Organisational Health
Patrick Lencioni splits a business into two halves. The smart half is strategy, marketing, finance, technology, the things that get studied, measured and argued about. The healthy half is whether the business has minimal politics, minimal confusion, high morale and low staff turnover.
His claim is that health is the larger opportunity, and it is largely uncontested. Every competitor you have is working on the smart half. Almost none of them are working on the other one, because it is harder to measure, less interesting to talk about, and it requires the leadership team to have conversations they have been avoiding.
What health actually means
Health is not perks, away days or fruit in reception. Lencioni is precise about it. A healthy organisation has minimal politics, minimal confusion, high morale and low turnover. Read those again as commercial measures rather than cultural ones, because that is what they are.
Politics is people making decisions based on what is good for them rather than what is good for the business, and it exists wherever the rules are unclear or unequally applied. Confusion is people spending effort on the wrong thing because nobody told them which thing was right. Morale and turnover are the price you pay for the first two.
He sets out four disciplines. Build a cohesive leadership team, one that argues properly and leaves the room aligned. Create clarity, by answering a small number of questions the same way. Overcommunicate that clarity, well past the point where you are bored of saying it. Then reinforce it through the human systems, meaning hiring, induction, performance conversations and meetings.
The six questions
Clarity is not a mood. It is six answers, and the leadership team either gives the same six or it does not.
- Why do we exist?
- How do we behave?
- What do we do?
- How will we succeed?
- What is most important, right now?
- Who must do what?
The fifth one does most of the damage when it is missing. A business can survive vague values. It cannot survive four senior people each pursuing a different single most important thing, because everything below them then pulls in four directions and none of it finishes.
How the problem shows up
Health problems rarely announce themselves as health problems. They arrive dressed as something else, which is why they get treated with the wrong medicine.
- Decisions get made twice. Once in the meeting, and then again afterwards in a smaller conversation with whoever really decides.
- Nothing finishes. Initiatives start with energy and are quietly abandoned as soon as a different priority arrives from a different direction.
- People check upwards before acting on things well inside their remit, because the rules have changed before without warning.
- The same complaint reaches you from two departments about each other, and both versions sound entirely reasonable.
- Good people resign without another job to go to, which is almost never about money.
Every one of those has a cost you could put a figure against if you sat down and did it. Not one of them appears on a management report, which is precisely why owners keep solving the smart half instead.
A worked example
Illustrative, not a client. Take a professional services firm of 34 people with a leadership team of four: the managing director, a sales director, a delivery director and a finance manager. The firm is profitable, growing slowly, and everyone would describe the atmosphere as fine.
Ask the four of them separately what is most important right now. The answers come back as growth, protecting margin, hiring, and controlling costs. Four sensible answers. Four different answers.
Now watch a quarter run on that basis.
The sales director closes a client at a 12 per cent discount, because volume is what matters. The delivery director staffs it thinly, because margin is what matters. The client gets a slower service than they were sold, complains twice, and leaves after seven months. Nobody did anything wrong by their own priority.
Meanwhile the finance manager has quietly frozen discretionary spend, so the two hires the delivery director needed to protect margin do not happen. The delivery team works over, quality wobbles again, and one senior person resigns in month three. Replacing them takes four months and the equivalent of a quarter's productivity from the person who covers.
Across the quarter the firm starts nine improvement initiatives and finishes two. Not because the people are weak. Because every initiative is somebody's priority and nobody's shared priority, so each one gets abandoned the moment something urgent arrives from a different direction.
The strategy was fine. The marketing was fine. The numbers were watched. The business still went sideways, and it went sideways for reasons that would not appear in any board pack.
How to apply it this week
- Ask your senior people the six questions separately, in writing. No discussion, no preamble. Collect the answers before anyone sees anybody else's. The gaps between them are your health problem, in evidence.
- Settle question five first. One thing, for one quarter, that everyone can name. Not three. If you genuinely cannot choose, that is the finding, and it is the reason nothing finishes.
- Audit your last leadership meeting for disagreement. If nobody disagreed, it was not a meeting, it was a briefing. Teams that never argue in the room argue in the corridor afterwards, and that is where politics comes from.
- Say the priority again, in three different places. All-team update, one to ones, and the way you open your own week. Lencioni's point is that leaders stop repeating the message roughly at the moment the organisation starts to hear it.
- Change one human system to match. Add the priority to the standing agenda, or to the one-to-one template, or to how you interview. Clarity that is not reinforced by a system will not survive contact with a busy month.
- Count your unplanned leavers over the last two years. Then work out what each one cost you in recruitment, lost output and cover. That figure is the price of the health problem you have been treating as soft.
The mistake most owners make
They treat health as culture, culture as morale, and morale as something you buy with events. So they run a summer party and are confused when the politics continue. Health is structural. It is whether people know what matters, whether the rules are applied to everybody, and whether the leadership team can disagree in a room and leave with one position.
The second mistake is assuming a quiet leadership team is a healthy one. Silence in a senior meeting is usually not agreement, it is calculation. A team that never has an uncomfortable exchange in front of each other is a team that has decided the exchange is not worth having, and that is a considerably worse position than an argument.
The third is working on the smart half because it is more enjoyable and more measurable. There is always another strategy session available, another system to look at, another report to build. Meanwhile the conversation with the second in command that everyone knows needs to happen sits in the diary as a recurring item that keeps getting moved.
The questions to sit with
- Out of 10, how confident are you that your senior people would give the same answer to what is most important right now?
- Where in your business are decisions currently being made on the basis of what is good for the person making them?
- When did your leadership team last genuinely disagree in front of each other, and what happened afterwards?
- What has your staff turnover cost in the last two years, once you count recruitment, lost output and the time it took the replacement to become useful?
This sits underneath the Systems & Scale work. Systems are the mechanism, but a system installed into a confused business simply gives the confusion a faster route to travel. Health comes first, and it is built in the leadership team or nowhere.
