Title: The Advantage: Why Organizational Health Trumps Everything Else in Business
Author: Patrick Lencioni
Copyright Date: 2012
There is a competitive advantage out there, arguably more powerful than any other. Is it superior strategy? Faster innovation? Smarter employees? No, New York Times best-selling author, Patrick Lencioni, argues that the seminal difference between successful companies and mediocre ones has little to do with what they know and how smart they are and more to do with how healthy they are. In this book, Lencioni brings together his vast experience and many of the themes cultivated in his other best-selling books and delivers a first: a cohesive and comprehensive exploration of the unique advantage organizational health provides.
Simply put, an organization is healthy when it is whole, consistent and complete, when its management, operations and culture are unified. Healthy organizations outperform their counterparts, are free of politics and confusion and provide an environment where star performers never want to leave. Lencioni’s first non-fiction book provides leaders with a groundbreaking, approachable model for achieving organizational health—complete with stories, tips and anecdotes from his experiences consulting to some of the nation’s leading organizations. In this age of informational ubiquity and nano-second change, it is no longer enough
to build a competitive advantage based on intelligence alone. The Advantage provides a foundational construct for conducting business in a new way—one that maximizes human potential and aligns the organization around a common set of principles.
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. That is the premise of this book—not to mention my career—and I am utterly convinced that it is true. Location 331
In spite of its undeniable power, so many leaders struggle to embrace organizational health (which I’ll be defining shortly) because they quietly believe they are too sophisticated, too busy, or too analytical to bother with it. In other words, they think it’s beneath them. Location 350
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. Location 360
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. Location 382
At its core, organizational health is about integrity, but not in the ethical or moral way that integrity is defined so often today. 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. Location 387
Whenever I present organizational health to a prospective client or a roomful of executives, I start by contrasting it with something more familiar to them. I explain that 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. Location 391
Smart organizations are good at those classic fundamentals of business—subjects like strategy, marketing, finance, and technology—which I consider to be decision sciences. Location 395
But being smart is only half the equation. Yet somehow it occupies almost all the time, energy, and attention of most executives. The other half of the equation, the one that is largely neglected, is about being 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. Location 400
The vast majority of organizations today have more than enough intelligence, expertise, and knowledge to be successful. What they lack is organizational health. Location 445
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. Location 462
In contrast, smart organizations don’t seem to have any greater chance of getting healthier by virtue of their intelligence. In fact, the reverse may actually be true because leaders who pride themselves on expertise and intelligence often struggle to acknowledge their flaws and learn from peers. They aren’t as easily open and transparent with one another, which delays recovery from mistakes and exacerbates politics and confusion. That’s certainly not to say that being smart isn’t desirable, just that it provides no inherent advantages for becoming healthy. Location 466
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. Location 492
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. Location 517
Okay, here is the next question that has to be answered, the one that will occupy the rest of this book: What does an organization have to do to become healthy? There are four required disciplines.
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. Location 685
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. Location 692
BEHAVIOR 1: BUILDING TRUST.
Members of a truly cohesive team must trust one another. I realize that sounds like the most patently obvious statement ever made, something that every organization understands and values. As a result, you’d think that most leadership teams would be pretty good at building trust. As it turns out, they aren’t, and I think a big part of it is that they have the wrong idea about what trust is. Location 706
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.” Location 714
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. Location 815
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. Location 893
BEHAVIOR 2: MASTERING CONFLICT.
Contrary to popular wisdom and behavior, conflict is not a bad thing for a team. In fact, the fear of conflict is almost always a sign of problems. Location 902
Overcoming the tendency to run from discomfort is one of the most important requirements for any leadership team—in fact, for any leader. Every endeavor of importance in life, whether it is creative, athletic, interpersonal, or academic, brings with it a measure of discomfort, calling to mind the old saying, “No pain, no gain.” Location 916
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. Location 1019
BEHAVIOR 3: 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.” Location 1057
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. Location 1063
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. Location 1111
BEHAVIOR 4: EMBRACING ACCOUNTABILITY.
Notice that I’m focused here on peers. That’s because peer-to-peer accountability is the primary and most effective source of accountability on the leadership team of a healthy organization. Most people assume that the leader of an executive team should be the primary source of accountability—and that’s the norm in most unhealthy organizations—but it isn’t efficient or practical, and it makes little sense. Location 1155
The irony of all this is that the only way for a team to develop a true culture of peer-to-peer accountability is for the leader to demonstrate that she is willing to confront difficult situations and hold people accountable herself. That’s right. The leader of the team, though not the primary source of accountability, will always be the ultimate arbiter of it. If she is reluctant to play that role—if she is a wuss who constantly balks when it’s time to call someone on their behavior or performance—then the rest of the team is not going to do their part. Location 1188
So—and here is the irony—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. Location 1194
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. Location 1202
BEHAVIOR 5: FOCUSING ON RESULTS.
The ultimate point of building greater trust, conflict, commitment, and accountability is one thing: the achievement of results. Location 1316
When it comes to how a cohesive team measures its performance, one criterion sets it apart from non-cohesive ones: its goals are shared across the entire team. This is not just a theoretical way of saying that people should help one another. It’s far more specific, and far more difficult too. Location 1341
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 second requirement for building a healthy organization—creating clarity—is all about achieving alignment. Location 1456
What leaders must do to give employees the clarity they need is agree on the answers to six simple but critical questions and thereby eliminate even small discrepancies in their thinking. 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:
More than getting the right answer, it is important to simply have an answer—one that is directionally correct and around which all team members can commit. Location 1545
QUESTION 1: WHY DO WE EXIST?
Answering this question requires a leadership team to identify its underlying reason for being, also known as its core purpose. Location 1588
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. Location 1596
Nonetheless, every organization must contribute in some way to a better world for some group of people, because if it doesn’t, it will, and should, go out of business.
QUESTION 2: HOW DO WE BEHAVE?
The answer to the question, How do we behave?, is embodied in an organization’s core values, which should provide the ultimate guide for employee behavior at all levels. Location 1749
The importance of values in creating clarity and enabling a company to become healthy cannot be overstated. More than anything else, values are critical because they define a company’s personality. They provide employees with clarity about how to behave, which reduces the need for inefficient and demoralizing micromanagement. Location 1753
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. Location 1788
Aspirational values are the qualities that an organization is aspiring to adopt and will do its best to manage intentionally into the organization. However, they are neither natural nor inherent, which is why they must be purposefully inserted into the culture. But they should not be confused with core values, which, again, do not change over time and do not come and go with the needs of the business. Location 1817
Confusing core and aspirational values is a frequent mistake that companies make. It is critical that leaders understand the difference. Location 1830
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. If those sound generic, something you’ve seen on virtually all of the values statements plastered on the walls of every mediocre company you’ve ever visited, then you understand the problem. Location 1849
Accidental Values. These values are the traits that are evident in an organization but have come about unintentionally and don’t necessarily serve the good of the organization. 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. Location 1873
It’s worth restating that the reason organizations need to understand the various kinds of values is to prevent them from getting confused with and diluting the core. Core values are what matters most. Location 1898
QUESTION 3: WHAT DO WE DO?
This question is the simplest of the six and takes the least amount of time and energy to address. The answer lies at the opposite end of the idealism scale from why an organization exists and is nothing more than a description of what an organization actually does. No flowery adjectives or adverbs here. Nothing ethereal or abstract. Just an unsexy, one-sentence definition—something your grandmother can understand (no offense to grandmas). The answer to this question is something we call an organization’s business definition (but never a mission statement!). Location 1972
QUESTION 4: HOW WILL WE SUCCEED?
When team leaders answer this question, essentially they are determining their strategy. Unfortunately, more than any word in the business lexicon, strategy is one of the most widely employed and poorly defined. Location 2007
Essentially we decided that an organization’s strategy is simply its plan for success. It’s nothing more than the collection of intentional decisions a company makes to give itself the best chance to thrive and differentiate from competitors. That means every single decision, if it is made intentionally and consistently, will be part of the overall strategy. Location 2020
QUESTION 5: WHAT IS MOST IMPORTANT, RIGHT NOW?
More than any of the other questions, answering this one will have the most immediate and tangible impact on an organization, probably because it addresses two of the most maddening day-to-day challenges companies face: organizational A.D.D. and silos. Location 2175
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. Leaders should not be surprised to find that the various departments within the organization are operating as independent units without alignment and cooperation. Location 2185
The point here is that every organization, if it wants to create a sense of alignment and focus, must have a single top priority within a given period of time. Location 2193
I called this rallying cry “a thematic goal” because it needs to be understood within the context of the organization’s other goals, at the top of the list. And so, the thematic goal is the answer to our question, What is most important, right now? Location 2213
A thematic goal is…
The best way to identify a thematic goal is to answer the question, If we accomplish only one thing during the next x months, what would it be? Location 2231
Second, the primary purpose of the thematic goal is not necessarily to rally all the troops within the organization, as helpful as that may seem. More than anything else, it is to provide the leadership team itself with clarity around how to spend its time, energy, and resources. Location 2238
On a cohesive team, leaders are not there simply to represent the departments that they lead and manage but rather to solve problems that stand in the way of achieving success for the whole organization. That means they’ll readily offer up their departments’ resources when it serves the greater good of the team, and they’ll take an active interest in the thematic goal regardless of how closely related it is to their functional area. Location 2251
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. They provide a level of specificity so that the thematic goal isn’t merely a slogan but rather a specific and understandable call to action. In most cases, there are between four and six defining objectives, depending on the nature of the goal itself. Location 2274
Once teams identify their defining objectives, they have to take on the next, and last, step in the thematic goal process: identifying their standard operating objectives. These are the ongoing and relatively straightforward metrics and areas of responsibility that any leadership team must maintain in order to keep the organization afloat. I like to refer to these responsibilities as the “leaders’ day jobs.” Location 2302
QUESTION 6: WHO MUST DO WHAT?
Regardless of how clear or confusing a company’s “org” chart may be, it is always worthwhile to take a little time to clarify so that everyone on the leadership team knows and agrees on what everyone else does and that all critical areas are covered.
Playbook Example: Lighthouse Consulting
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. Location 2482
Once a leadership team has become cohesive and worked to establish clarity and alignment around the answers to the six critical questions, then, and only then, can they effectively move on to the next step: communicating those answers. Or better yet, overcommunicating those answers—over and over and over and over and over and over and over again. Location 2518
The only way for people to embrace a message is to hear it over a period of time, in a variety of different situations, and preferably from different people. That’s why great leaders see themselves as Chief Reminding Officers as much as anything else. Their top two priorities are to set the direction of the organization and then to ensure that people are reminded of it on a regular basis. Location 2542
The most reliable and effective way to get an organization moving in the same direction is for members of a leadership team to come out of their meetings with a clear message about what was decided, promptly communicate that message to their direct reports, and have those direct reports do the same for their own direct reports. We call this “cascading communication” because it begins the structured but interpersonal process of rolling key messages down through the organization directly from the leadership team. Location 2568
The best way to do cascading communication is face-to-face and live. Seeing a leader and hearing the tone of his or her voice is critical for employees, as is being able to ask a question or two. Having said that, the realities of virtual teams and geographically dispersed employees sometimes make face-to-face communication impossible. That’s when a telephone call or a videoconference is a good idea. The key is that the discussion is live and interactive. Location 2627
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:
As important as overcommunication is, leaders of a healthy organization cannot always be around to remind employees about the company’s reason for existing, its values, and so on. In order to ensure that the answers to the six critical questions become embedded in the fabric of the organization, leaders must do everything they can to reinforce them structurally as well. The way to do that is to make sure that every human system—every process that involves people—from hiring and people management to training and compensation, is designed to reinforce the answers to those questions. Location 2709
The best approach to hiring is to put just enough structure in place to ensure a measure of consistency and adherence to core values—and no more. That’s right. When it comes to the continuum of hiring, ironically, I find that it is better to be somewhere closer to having a little less structure than more. I believe this because too much structure almost always interferes with a person’s ability to use their common sense, and because it is far easier to add a little structure later to a fairly bare system than it is to deconstruct an already overcomplicated process. Location 2788
There are plenty of books that delve into specifics about hiring and interviewing, so I don’t need to go into any more detail here. However, I will repeat, yet again, that without a clear understanding of what a cultural fit—or misfit—looks like, without a proper mix of consistency and flexibility, and without the active involvement of the leadership team, even the most sophisticated hiring process will fail. Location 2832
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 Location 2836
Healthy organizations believe that performance management is almost exclusively about eliminating confusion. They realize that most of their employees want to succeed, and that the best way to allow them to do that is to give them clear direction, regular information about how they’re doing, and access to the coaching they need. Location 2873
The point that needs to be made here is that the single most important reason to reward people is to provide them with an incentive for doing what is best for the organization. Location 2891
Keeping a relatively strong performer who is not a cultural fit creates a variety of problems. Most important of all, it sends a loud and clear message to employees that the organization isn’t all that serious about what it says it believes. Tolerating behavior that flies in the face of core values inspires cynicism and becomes almost impossible to reverse over time. Location 2981
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:
No action, activity, or process is more central to a healthy organization than the meeting. As dreaded as the “m” word is, as maligned as it has become, there is no better way to have a fundamental impact on an organization than by changing the way it does meetings. Location 3022
In fact, if someone were to offer me one single piece of evidence to evaluate the health of an organization, I would not ask to see its financial statements, review its product line, or even talk to its employees or customers; I would want to observe the leadership team during a meeting. This is where values are established, discussed, and lived and where decisions around strategy and tactics are vetted, made, and reviewed. Bad meetings are the birthplace of unhealthy organizations, and good meetings are the origin of cohesion, clarity, and communication. Location 3024
The fact is that the human brain isn’t meant to process so many disparate topics in one sitting. There needs to be greater clarity and focus, which means that there needs to be different kinds of meetings for different kinds of issues. And, yes, that means there will be more meetings, not fewer. Location 3043
1. Daily Check-Ins
The first category of meetings is the least important but certainly worth doing when it is practically possible. Essentially, it’s about the team getting into the habit of gathering once a day, for no more than ten minutes, to clear the air about anything administrative that would be helpful to know. Schedules. Events. Issue alerts. That kind of stuff. Location 3053
2. Tactical Staff Meetings
The truth is, there is no more valuable activity in any organization than the regular staff meeting of a leadership team. But if they are not effective, there is little or no chance of building a cohesive team or a healthy organization. Location 3102
The first thing a team must do to improve their staff meetings is really about what they should stop doing before the meeting. I’m referring to the dreaded agenda. Putting together an agenda before a staff meeting is like a marriage counselor deciding what issues she’s going to cover with a couple prior to meeting with them. The fact is, you don’t know what you need to discuss until you’ve come together and assessed the situation. Location 3112
First, the leader needs to go around the room and ask every member of the team to take thirty seconds to report on the two or three key activities that they believe are their top priorities for the week. Notice that I said “that they believe are their top priorities.” See, it’s possible that after everyone explains what they’re doing and the team assesses what’s going on in the organization, people are going to have to reorder their priorities. Location 3118
3. The Ad-Hoc Meeting
Probably the most interesting and compelling of all meetings is the third type: the adhoc topical meeting. In fact, it may be the most fun that leaders can have at work. Location 3159
The purpose of this kind of meeting is to dig into the critical issues that can have a long-term impact on an organization or that require significant time and energy to resolve: a major competitive threat, a disruptive industry change, a substantial shift in revenue, a significant product or service deficiency, or even a troubling drop in morale, among many others. Location 3161
The fourth type of meeting that every leadership team needs to have is often known as the “off-site.” Location 3198
The problem with these meetings is that too often they are nothing more than an expensive and extended version of the unproductive staff meeting. The purpose of them, like each of the others, should be unique and focused. In this case, that focus is all about stepping back from the business to get a fresh perspective, which is why it is best done away from the office. Location 3199
In essence, the off-site review is where the leadership team needs to step back and revisit the four disciplines covered in this book: team, clarity, communication, and human systems. Location 3204
But what about management? Don’t leaders need to allocate a lot of their time to managing their people? While it’s true that the single most important activity that a leader must do (outside of being a good team member) is managing his or her direct reports, much of that actually happens during meetings. Sure, they need to do some one-on-one mentoring, but that isn’t usually what executives are hoping to do when they’re arguing about having to spend too much time in meetings. The truth is, if executives are having the right kind of meetings, if they’re driving issues to closure and holding one another accountable, then there is much less to do outside meetings, including managing their direct reports. Location 3232
The truth is, being the leader of a healthy organization is just plain hard. But in the end, it is undeniably worth it. Location 3311
Note: should you wish to find any quote in its origianl context, the Kindle “location” is provided after each entry.
Chuck OlsonAs founder and president of Lead With Your Life, Dr. Chuck Olson is passionate about inspiring, resourcing and equipping Kingdom leaders to lead from the inside out. To lead, not with the external shell of positions, achievements or titles, but from an internal commitment to a deep, abiding and transparent relationship with Jesus. Serving as a pastor and leadership coach for over forty years, Chuck has a track record of building these truths deep into the lives of both ministry and marketplace leaders.
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