Patrick Lencioni – Building a Healthy Organization

“Organizational health is the single greatest competitive advantage in business. It is virtually free and accessible to any leader who wants it, and yet it is virtually untapped in most organizations.”

The reason? “Too many leaders think it’s beneath them.”

What is organizational health?

The best way to understand it is to contrast it with something we are more familiar with?

In order for any organization to be effective, there are two requirements for success. First, it must be smart. Strategy, marketing, finance, technology, etc. This stuff is important. Nobody should ever tell you it’s not important. The problem is it’s only half the equation, yet it gets 80% of the attention. If we are going to maximize our organizations, we also need to make them  healthy. A healthy organization has minimal politics and confusion, high morale, high productivity, and low turnover.

“When I show most CEOs this slide, they say ‘I’d give my left leg to have the right side of that slide — organizational health. But I don’t know how to do that. They didn’t really teach us that in business school. Let’s go to the left side of that slide and tweak some stuff.'”

Many leaders are more comfortable in strategy and finance than organizational health. But if we want to change our organizations, we have to make them healthier.

“Every organization I work with has enough domain expertise to be wildly successful, but few tap into it because they aren’t healthy. There are politics and confusion.”

Southwest Airlines is an excellent company, but it’s not because they’re smarter. They are great because they are so healthy as an organization. As a result, they use every bit of knowledge that they have.

So, how do we make our organizations healthy? There are four organizations you have to master. They are simple, but hard.

1. Build and maintain a cohesive leadership team

Trust, conflict, commitment, accountability, results. Leadership teams must be cohesive. [See his book The Five Dysfunctions of a Team.]

2. Create organizational clarity

Many people this is just about mission statements. But many mission statements don’t work because they try to do too many things. Here’s an example: [Wait, it’s too long and boring — I’m not going to type it! Just imagine the most boring, hard to grasp sentence you’ve ever seen. It’s from . . . Dunder Mifflin! And yet it’s surprising how close to reality it is for many organizations.]

What you need to do is answer six critical questions. If you can answer these six questions, you can create clarity in your organization and the result is true empowerment.

1. Why do we exist?

This is your core purpose. This is not just a restatement of what you do. For example, the purpose of Southwest Airlines is to democratize travel — making it cheap and possible for everyone to fly. Your core purpose helps you make all your decisions. For example, in the issue of whether to charge fees for checked luggage, Southwest asked “would this help democratize air travel?” The answer was no, so they don’t charge.

2. How do we behave?

These are  core values. You can’t list every positive value here, however. That is too much and overwhelming. Get down to the one, two, or maybe truly endemic behaviors. So we need to distinguish different types of values. For example, there are aspirational values. These are things you aspire to, but which aren’t true of your organization right now. When you make these core values, you lose credibility. One of Enron’s core values, for example, was integrity! That was not a true core value for them. A core value is something you are willing to be punished for. You will hold to it even if it would be to your detriment.

When someone asks you to violate a core value, you lovingly recognize that this is not the place for them. This is how you know you believe in something — if you will hold to it even if it wouldn’t benefit you (externally).

Churches really struggle here. This is because they confuse core values with permission to play values. These are the minimum standards. For example: telling the truth. This is more of a minimum standard. Of course you won’t hire people who lie. Minimum standards are critical. But this isn’t what we’re talking about when we talk about core values. Here, one church is often very different from another. Everyone should be able to worship at your church, but this doesn’t mean anybody should be able to work there. There must be a core value fit.

“To work in a church, you should never do it because you have to have the job.” It should be only because you are able to contribute to the mission. [If you are there just to have a job, please leave as fast as you can! I know some people like this and there is no faster way to ruin a church!]

3. What do we do?

Many executives actually aren’t on the same page here.

4. How will we succeed?

This is the issue of strategy. Strategy boils down to three anchors, which become the filter for every decision you make. Every organization can do this. For example, at Southwest: make the customers fanatically loyal, don’t make the plane late, and keep fares low. They tell everyone in the organization these three things, and say: “As long as you do these three things, you can make whatever decision you need.” This empowers employees.

Most employees’ strategy boils down to this: I’m just going to try to avoid getting in trouble. This is why most customer service is so bad.

5. What is most important, right now?

6. Who must do what?

3. Over-communicate clarity

You need to hear something 7 times in most organizations before people believe it.

4. Reinforce clarity through human systems

Do things in creative ways that reinforce and demonstrate the values.

I hope that someday organizational health will become standard in organizations. That will change the world. Until that happens, this represents an incredible opportunity for competitive advantage.