The Advantage: Why Organizational Health Trumps Everything Else In Business

by Patrick Lencioni

The single greatest advantage any company can achieve is organizational health. Yet it is ignored by most leaders even though it is simple, free, and available to anyone who wants it.

The health of an organization provides the context for strategy, finance, marketing, technology, and everything else that happens within it, which is why it is the single greatest factor determining an organization’s success. More than talent. More than knowledge. More than innovation.

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.

any organization that really wants to maximize its success must come to embody two basic qualities: it must be smart, and it must be healthy.

A good way to recognize health is to look for the signs that indicate an organization has it. These include minimal politics and confusion, high degrees of morale and productivity, and very low turnover among good employees.

Two Requirements for Success

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.

That’s why 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.

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.

And so, being smart—as critical as it is—has become something of a commodity. It is simply permission to play, a minimum standard required for having even a possibility of success.

The vast majority of organizations today have more than enough intelligence, expertise, and knowledge to be successful. What they lack is organizational health. This point is worth restating. 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.

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 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.

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.

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.

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

When more than eight or nine people are on a team, members tend to advocate a heck of a lot more than they inquire. This makes sense because they aren’t confident that they’re going to get the opportunity to speak again soon, so they use their scarce floor time to announce their position or make a point. When a team is small, members are more likely to use much of their time asking questions and seeking clarity, confident that they’ll be able to regain the floor and share their ideas or opinions when necessary.

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.

Collective responsibility implies, more than anything else, selflessness and shared sacrifices from team members.

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.”

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.

When team members trust one another, when they know that everyone on the team is capable of admitting when they don’t have the right answer, and when they’re willing to acknowledge when someone else’s idea is better than theirs, the fear of conflict and the discomfort it entails is greatly diminished. When there is trust, conflict becomes nothing but the pursuit of truth, an attempt to find the best possible answer. It is not only okay but desirable. Conflict without trust, however, is politics, an attempt to manipulate others in order to win an argument regardless of the truth.

when we avoid necessary pain, we not only fail to experience the gain, we also end up making the pain worse in the long run.

When leadership team members avoid discomfort among themselves, they only transfer it in far greater quantities to larger groups of people throughout the organization they’re supposed to be serving. In essence, they leave it to others below them to try to resolve issues that really must be addressed at the top. This contributes to employee angst and job misery as much as anything else in organizational life.

when a leader sees her people engaging in disagreement during a meeting, even over something relatively innocuous, she should do something that may seem counterintuitive but is remarkably helpful: interrupt. That’s right. Just as people are beginning to challenge one another, she should stop them for a moment to remind them that what they are doing is good.

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.”

This is a critical point and needs to be clarified because it should not be misinterpreted as an argument for consensus. When leadership teams wait for consensus before taking action, they usually end up with decisions that are made too late and are mildly disagreeable to everyone. This is a recipe for mediocrity and frustration.

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.

At the end of every meeting, cohesive teams must take a few minutes to ensure that everyone sitting at the table is walking away with the same understanding about what has been agreed to and what they are committed to do.

the more comfortable a leader is holding people on a team accountable, the less likely she is to be asked to do so. The less likely she is to confront people, the more she’ll be called on to do it by subordinates who aren’t willing to do her dirty work for her.

Firing someone is not necessarily a sign of accountability, but is often the last act of cowardice for a leader who doesn’t know how or isn’t willing to hold people accountable.

At its core, accountability is about having the courage to confront someone about their deficiencies and then to stand in the moment and deal with their reaction, which may not be pleasant. It is a selfless act, one rooted in a word that I don’t use lightly in a business book: love. To hold someone accountable is to care about them enough to risk having them blame you for pointing out their deficiencies.

Many leaders who struggle with this (again, I’m one of them) will try to convince themselves that their reluctance is a product of their kindness; they just don’t want to make their employees feel bad. But an honest reassessment of their motivation will allow them to admit that they are the ones who don’t want to feel bad and that failing to hold someone accountable is ultimately an act of selfishness.

there is nothing noble about withholding information that can help an employee improve. Eventually that employee’s lack of improvement is going to come back to haunt him in a performance review or when he is let go.

there is nothing kind about firing someone who has not been confronted about his performance.

Conflict is about issues and ideas, while accountability is about performance and behavior.

As uncomfortable and difficult as it can often be, accountability helps a team and an organization avoid far more costly and difficult situations later.

Too many leaders seem to have a greater affinity for and loyalty to the department they lead rather than the team they’re a member of and the organization they are supposed to be collectively serving. Other distractions include a concern for individual career development, budget allocations, status, and ego, all of them common distractions that prevent teams from being obsessed with achieving results.

Some leaders of teams that don’t regularly succeed will still insist that they have a great team because team members care about one other and no one ever leaves the team. A more accurate description of their situation would be to say that they have a mediocre team that enjoys being together and isn’t terribly bothered by failure.

no matter how good a leadership team feels about itself, and how noble its mission might be, if the organization it leads rarely achieves its goals, then, by definition, it’s simply not a good team.

The only way for a team to really be a team and to maximize its output is to ensure that everyone is focused on the same priorities—rowing in the same direction, if you will. When the marketing department defines itself by how well it does marketing and the other departments do the same in their functional areas, there is no reason to expect synergy within the team.

When members of a leadership team feel a stronger sense of commitment and loyalty to the team they lead than the one they’re a member of, then the team they’re a member of becomes like the U.S. Congress or the United Nations: it’s just a place where people come together to lobby for their constituents. Teams that lead healthy organizations reject this model and come to terms with the difficult but critical requirement that executives must put the needs of the higher team ahead of the needs of their departments.

1. Why do we exist? 2. How do we behave? 3. What do we do? 4. How will we succeed? 5. What is most important, right now? 6. Who must do what? If members of a leadership team can rally around clear answers to these fundamental questions—without using jargon and smarmy language—they will drastically increase the likelihood of creating a healthy organization. This may well be the most important step of all in achieving the advantage of organizational health.

it’s often tempting for leaders to slip into a marketing or sloganizing mind-set when answering these questions, trying to come up with catchy phrases or impressive-sounding statements. This is a sign that the team is missing the boat and has been distracted from its real purpose: establishing true clarity and alignment.

This tendency to apply twenty-twenty hindsight to success falsely leads people to think that intelligence and precision, rather than clarity, are key.

Plenty of euphemisms attest to this idea that implementation science is more important than decision science. One I heard years ago comes from the military: a plan is better than no plan. And it was General Patton who once said, “A good plan violently executed today is better than a perfect plan executed next week.” Those adages attest to something I’ve seen among too many leadership teams: a simple failure to achieve clarity because executives are waiting for perfection. In the meantime, confusion reigns, leaders lose credibility, and the organization suffers.

waiting for clear confirmation that a decision is exactly right is a recipe for mediocrity and almost a guarantee of eventual failure. That’s because organizations learn by making decisions, even bad ones. By being decisive, leaders allow themselves to get clear, immediate data from their actions.

An organization’s core purpose—why it exists—has to be completely idealistic. I can’t reiterate this point enough. Many leadership teams struggle with this, afraid that what they come up with will seem too grand or aspirational. Of course, that’s the whole point. Employees in every organization, and at every level, need to know that at the heart of what they do lies something grand and aspirational. They’re well aware that ultimately it will boil down to tangible, tactical activities.

an organization’s reason for existing is not meant to be a differentiator and that the purpose for identifying it is only to clarify what is true in order to guide the business.