The Advantage: Why Organizational Health Trumps Everything Else In Business

by Patrick Lencioni

organizational health is different. It’s not at all touchy-feely, and it’s far bigger and more important than mere culture. More than a side dish or a flavor enhancer for the real meat and potatoes of business, it is the very plate on which the meat and potatoes sit.

The Sophistication Bias: Organizational health is so simple and accessible that many leaders have a hard time seeing it as a real opportunity for meaningful advantage. After all, it doesn’t require great intelligence or sophistication, just uncommon levels of discipline, courage, persistence, and common sense. In an age where we have come to believe that differentiation and dramatic improvement can be found only in complexity, it’s hard for well-educated executives to embrace something so simple and straightforward.

The Adrenaline Bias: Becoming a healthy organization takes a little time. Unfortunately, many of the leaders I’ve worked with suffer from a chronic case of adrenaline addiction, seemingly hooked on the daily rush of activity and firefighting within their organizations. It’s as though they’re afraid to slow down and deal with issues that are critical but don’t seem particularly urgent. As simple as this may seem, it remains a serious obstacle for many dysfunctional organizations led by executives who don’t understand that old race-car drivers’ axiom: you have to slow down in order to go fast.

The Quantification Bias: The benefits of becoming a healthy organization, as powerful as they are, are difficult to accurately quantify. Organizational health permeates so many aspects of a company that isolating any one variable and measuring its financial impact is almost impossible to do in a precise way. That certainly doesn’t mean the impact isn’t real, tangible, and massive; it just requires a level of conviction and intuition that many overly analytical leaders have a hard time accepting.

I am convinced that once organizational health is properly understood and placed into the right context, it will surpass all other disciplines in business as the greatest opportunity for improvement and competitive advantage. Really.

An organization has integrity—is healthy—when it is whole, consistent, and complete, that is, when its management, operations, strategy, and culture fit together and make sense.

Most leaders prefer to look for answers where the light is better, where they are more comfortable. And the light is certainly better in the measurable, objective, and data-driven world of organizational intelligence (the smart side of the equation) than it is in the messier, more unpredictable world of organizational health. Studying spreadsheets and Gantt charts and financial statements is relatively safe and predictable, which most executives prefer. That’s how they’ve been trained, and that’s where they’re comfortable. What they usually want to avoid at all costs are subjective conversations that can easily become emotional and awkward. And organizational health is certainly fraught with the potential for subjective and awkward conversations.

so many leaders, even when they acknowledge the pain that politics and confusion are causing their organizations, continue to spend their time tweaking the dials in more traditional disciplines. Unfortunately, the opportunities for improvement and competitive advantage they find in those areas are incremental and fleeting at best. That’s right. The advantages to be found in the classic areas of business—finance, marketing, strategy—in spite of all the attention they receive, are incremental and fleeting. In this world of ubiquitous information and nanosecond technology exchange, it’s harder than it has ever been in history to maintain a competitive advantage based on intelligence or knowledge. Information just changes hands too rapidly today. Companies, even entire industries, come and go faster than we could have imagined even a decade ago.

a lack of intelligence, domain expertise, or industry knowledge is almost never the problem I see in organizations. In twenty years of consulting to clients in virtually every industry, I have yet to meet a group of leaders who made me think, Wow, these people just don’t know enough about their business to succeed. Really. The vast majority of organizations today have more than enough intelligence, expertise, and knowledge to be successful. What they lack is organizational health.

After two decades of working with CEOs and their teams of senior executives, I’ve become absolutely convinced that the seminal difference between successful companies and mediocre or unsuccessful ones has little, if anything, to do with what they know or how smart they are; it has everything to do with how healthy they are.

if someone were to press me on which of the two characteristics of an organization, intelligence or health, should receive first priority, I would say without hesitation that health comes out a clear number one.

Health Begets—and Trumps—Intelligence

An organization that is healthy will inevitably get smarter over time. That’s because people in a healthy organization, beginning with the leaders, learn from one another, identify critical issues, and recover quickly from mistakes. Without politics and confusion getting in their way, they cycle through problems and rally around solutions much faster than their dysfunctional and political rivals do. Moreover, they create environments in which employees do the same.

The same phenomenon can be seen in families. Healthy families—the ones where parents give their children discipline, affection, and time—almost always improve over the years, even when they lack many of the advantages and resources that money can buy. Unhealthy families, the ones without discipline and unconditional love, will always struggle, even if they have all the money, tutors, coaches, and technology they could ever want.

The key ingredient for improvement and success is not access to knowledge or resources, as helpful as those things may be. It’s really about the health of the environment. And consider this: if you had to bet on the future of one of two kids, one raised by loving parents in a solid home and the other a product of apathy and dysfunction, you’d always take the former regardless of the resources surrounding them. Well, the same is true in organizations.

Here is another testament to the superiority of organizational health over intelligence. In my career as a consultant, I’ve worked with a number of great, healthy companies that were led by men and women who attended relatively modest colleges—people who would admit to being just a little above average in intellectual capacity. When those companies made wise decisions that set them apart from their competition, journalists and industry analysts incorrectly attributed their success to their intellectual prowess. The truth of the matter was that those companies weren’t smarter than their competitors; they simply tapped into the adequate intelligence they had and didn’t allow dysfunction, ego, and politics to get in the way. On the flip side, I’ve seen all too many companies whose leaders earned the best grades at the top universities, who possessed tremendous intellectual capacity and had extraordinary experience and industry knowledge, yet still managed to fail because they couldn’t tap into much of it. In almost every situation, it was politics, behavioral misalignment, and inconsistency that did them in, leading them to make what seemed in retrospect like obvious tactical and strategic mistakes. Journalists and analysts always seem perplexed by how those executives “could have been so dumb.” But again, they miss the point by attributing the bad decisions to intellectual deficiencies. They fail to see that the real deficiency, the one that makes it possible for smart peopl...

And so a good way to look at organizational health—and one that executives seem to respond to readily—is to see it as the multiplier of intelligence. The healthier an organization is, the more of its intelligence it is able to tap into and use.

Most organizations exploit only a fraction of the knowledge, experience, and intellectual capital that is available to them. But the healthy ones tap into almost all of it. That, as much as anything else, is why they have such an advantage over their unhealthy competitors.

organizational health gets overlooked because the elements that make it up don’t seem to be anything new. And in many ways, they aren’t. The basic components—leadership, teamwork, culture, strategy, meetings—have been a subject of discussion within academia for a long time. The problem is that we’ve been looking at those elements in isolated, discreet, and theoretical ways instead of as an integrated, practical discipline.

Anyone who has ever worked in an unhealthy organization—and almost everyone has—knows the misery of dealing with politics, dysfunction, confusion, and bureaucracy. As much as we enjoy making jokes about these artifacts of organizational plight, there is no denying that they exact a significant toll. The financial cost of having an unhealthy organization is undeniable: wasted resources and time, decreased productivity, increased employee turnover, and customer attrition. The money an organization loses as a result of these problems, and the money it has to spend to recover from them, is staggering.

When leaders of an organization are less than honest with one another, when they put the needs of their departments or their careers ahead of the needs of the greater organization, when they are misaligned, confused, and inconsistent about what is important, they create real anguish for real human beings. And they experience that anguish themselves too. Aside from the obvious impact this has within the organization, there is a larger social cost. People who work in unhealthy organizations eventually come to see work as drudgery. They view success as being unlikely or, even worse, out of their control. This leads to a diminished sense of hope and lower self-esteem, which leaks beyond the walls of the companies where they work, into their families where it often contributes to deep personal problems, the effects of which may be felt for years. This is nothing short of a tragedy, and a completely avoidable one.

I point all this out only so that we don’t underestimate the cost of allowing our organizations to remain unhealthy, and, more important, so that we fully grasp the opportunity that lies before us. Turning an unhealthy company into a healthy one will not only create a massive competitive advantage and improved bottom line, it will also make a real difference in the lives of the people who work there. And for the leaders who spearhead those efforts, it will be one of the most meaningful and rewarding endeavors they will ever pursue.

An organization doesn’t become healthy in a linear, tidy fashion. Like building a strong marriage or family, it’s a messy process that involves doing a few things at once, and it must be maintained on an ongoing basis in order to be preserved. Still, that messy process can be broken down into four simple disciplines.

Once a leadership team has established behavioral cohesion and created clarity around the answers to those questions, it must then communicate those answers to employees clearly, repeatedly, enthusiastically, and repeatedly (that’s not a typo). When it comes to reinforcing clarity, there is no such thing as too much communication.

Is this model foolproof? Pretty much. When an organization’s leaders are cohesive, when they are unambiguously aligned around a common set of answers to a few critical questions, when they communicate those answers again and again and again, and when they put effective processes in place to reinforce those answers, they create an environment in which success is almost impossible to prevent. Really.

The first step a leadership team has to take if it wants the organization it leads to be healthy—and to achieve the advantages that go with it—is to make itself cohesive. There’s just no way around it. If an organization is led by a team that is not behaviorally unified, there is no chance that it will become healthy.

It’s kind of like a family. If the parents’ relationship is dysfunctional, the family will be too. That’s not to say that some good things can’t come out of it; it’s just that the family/company will not come anywhere close to realizing its full potential.

Becoming a real team requires an intentional decision on the part of its members. I like to say that teamwork is not a virtue. It is a choice—and a strategic one. That means leaders who choose to operate as a real team willingly accept the work and the sacrifices that are necessary for any group that wants to reap the benefits of true teamwork. But before they can do that, they should understand and agree on a common definition of what a leadership team really is.

A leadership team is a small group of people who are collectively responsible for achieving a common objective for their organization.

Advocacy is the kind of communication that most people are accustomed to, and it is all about stating your case or making your point. I think we should change our advertising approach. Or, I recommend that we cut costs. Inquiry is rarer and more important than advocacy. It happens when people ask questions to seek clarity about another person’s statement of advocacy. Why do you think the advertising approach is wrong? And which aspects of it are you referring to? Or, What evidence do you have that our expenses are too high? And how certain are you of this?

Inclusivity, or the basic idea behind it, should be achieved by ensuring that the members of a leadership team are adequately representing and tapping into the opinions of the people who work for them, not by maximizing the size of the team.

The only reason that a person should be on a team is that she represents a key part of the organization or brings truly critical talent or insight to the table. If someone is unhappy with his pay or status or wavering about accepting a job offer, the leader should deal with that issue head-on, not compound it by making the executive team larger and less productive.

This is perhaps the most important distinction between a working group and a real leadership team. Collective responsibility implies, more than anything else, selflessness and shared sacrifices from team members.

Members of cohesive teams spend many hours working together on issues and topics that often don’t fall directly within their formal areas of responsibility. They go to meetings to help their team members solve problems even when those problems have nothing to do with their departments. And perhaps most challenging of all, they enter into difficult, uncomfortable discussions, even bringing up thorny issues with colleagues about their shortcomings, in order to solve problems that might prevent the team from achieving its objectives. They do this even when they’re tempted to avoid it all and go back to the relative safety of their offices to do what I refer to as their “day jobs,” that is, the work of their department.

Though this is pretty straightforward, it’s worth stating that most of a leadership team’s objectives should be collective ones. If the most important goal within the organization is to increase sales, then every member of the team shares that goal. It isn’t just the responsibility of the head of sales. No one on a cohesive team can say, Well, I did my job. Our failure isn’t my fault.

if a team shares a common objective, a good portion of their compensation or reward structure, though not necessarily all of it, should be based on the achievement of that common objective. When leaders preach teamwork but exclusively reward individual achievement, they are confusing their people and creating an obstacle to true team behavior.

The kind of trust that is necessary to build a great team is what I call vulnerability-based trust. This is what happens when members get to a point where they are completely comfortable being transparent, honest, and naked with one another, where they say and genuinely mean things like “I screwed up,” “I need help,” “Your idea is better than mine,” “I wish I could learn to do that as well as you do,” and even, “I’m sorry.”

When everyone on a team knows that everyone else is vulnerable enough to say and mean those things, and that no one is going to hide his or her weaknesses or mistakes, they develop a deep and uncommon sense of trust. They speak more freely and fearlessly with one another and don’t waste time and energy putting on airs or pretending to be someone they’re not. Over time, this creates a bond that exceeds what many people ever experience in their lives and, sometimes, unfortunately, even in their families.

At the heart of vulnerability lies the willingness of people to abandon their pride and their fear, to sacrifice their egos for the collective good of the team.

At the heart of the fundamental attribution error is the tendency of human beings to attribute the negative or frustrating behaviors of their colleagues to their intentions and personalities, while attributing their own negative or frustrating behaviors to environmental factors.

The only way for the leader of a team to create a safe environment for his team members to be vulnerable is by stepping up and doing something that feels unsafe and uncomfortable first. By getting naked before anyone else, by taking the risk of making himself vulnerable with no guarantee that other members of the team will respond in kind, a leader demonstrates an extraordinary level of selflessness and dedication to the team. And that gives him the right, and the confidence, to ask others to do the same.

Trust is just one of five behaviors that cohesive teams must establish to build a healthy organization. However, it is by far the most important of the five because it is the foundation for the others. Simply stated, it makes teamwork possible. Only when teams build vulnerability-based trust do they put themselves in a position to embrace the other four behaviors,

Overcoming the tendency to run from discomfort is one of the most important requirements for any leadership team—in fact, for any leader.

When it comes to the range of different conflict dynamics in an organization, I’ve found there is a continuum of sorts. At one end of that continuum is no conflict at all. I call this artificial harmony, because it is marked by a lot of false smiling and disingenuous agreement around just about everything, at least publicly. At the other end of the continuum is relentless, nasty, and destructive conflict, with people constantly at one another’s throats. As you move away from the extreme of artificial harmony, you encounter more and more constructive conflict. Somewhere in the middle of those two extremes is the demarcation line where good, constructive conflict crosses over into the destructive kind.

The optimal place to be on this continuum is just to the left of the demarcation line (the Ideal Conflict Point). That would be the point where a team is engaged in all the constructive conflict they could possibly have, but never stepping over the line into destructive territory. Of course, this is impossible. In any team, and for that matter, in any family or marriage, someone at some point is going to step over the line and say or do something that isn’t constructive. But rather than fearing this, teams need to accept that it will happen and learn to manage it. They must be willing to live through the messiness of recovering from slightly inappropriate conflict, so that they will have the courage to go back to the best place again and again. Eventually they’ll develop the confidence that they can survive an occasional step over the line and can even get stronger and build greater trust with one another when they do. But this will never happen if executives are clinging to the side at the shallow end of the pool in the world of artificial harmony.

One of the best ways for leaders to raise the level of healthy conflict on a team is by mining for conflict during meetings. This happens when they suspect that unearthed disagreement is lurking in the room and gently demand that people come clean.

In a similar way that trust enables conflict, conflict allows a team to move on to the next critical behavior of a cohesive team: achieving commitment.

The reason that conflict is so important is that a team cannot achieve commitment without it. People will not actively commit to a decision if they have not had the opportunity to provide input, ask questions, and understand the rationale behind it. Another way to say this is, “If people don’t weigh in, they can’t buy in.”

Great teams avoid the consensus trap by embracing a concept that Intel, the legendary microchip manufacturer, calls “disagree and commit.” Basically they believe that even when people can’t come to an agreement around an issue, they must still leave the room unambiguously committed to a common course of action. Most executives who hear about this disagree-and-commit philosophy are immediately convinced that it is something they want. But they need to remember that it requires a willingness on the part of the leader to invite the discomfort of conflict. After all, the principle of disagree and commit can’t happen without the disagree part.

it’s only when colleagues speak up and put their opinions on the table, without holding back, that the leader can confidently fulfill one of his most important responsibilities: breaking ties. When a leader knows that everyone on the team has weighed in and provided every possible perspective needed for a fully informed decision, he can then bring a discussion to a clear and unambiguous close and expect team members to rally around the final decision even if they initially disagreed with it.