The Advantage: Why Organizational Health Trumps Everything Else In Business

by Patrick Lencioni

But before leaders can tap into the power of organizational health, they must humble themselves enough to overcome the three biases that prevent them from embracing it. 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 isol...

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.

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.

Some people ask me if it’s possible for team members to be too vulnerable with one another, to leave themselves open to being hurt. My answer is no. To believe that a person on a team can be too vulnerable is really to suggest that she would be wise to withhold information about her weaknesses, mistakes, or need for help. This is almost never a good idea. Perhaps during the initial stages of team development, complete vulnerability is not a realistic expectation. But soon after, the only way for teams to build real trust is for team members to come clean about who they are, warts and all.

Many leaders struggle with accountability but don’t know it. Some will tell me that since they aren’t afraid to fire people, they must not have an accountability problem. Of course, this is misguided. 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.

CHECKLIST FOR DISCIPLINE 1: BUILD A COHESIVE LEADERSHIP TEAM Members of a leadership team can be confident that they’ve mastered this discipline when they can affirm the following statements: The leadership team is small enough (three to ten people) to be effective. Members of the team trust one another and can be genuinely vulnerable with each other. Team members regularly engage in productive, unfiltered conflict around important issues. The team leaves meetings with clear-cut, active, and specific agreements around decisions. Team members hold one another accountable to commitments and behaviors. Members of the leadership team are focused on team number one. They put the collective priorities and needs of the larger organization ahead of their own departments.

No matter how many times executives preach about the “e” word in their speeches, there is no way that their employees can be empowered to fully execute their responsibilities if they don’t receive clear and consistent messages about what is important from their leaders across the organization. There is probably no greater frustration for employees than having to constantly navigate the politics and confusion caused by leaders who are misaligned. That’s because just a little daylight between members of a leadership team becomes blinding and overwhelming to employees one or two levels below.

None of these questions is novel per se. What is new is the realization that none of them can be addressed in isolation; they must be answered together. Failing to achieve alignment around any one of them can prevent an organization from attaining the level of clarity necessary to become healthy. These are the six questions: 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.

The point here is that 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. When leaders try to use their purpose as a strategic differentiator, they usually fail to fully tap into the real reason for having one, and then find themselves disappointed when they learn that another company, perhaps even within their industry, shares theirs.

When an organization announces that it has nine core values including customer service, innovation, quality, honesty, integrity, environmental responsibility, work-life balance, financial responsibility, and respect for the individual, it makes it impossible to use those values to make decisions, hire employees, or enact policies. After all, no action, person, or policy can meet all of those criteria.

Core Values These are the few—just two or three—behavioral traits that are inherent in an organization. Core values lie at the heart of the organization’s identity, do not change over time, and must already exist. In other words, they cannot be contrived. An organization knows that it has identified its core values correctly when it will allow itself to be punished for living those values and when it accepts the fact that employees will sometimes take those values too far.

Aspirational Values These are the characteristics that an organization wants to have, wishes it already had, and believes it must develop in order to maximize its success in its current market environment.

Permission-to-Play Values These values are the minimum behavioral standards that are required in an organization. Although they are extremely important, permission-to-play values don’t serve to clearly define or differentiate an organization from others. Values that commonly fit into this category include honesty, integrity, and respect for others.

Permission-to-play values must be delineated from the core to avoid dilution and genericism (I don’t think that’s a word, but you get the point).

It’s important that leaders guard against accidental values taking root because they can prevent new ideas and people from flourishing in an organization. Sometimes they even sabotage its success by shutting out new perspectives and even potential customers.

If an organization’s reason for existence answers the question, Why?, then its business definition answers the question, What? It’s critical that it be clear and straightforward. It should not be crafted so that it can also be used in marketing material.

We came to realize that the best way for an organization to make strategy practical is to boil it down to three strategic anchors that will be used to inform every decision the organization makes and provide the filter or lens through which decisions must be evaluated to ensure consistency. Strategic anchors provide the context for all decision making and help companies avoid the temptation to make purely pragmatic and opportunistic decisions that so often end up diminishing a company’s plan for success.

Most organizations I’ve worked with have too many top priorities to achieve the level of focus they need to succeed. Wanting to cover all their bases, they establish a long list of disparate objectives and spread their scarce time, energy, and resources across them all. The result is almost always a lot of initiatives being done in a mediocre way and a failure to accomplish what matters most.

By communicating that the organization has five or seven top priorities, leaders put their well-intentioned employees in the inevitable position of getting pulled in different directions, sometimes polar opposite ones. Wanting only to succeed, they often find themselves working at cross-purposes with their colleagues in other departments who are left to make their own decisions about which of the many priorities is most important.

Realizing the benefits of having a clear and collective focus requires more than merely identifying the thematic goal. That goal must then be further clarified by defining the objectives which will make accomplishing it possible. I call these, for obvious reasons, defining objectives. (I originally wanted to call them “big buckets of stuff” but was overruled by my wiser colleagues.) Defining objectives are the general categories of activity required to achieve the thematic goal. Like the thematic goal, defining objectives must be qualitative, temporary, and shared by the leadership team.

Basically OKRs

CHECKLIST FOR DISCIPLINE 2: CREATE CLARITY Members of a leadership team can be confident that they’ve mastered this discipline when they can affirm the following statements: Members of the leadership team know, agree on, and are passionate about the reason that the organization exists. The leadership team has clarified and embraced a small, specific set of behavioral values. Leaders are clear and aligned around a strategy that helps them define success and differentiate from competitors. The leadership team has a clear, current goal around which they rally. They feel a collective sense of ownership for that goal. Members of the leadership team understand one another’s roles and responsibilities. They are comfortable asking questions about one another’s work. The elements of the organization’s clarity are concisely summarized and regularly referenced and reviewed by the leadership team.

CHECKLIST FOR DISCIPLINE 3: OVERCOMMUNICATE CLARITY Members of a leadership team can be confident that they’ve mastered this discipline when they can affirm the following statements: The leadership team has clearly communicated the six aspects of clarity to all employees. Team members regularly remind the people in their departments about those aspects of clarity. The team leaves meetings with clear and specific agreements about what to communicate to their employees, and they cascade those messages quickly after meetings. Employees are able to accurately articulate the organization’s reason for existence, values, strategic anchors, and goals.

The most memorable time of an employee’s career, and the time with the biggest impact, are his or her first days and weeks on a new job. The impact of first impressions is just that powerful, and healthy companies take advantage of that to move new employees in the right direction. That means orientation shouldn’t revolve around lengthy explanations of benefits and administration but rather around reinforcing the answers to the six critical questions. When employees get the opportunity to hear their leaders talk about why the organization they joined exists, what behavioral values were used to select them during the hiring process, how the organization plans to succeed, what its top priority is, and who does what at the executive level, they can immediately see how they will contribute to the greater good of that organization.

CHECKLIST FOR DISCIPLINE 4: REINFORCE CLARITY Members of a leadership team can be confident that they’ve mastered this discipline when they can affirm the following statements: The organization has a simple way to ensure that new hires are carefully selected based on the company’s values. New people are brought into the organization by thoroughly teaching them about the six elements of clarity. Managers throughout the organization have a simple, consistent, and nonbureaucratic system for setting goals and reviewing progress with employees. That system is customized around the elements of clarity. Employees who don’t fit the values are managed out of the organization. Poor performers who do fit the values are given the coaching and assistance they need to succeed. Compensation and reward systems are built around the values and goals of the organization.

CHECKLIST FOR MEETINGS Members of a leadership team can be confident that they’ve mastered meetings when they can affirm the following statements: Tactical and strategic discussions are addressed in separate meetings. During tactical staff meetings, agendas are set only after the team has reviewed its progress against goals. Noncritical administrative topics are easily discarded. During topical meetings, enough time is allocated to major issues to allow for clarification, debate, and resolution. The team meets quarterly away from the office to review what is happening in the industry, in the organization, and on the team.