’s required of them, or a failure of learning and development initiatives. Instead, it stems from organisational design and ways of working that were built for a vastly different environment than we find ourselves in today.
And as the pace of disruption has accelerated, challenges are compounding. Leaders are often expected to get by largely on their own, managing complexity, ambiguity, and people risk, often while navigating increasing workloads, organisational restructures and rapid technological changes, all while coping with the personal impacts of this chaos.
Leaders in your organisation are likely struggling with these challenges. They are doing their best with what they have, with the desire, but no capacity, to focus on leading themselves and their teams through the complexities they are experiencing. They are operating in a high-demand environment that feels both permanent and uncomfortable, often without the necessary organisational support to maintain performance amid ongoing disruption.
Very few organisations have worked it out, and those that believe they’re doing it well almost certainly have a disconnect between those areas of the business that possess the skills and capabilities to support employees during this crisis, which means the experience for leaders still leaves them wanting.
The biggest challenge is that the impact of disruption on your workforce, along with the disconnect in your approach to address it, is growing with each wave of change. Organisational change, whether sporadic or continuous, can both amplify existing psychosocial hazards and create new ones.
This is likely to be costing your organisation more than you realise.
The human cost shows up as burnout and psychological harm. The organisational cost shows up as decreased business performance, lower employee engagement and regrettable turnover. And now there is a third cost: compliance and legal risks that didn’t exist five years ago, and one that most organisations aren’t ready for.
Between 2020 and 2025, Australia fundamentally reshaped workplace health and safety by moving psychosocial hazards from an emerging issue to a legal obligation.
The most significant legislative development came in April 2022, when Safe Work Australia amended the Model WHS Regulations to include specific provisions on psychosocial hazards. States and territories adopted these provisions at different speeds, and across most Australian jurisdictions, organisations are now required by law to proactively identify and assess psychosocial risks and implement measures to eliminate or minimise them so far as is reasonably practicable.
Psychosocial hazards are now clearly defined and include job demands, poor support, harmful behaviours, lack of role clarity, bullying and poor organisational change management. The breadth reflects a broader shift from identifying and treating mental ill-health to preventing it through safer work design.
Psychological harm doesn't only happen during restructures, mergers or technology implementations. It happens every day, across all industries and at every level of the workforce. In an era when digital transformation and continued revenue growth are the priorities, leaders are now expected to do more with less support.
These expectations to deliver higher performance while simultaneously becoming coaches, wellbeing champions, change leaders and the first line of defence against psychosocial risk will only heighten the pressure they’ve been feeling for years.
What high-performing organisations do differently
I’ve spent the last 15 years supporting some of Australia’s largest organisations as they transform into responsible, high-performing organisations. During this time, I’ve bumped up against some of the toughest problems they’re facing and, often, their inability to solve them despite well-intentioned executive teams, capable leaders and engaged frontline team members.
This experience has given me insight into what high-performing organisations do differently, focusing on three different but interrelated organisational capabilities.
1 · Organisational and work design
Although technically two separate areas of specialisation, they are grouped here to describe both macro (organisational) and micro (task) aspects of a deliberate process for aligning how, when, and where work gets done to deliver strategy, optimise performance, and protect and promote employee health, safety and wellbeing.
This capability is rarely embedded within organisations. Historically, it has been viewed as relevant only during major restructures, significant market changes or acute internal challenges. Where in-house capability does exist, typically within agile or technology-focused organisations, it is usually scoped narrowly around technology work design and delivery rather than the organisation as a whole.
Only a handful of Australian organisations have successfully expanded this approach beyond technology to build capabilities that support leaders and teams in optimising organisational and work design.
2 · Change management
Change management emerged as a capability in the 1990s, designed to transition an organisation’s people, processes, and systems from the current state to a desired future state. Traditionally, change management has been viewed as a time-bound, project-specific necessity, rather than a continuous, ‘always- on’ capability.
Current practices advocate for ‘routinising change’ to manage continuous, highly interdependent change, so employees see change as a normal part of their work, enabling them to manage their discomfort and build intuitive responses to new situations (Gartner, 2025).
This approach aligns with the same mindset behind Agile project delivery and Lean continuous improvement. According to Gartner’s research, it is three times more effective than traditional change management approaches.
3 · Leadership development
While the discipline of leadership development has undergone many iterations since its emergence in the mid-20th century, it is defined here as the process of building the individual and collective leadership capabilities required to deliver on an organisation’s strategic intent.
In this context, the intention is not solely to improve individual leaders, but to create an environment where strategy, culture, and performance remain aligned, particularly during periods of disruption and change.
However, leadership development rarely reflects this complexity, resulting in an approach that is more sporadic than integrated, focused on individual development rather than system improvement, and disconnected from the day-to-day conditions that enable or undermine effective leadership.
Most leadership programs focus on sharing frameworks and building skills, and rarely address what lies beneath: the deeply held belief patterns and habitual responses that activate under pressure, often before a leader even realises it's happening.
When workloads are unsustainable, when change is constant, and when psychological safety is low, leaders don't draw on what they learned in the last development program or team day. They revert to what they’ve always known, and the more threatened they feel, the more predictable and rigid those default behaviours become.
Building leaders who can lead with empathy and compassion in a complex environment requires a different approach. It requires self-awareness and creating organisational conditions that enable sustained behaviour change.
Figure 1: Organisational vitality chart
For the most part, these three capabilities evolve in isolation, are rarely integrated or permanently resourced, and are episodic in their focus and delivery. To address this, organisations must move beyond treating these as separate capabilities or time-bound initiatives.
Instead, they must integrate and resource them strategically to create the conditions for organisational vitality, where business performance outcomes are elevated through a psychologically safe workforce.
When these capabilities are integrated and embedded, they create the conditions necessary for organisational vitality. The organisation and its processes are designed to sustain or improve performance without leading to burnout. Leaders transition from reactive, instinctual responses to intentional actions, becoming equipped to advocate for improvements in work processes and to effectively define, manage and lead change as it arises. This change is managed in a way that achieves desired outcomes without disrupting the optimised organisational structure or exhausting the people responsible for making it stick.
The case for integration
The business case for this integrated and embedded approach is well established, even if the approach itself remains rare in practice.
Organisations that invest equally in people, performance and employee health are 4.3 times more likely to maintain top-tier financial performance for nine out of ten years, and 1.5 times more likely to remain high financial performers over time (McKinsey Global Institute, 2023).
Organisations with a people and performance focus achieve around 30% higher revenue growth than their peers for every dollar invested in human and organisational capital, and in those organisations that don't invest in human and organisational capital, 60% of their leaders identified disengaged employees as a major barrier to performance (McKinsey & Company, 2026).
And for those navigating large-scale transformation, the stakes are even higher, as successful leadership development doubles the success rate of organisational transformations (McKinsey & Company, 2024).
The financial case is compelling. But the more immediate reality for most Australian organisations right now is compliance exposure.
Psychosocial legislation has redefined both where accountability for workforce health and wellbeing sits and what organisations must demonstrate to meet their obligations. Organisations can no longer point to an Employee Assistance Program and consider the obligation met.
The expectation is proactive, systemic psychosocial risk management, and the gap between what most organisations currently have in place and what the legislation requires is significant.
The organisations that build and resource these integrated capabilities will do more than meet compliance obligations; they'll be better positioned to attract and retain talent, deliver on their strategy, and absorb the next wave of disruption from a position of organisational vitality rather than survival.
The path forward
The workforce health and leadership crisis unfolding across Australian organisations won’t resolve itself. The data is clear, the trajectory is worsening, and traditional responses are no longer sufficient.
The organisations that close the gap between the ambition of their strategy and the reality of how work gets done, how change is managed, and how leaders are supported to lead are the ones that will thrive into the future.
That requires something most organisations haven't yet built: an integrated, embedded capability that treats organisation and work design, change management and leadership development not as separate disciplines, but as a single, coherent response to the complex environment we're all operating in.
The cost of not doing this is no longer just a people and culture problem. It shows up in your financial performance, engagement data, turnover numbers, and increasingly, your exposure to the legal risks posed by unmanaged psychosocial hazards.
The path forward doesn't require starting from scratch, as most organisations already have the ingredients. What's missing is the prioritisation, infrastructure, and intention to make the ingredients for organisational vitality permanent, not episodic.
And the good news? The starting point is usually far simpler than it seems.
References
McKinsey and Co. (2024). The art of 21st-century leadership: From succession planning to building a leadership factory.
McKinsey and Co. (2026). The State of Organizations 2026.
McKinsey Global Institute. (2023). Performance through people: Transforming human capital into competitive advantage.
Safe Work Australia. (2025). Key Work Health and Safety Statistics Australia, 2025. https://data.safeworkaustralia.gov.au/insights/key-whs-statistics-australia
Staffbase. (2026). Executive Priorities for the Next Digital Workplace Era, 2026
TELUS. (2026). The Mental Health Index – Australia, Q1, 2026