The Advantage

Patrick Lencioni’s Why Organizational Health Trumps Everything Else in Business

• Smart organizations are good at classic fundamentals of business — decision sciences like strategy, marketing, finance, and technology. Being smart is only half the equation. The other largely neglected piece is the organizational health
• The vast majority of organizations today have more than enough intelligence, expertise, and knowledge to be successful. But most organizations only exploit a fraction of the knowledge, experience, and intellectual capital available to them. The healthy ones can tap into almost all of it
• Same can be said of families: Healthy families — the ones where parents give their children discipline, affection, and time — almost always improve over the years, even when they lack many of the advantages and resources that money can buy. Unhealthy families — the ones without discipline and unconditional love — will always struggle, even if they have all the money, tutors, coaches, and technology they could ever want

If you had to bet on the future of 1 of 2 kids, one raised by loving parents in a solid home and the other a product of apathy and dysfunction, you’d always take the former regardless of the resources surrounding them

• Financial cost of having an unhealthy organization is undeniable: wasted resources and time, decreased productivity, confusion, politics & bureaucracy, increased employee turnover, customer attrition

Four Disciplines Model

“Like a marriage, maintaining these four disciplines require ongoing attention and effort: maintaining a cohesive team, revisiting core values, over-communicating, and reinforcing them.”

1. Build a Cohesive Leadership Team

• A real team isn’t like a golf team, where players go off individually to play and then get together to add up their scores
• A real team is more like a basketball team, one that plays together simultaneously, in an interactive, mutually dependent, often interchangeable way
• A leadership team should be made up of 3–10 people (small, 8+ becomes problematic) collectively responsible (willing to make literal time, emotion, resource, budget sacrifices) for achieving a common objective for their organization
• No one on a cohesive team can say, “Well, I did my job. Our failure isn’t my fault.”
• If a team shares a common objective, a good portion of their compensation or reward structure, though not necessarily all of it, should be based on the achievement of that common objective
• Build vulnerability-based trust: at the heart of vulnerability lies the willingness of people to abandon their pride and their fear, to sacrifice their egos for the collective good of the team, and to develop a sense of respect, admiration, and understanding
• Master conflict: most organizations avoid conflict but healthy, constructive conflict among teams is necessary
• If people remain silent during discussions, 2 rules can increase participation: rule #1) silence is interpreted as disagreement; rule #2) ask each member for a formal commitment to the decision at the end. Most people are generally reasonable and can rally around an idea that wasn’t their own as long as they know they’ve had a chance to weigh in

• Achieve commitment: once people leave the room, they must be unambiguously committed to a common course of action. Demand that once they go back to their teams after the meeting, they communicate exactly what was agreed on. When team members know that they are going to have to stand in front of the people they lead and vouch for a decision, they are much more likely to push back on that decision. The only thing more painful than taking additional time to get clarity and commitment is going out into the organization with a confusing and misaligned message
• Embrace accountability: most people assume the leader of an executive team should be the primary source of accountability but it isn’t efficient or practical. Peer-to-peer accountability is the primary and most effective source of accountability on a leadership team
• Many leaders struggle with accountability. They think they don’t have an issue firing people so therefore they don’t have an accountability problem. 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. To hold someone accountable is to care about them enough to risk having them blame you for pointing out their deficiencies

• Behavioral problem almost always precede — and cause — a downturn in performance and results
• Conflict is about issues and ideas, while accountability is about performance and behavior
• Startup Garage Feedback Exercise: have team members write down single areas of strength for the collective group and one aspect of each person that sometimes hurts the team. Deliver the positive and constructive feedback
• Exercise: deliver accountability messages publicly in meetings that way every member of the team receives the message simultaneously and doesn’t make the same mistake to learn the lesson of the person being held accountable. Everyone also then knows the leader is holding their colleague accountable and reinforces the culture of accountability

2. Create Clarity to Achieve Alignment

• Most mission statements have neither inspired people to change the world nor provided them with an accurate description of what an organization actually does for a living
• 6 critical questions to constructing a value system:

1. Why do we exist? What is the fundamental reason your organization was founded? Why does it exist? Be prepared to stick with your answer for as long as the organization exists. Is it related to serving the needs of an organization’s customer, primary constituent, community, employees, a greater cause? Is the purpose about being immersed in a given industry? An organization’s reason for existing is not meant to be a differentiator but only to clarify true compass north to guide the business
2. How do we behave? Identify 2–3 core values on how the company should be behave at the heart of the company’s identity that do not change over time and that already exist. Avoid generic common words (e.g., innovation, quality) that means something different to each person. These core values should dictate employee hires, company policies and activities!
3. What do we do? One sentence you grandmother understands. Concrete, detailed definition that describes what your organization does and why
4. How will we succeed? How will we make decisions in a purposeful, intentional, and unique way that allow us to maximize our success and differentiate us from our competitors? What is your company’s 3 strategy anchors, its collective plan for success? Create a long list of priorities and boil down / filter down to 3 fundamentals that inform every other decision. Is this strategy a fundamental or a function of something else more fundamental?
5. What is most important, right now? If we could only accomplish 2–3 goals in the next [6] months, what would it be? What must be true [6] months from now for us to be able to look back and say with any credibility that we had a good period? Develop these goals on a 1-pager with defining characteristics and specific KPIs
6. Who must do what? Identify division of labor. Be careful the CEO isn’t both the leader of the executive team and a functional specialist!

3. Over-communicate Clarity

• Repetition, reinforcement, repetition: people are skeptical about what they’re being told unless they hear it consistently over time
• “Cascading communication”: when members of a leadership team come out of their meetings with a clear message about what was decided, they should promptly communicate that message to their direct reports, and have those direct reports do the same for their own direct reports
• Face-to-face and live is the best way to do cascading communication for visibility, tone of voice, Q&A. In the best companies, employees are able to accurately articulate the organization’s reason for existence, values, strategic anchors, and goals

4. Reinforce Clarity

• Performance management is almost exclusively about eliminating confusion. The best way to allow employees to succeed is to give them clear direction, regular information about how they’re doing, and access to the coaching they need
• The best performance management programs are simple, designed to stimulate the right conversations around the organization’s goals, values, roles & responsibilities
• Many leaders convince themselves that employees are motivated primarily by money. The majority of employees, at all levels of an organization see financial rewards as a satisfier, not a driver. Above a certain threshold, additional money doesn’t yield proportionate increases in job satisfaction. The main drivers are gratitude, recognition, increased responsibilities, and other forms of genuine appreciation
• The single most important activity a leader must do (outside of being a good team member) is managing his or her direct reports, much of which actually happens during meetings. If executives are having the right kinds of meetings, they are driving issues to closure and holding one another accountable
• Meetings all management teams should have:

1. Quick daily check-ins to address day-to-day minor issues and resolve endless administrative issues
2. Weekly tactical staff meetings with a real-time agenda (each member takes 30 seconds to report 2–3 key activities and top priorities for the week, and everyone steps back to evaluate what is the most important thematic goal, defining objectives and KPIs)
3. Ad-hoc strategic topical issues that are deep dives into critical issues having a long-term impact on the organization. These issues require significant time and energy to resolve and prepare (e.g., competitive threat, disruptive industry change, shift in revenue, significant product or service deficiency, troubling drop in morale). Leadership teams rarely carve out enough time for this and try to resolve / bundle in staff meetings
4. Quarterly off-sites to review the organization’s strategic anchors and thematic goal, assess key employee performance, discuss industry changes and competitive threats, review the behaviors of top team members in regard to cohesiveness