Organizational Health Principles for Businesses, Ministries, and Non-Profits
After doing a lot of research on an area, I often create a document that synthesizes the most significant principles I’ve learned on the subject. A few years ago I did this on the subject of organizational health. I thought it might be useful to share them with you. In this case, I focused mostly on one book, Patrick Lencioni’s excellent The Four Obsessions of an Extraordinary Executive. So these are essentially my notes from his book, organized for the purpose of making them as easy to follow as possible.
Organizational Health Principles
Notes from Patrick Lencioni’s The Four Obsessions of an Extraordinary Executive, and a few other things.
- It is the appreciation for simplicity and discipline that makes one an extraordinary executive.
- Success is not so much a function of intelligence or natural ability, but rather of commitment to the right disciplines.
- We can become poor leaders if we let ourselves become distracted by overly tactical and political matters.
- Organizational health is one competitive advantage that is available to any company that wants it, yet it is largely ignored. And, it is highly sustainable because it is not based on information or intellectual property. It should occupy a lot of time and attention of extraordinary executives (139).
- “A healthy organization is one that has less politics and confusion, higher morale and productivity, lower unwanted turnover, and lower recruiting costs than an unhealthy one” (140).
- The core idea of organizational health is to create, communicate, and reinforce organizational clarity.
- There are four components to creating a healthy organization: create a cohesive leadership team, create organizational clarity, over-communicate organizational clarity, and reinforce organizational clarity through human systems.
Create a cohesive leadership team
- The aim here is to build and maintain a cohesive leadership team.
- Essence of a cohesive leadership team is trust. Trust is marked by an absence of politics, unnecessary anxiety, and wasted energy (143).
- Cohesive teams resolve their issues and create environments of trust for themselves, and therefore their people. Outstanding employees rarely leave these organizations.
- You build and maintain a cohesive leadership team by:
- Knowing one another’s unique strengths and weaknesses
- Openly engaging in constructive ideological conflict
- Holding one another accountable for behaviors and actions
- Committing to group decisions
- A group’s cohesiveness has far more impact on its success than its collective level of experience or knowledge. Teams filled with industry luminaries have been unable to compete with less experienced and relatively unknown teams that were able to create environments of trust and passion.
- “Cohesiveness at the executive level is the single greatest indicator of future success that any organization can achieve” (148).
- Politics is the result of unresolved issues at the highest level of an organization, and attempting to curb politics without addressing issues at the executive level is pointless. 143
- Most underestimate the magnitude of the political behavior on their teams because what executives believe are small disconnects between themselves and their peers actually look like major rifts to people deeper in the organization. When they try to resolve the differences among themselves, they become engaged in bloody and time-consuming battles, with no possibility for resolution. All this because leaders higher in the org failed to work out minor issues, usually out of fear of conflict.
- “When an executive decides not to confront a peer about a potential disagreement, he or she is dooming employees to waste time, money, and emotional energy dealing with unresolved issues. This causes the best employees to start looking for jobs in less dysfunctional organizations, and it creates an environment of disillusionment, distrust, and exhaustion for those who stay” (143-144).
The Nature of Cohesive Leadership Teams
- Cohesive teams are efficient. Arrive at decisions more quickly and with greater buy-in. Spend less time worrying about whether their peers will commit to a plan and deliver.
- “One of the best ways to recognize a cohesive tam is the nature of its meetings. Passionate. Intense. Exhausting. Never boring” (144).
- For cohesive teams, meetings are compelling and vital. “They are forums for asking difficult questions, challenging one another’s ideas, and ultimately arriving at decisions that everyone agrees to support and adhere to, in the best interests of the company.” 144
- Members hold their peers accountable for behaviors that are not conducive to team performance.
- No one reads e-mail or does ancillary busywork during meetings, even when the issue is not directly related to them. If a non-compelling item hits the agenda, team members question whether it is worth their time.
- Cohesive teams fight. But about issues, not personalities. When they are done fighting, they “have an amazing capacity to move on to the next issue, with no residual feelings” (145).
Building a Cohesive Leadership Team
- The ultimate way to do this is to build trust. This means getting to know one another at a level that few groups ever achieve.
- Myers-Briggs Type Indicator. Helping team members understand one another’s behaviors and avoiding dangerous misattributions.
- Read The Wisdom of Teams and Teams at the Top. They outline the basic requirements for real teamwork and high-performing teams.
- Read The Five Temptations of a CEO.
- Personal histories. Spend time talking about your backgrounds. “People who understand one another’s personal philosophies, family histories, educational experiences, hobbies, and interests are far more likely to work well together than those who do not.” 147 Also, getting to know peers on a meaningful level can go a long way toward making work fulfilling.
- A key part of building trust is living through difficult times. The only way to build strength is to share experiences that require everyone to rally and overcome obstacles. The most cohesive teams he knows have even come dangerously close to dissolution.
- Trust then allows engaging in unfiltered conflict around ideas. Trust makes this possible because it allows you to overcome the fear of conflict.
- Unfiltered conflict around ideas allows commitment, because unless everyone is able to air their opinions and be heard, they will be unwilling to fully and truly commit to a course of action.
- Commitment then enables accountability, since only when the outcomes are clear and committed to can people be held accountable for delivering on them.
- Accountability then enables focus on results, which is the ultimate purpose of the team.
- Once a team has cohesiveness, the ability to maintain it depends upon continually addressing core issues, and its discipline around having regular, frequent, and in-person meetings. Must not give in to temptation to scale back meetings, as hard as it can be. “Failing to honor meeting schedules is the first sign that a leadership team is about to experience problems” (148).
- Qualities to look for in hiring someone who will be a good team member include: someone who can demonstrate trust, engage in conflict, commit to group decisions, hold their peers accountable, and focus on the results of the team, not their own ego.
- Every team should also have a charter that briefly outlines: why this team exists…, what we value…, our outcomes are…, we can measure our effectiveness when…, our top current priorities are… (and that should be reviewed and updated each week).
- The larger the company, the smaller the team should be at the top.
Assessing Your Team for Cohesiveness
Ask these questions:
- Are meetings compelling? Are the important issues being discussed? Lack of interest in meetings is a good indicator the team may be avoiding issues because they are uncomfortable with one another. “There is no excuse for having continually boring meetings” (149).
- Do team members engage in unguarded debate? Do they honestly confront one another? Even teams that get along well should be experiencing regular conflict and intense debate during these meetings.
- Do team members apologize if they get out of line? Do they ever get out of line?
- Do team members understand one another? “Members of cohesive teams know one another’s strengths and weaknesses and don’t hesitate to point them out” (150).
- Do team members avoid gossiping about one another? Talking about a colleague not present is not gossip—gossip requires intent to hurt, and is usually accompanied by unwillingness to confront a person with the info being discussed.
Create organizational clarity
- The objective here is to create organizational clarity.
- Organizational clarity is not about choosing the right words, but agreeing on the fundamental concepts that drive the company.
- Clarity is so important because it “provides employees at all levels of an organization with a common vocabulary and set of assumptions about what is important and what is not. More important, it allows them to make decisions and resolve problems without constant supervision and advice from managers. Essentially, organizational clarity allows a company to delegate more effectively and empower its employees with a true sense of confidence” (151).
What Clarity Looks Like
- An org that has achieved clarity has a sense of unity around everything it does. It aligns its resources, especially the human ones, around common concepts, values, definitions, goals, and strategies, thereby realizing the synergies that all great companies must achieve.
- Result is undeniable sense of focus and efficiency. Low level of wasted time and energy and powerful sense of traction. Comes when employees at all levels share a common understanding of where the company is headed, what success looks like, whom their competitors are, and what needs to be achieved to claim victory.
- Employees in these organizations have amazing levels of autonomy. Know what their boundaries are and when need guidance from management before taking action. Their ability to make decisions for themselves crates an environment of empowerment, traction, and urgency.
- Why don’t all executives crate clarity? Many overemphasize the value of flexibility. “Wanting their organizations to be nimble, they hesitate to articulate their direction clearly, or do so in a less than thorough manner, thus giving themselves the deceptively dangerous luxury of changing plans in midstream. Ironically, truly nimble organizations dare to create clarity at all times, even when they are not completely certain about whether it is correct” (154) If they need to change course, they do so without hesitation or apology, and create clarity around the new idea or answer.
- The executive team must demonstrate commitment and courage. Not necessarily smarter or more experienced than their competitors, but less afraid of being wrong.
- Clarity provides power like nothing else can. Establishes foundation for hiring, communication, training, promotion, decision-making, and accountability.
How You Create Clarity
- You need to obtain clarity on six points:
- Why does the organization exist, and what difference does it make in the world?
- What behavioral values are irreplaceable and fundamental?
- What business are we in, and against whom do we compete?
- How does our approach differ from that of our competition?
- What are our goals this month, this quarter, this year, next year, five years from now?
- Who has to do what for us to achieve our goals this month, this quarter, this year, next year, five years from now?
- At any given point in time, a healthy organization can point to an answer for each question.
- Focus on the essence of each question—don’t get bogged down by temptation to wordsmith the answers. Don’t lapse into marketing mode when discussing clarity.
1. Why the Organization Exists
- Valuable only when you actually use as a guide in making decisions.
- When evaluating new projects, job applicants, markets, strategies, always ask whether they fit with your reason for being.
2. Core Values
- Don’t adopt every positive value that exists. Only 5-7.
- Identify a small set of values that are particularly fundamental, and adhere to them without exception.
- Know which qualities lie at the heart of who you are. Fundamental values are not chosen from thin air or based on desire, but are discovered within what already exists in the organization.
- Can identify by asking who are the two or three employees who best embody what is good about the firm, then ask about one or two employees who have left the firm or should leave it. Another approach is to focus on the common behavioral values of the people who founded the organization. Or ask what values you would hold even if you were punished for holding them. Which values would you continue holding even if it meant you would go out of business? Wrong way is to survey.
- There are permission to play values, core values, strategic values, and aspirational values.
3. What Business are We in, and Against Whom do we Compete?
- A company cannot be called great unless virtually every employee, and certainly every executive, can articulate the basic definition of what the company does.
- Articulate exactly what you do, who you serve, against whom you compete.
4. How does our approach differ from our competitors?
- This is a strategy question.
- Key is to look at all of the decisions that the company has made, even the obvious ones, and identify those that when combined make the company uniquely positioned for success.
5. What are our goals this month, this quarter, this year, next year, five years from now?
- Must distinguish different types of goals from one another.
- Highest level: thematic goals for a given period. Purpose is to rally employees, regardless of their specific jobs, around a common direction. Examples might be survival, efficiency, professionalism, or growth. Good way to arrive at is to finish this sentence: “This is the year that our organization will…”
- Beneath thematic goal: major strategic goals. They span the organization and support its overall theme. Ex: If thematic goal is growth, major strategic goals might be to increase revenue, add new customers, hire new employees, expand to new sites, increase market awareness, and improve infrastructure.
- Key is to focus on the areas that matter most and avoid making every possible topic an area of equal importance. Ex: Even a growing company needs to retain employees, but employee acquisition may be the most relevant category to focus on and deserves more attention.
- Within each of these goals, must be explicit. How many new customers? By when? From which regions? Getting specific about what needs to be achieved, even in the face of uncertainty, is one mark of a healthy organization.
- Strategic goals need to be aligned with organization’s permanent measures of success, which are metrics. Always have quantitative objectives related to permanent topics like revenue, expense, profit, employee turnover, employee satisfaction, and productivity. These objectives become the means for keeping score over time and evaluating the success of the actions within each of the thematic categories.
- Many orgs use metrics in place of thematic or strategic goals. Mistake: metrics do not inspire enthusiasm among employees, nor do they align behaviors around common themes or strategies.
- Thematic goals: What is this period’s focus?
- Major strategic goals: What are the key areas which relate to that focus, and exactly what needs to be achieved?
- What are the ongoing measures that allow the organization to keep score?
- Once these areas are defined, call on various departments to build their own goals, in manner aligned with the direction of the entire organization.
6. Who has to do What for us to Achieve our Goals for this Month, this Quarter, this Year, Next Year, and Five Years from Now?
- Crucial to translate company goals into concrete responsibilities for members of an executive team.
- Sometimes roles are unclear because individual responsibilities are set before organizational goals have been set.
How do you asses for organizational clarity?
- Ask your team members to individually answer the questions set out in the above section. Have them write their answers down, then go around table and have everyone report their answers to the team. Fundamental differences will be painfully apparent.
COMMUNICATING ORGANIZATIONAL CLARITY
Over-communicate organizational clarity
- Simplest of the disciplines, but most underachieved. Necessary to reaping the benefits of disciplines one and two.
- Healthy organizations align their employees around organizational clarity by:
- Repetition: Don’t be afraid to repeat the same message, again and again.
- Simplicity: The more complicated the message, the more potential for confusion and inconsistency.
- Multiple mediums: People react to information in many ways; use a variety of mediums.
- Cascading messages: Leaders communicate key messages to direct reports; the cycle repeats itself until the message is heard by all.
What does over-communication look like?
- Employees at all levels and in all departments understand what the organization is about and how they contribute to its success. Don’t spend time speculating on what the executives are really thinking, and don’t look for hidden messages among the information they receive.
- Strong sense of common purpose and direction, which supersedes any departmental or ideological allegiances they may have.
How does an executive team over-communicate?
- The three most critical practices: repetition, simple messages, multiple mediums.
- One of the keys to successful communication is to get used to saying the same things again and again, to different audiences, in slightly different ways.
- Use cascading communication: After every executive staff meeting, ask: What do we need to communicate to our people? Then discuss. Any issues which need clarification will come to light. Avoids confusion among the executives, and gives employees a sense that the people who head their respective departments are working together and coming to agreement on important issues.
How do you assess for effective over-communication?
- Ask employees if they know why the org exists, what its fundamental values are, what business it is in, whom its competitors are, what its strategy is, what its major goals for the year are, and who is responsible for doing what at the executive level. Then ask them how their job affects each of those areas.
Reinforce organizational clarity through human systems
- Communication alone not enough. Needs to build a sense of that clarity into the fabric of the organization through processes and systems that drive human behavior.
- Organizations sustain their health by ensuring consistency in:
- Performance planning
- Rewards and recognition
- Training and advancement
- Employee dismissal
- Other important systems include: approach to teams (on which, see some of the above), job design, meetings, and planning (on which, see some of the above).
What does reinforcement through human systems look like?
- Such an org maintains its identity and sense of direction even during times of change. Ensures that employees are hired, managed, rewarded, and fired for reasons consistent with its organizational clarity.
- Four primary human systems: Hiring profiles, performance management, rewards and recognition, dismissal.
- Hiring profiles. Based largely on values of the org. Healthy orgs look for qualities in job candidates that match the values of the company. Ask behavioral questions and probe for evidence the candidate is a fit. Debrief after interview, paying special attention to candidate’s alignment with fundamental values.
- Performance management. True essence of this is communication and alignment. Many companies make their systems too complex. Others too generic, purchasing off-the-shelf systems.
- Best performance management systems include only essential information, and allow managers and their employees to focus on the work that must be done to ensure success. Little emphasis on legal issues and quantitative evaluations.
- Not just about communication during employee review cycles, but ongoing dialogue around how employees can align their behaviors around the organization’s clarity.
- Rewards and recognition. Eliminate subjectivity as much as possible by using consistent criteria for paying, recognizing, and promoting employees.
- In addition to monetary rewards, recognition of employees is designed around the organization’s values.
- No one is promoted unless they represent the behavioral values.
- Dismissal. Use their values and other issues related to org clarity to guide decisions about removing employees.
How does an organization assess itself for human systems?
- Some questions:
- Is there a process for interviewing candidates and debriefing those interviews as a team?
- Are there consistent behavioral interview questions asked across every department?
- Is there a consistent process for managing the performance of employees across the organization?
- Do we spend time evaluating employees’ behavior versus the organization’s values and goals?
- Is there a consistent process for determining rewards and recognition for employees?
- For evaluating promotion candidates against organizational values?
- For removing employees?
- Are employees ever terminated because they are a poor fit within the organization’s values?
- Two concluding points: There is nothing more important than making an organization healthy, and there is no substitute for discipline.