as a competitive advantage
Why Organizational Health?
Both research and common sense indicate that organizational health is the biggest single driver of business results with a competitive edge.
Managers possess high levels of intelligence, technical know-how, experience, leadership skills, energy and drive. The better it is applied to the daily work of the company (though a clear and motivating direction, simple priorities, fast decision making, friction-free collaboration and freedom to innovate), the better the business results will be. Most companies operate at a level far from 100% application of its talent. This makes even a small improvement vs. the norm a competitive advantage.
A McKinsey study of 500 companies and 600 000 employees (“Organizational Health: The Ultimate Competitive Advantage”) showed that companies with strong organizational health doubled their chances of growing top and bottom line ahead of the market. It also showed that Organizational Health accounted for more than 50% of the business results. This is more than the combined effects of strategy, finance, technology, product supply, innovation, etc.
What is The Table Group?
Patrick Lencioni founded The Table Group 2o years ago to find the solutions to the dysfunctional behaviours which he had seen in the companies he had worked for – and which were hampering growth and financial success. He saw that the frustrations felt by managers and employees in such companies were unnecessary – and they were signs that the company could do much better.
He coined the term Organizational Health as the 2nd of the 2 capabilities a company must have. A company must first be smart. This is all the intellectual capabilities such as strategy, technology, functional expertise in Finance, Production, etc. But a company must also be healthy. This is the behaviour which allows the company’s many employees and departments to tap into the knowledge and intellectual expertise and apply to the company’s products, services and goals. While most companies today are close to best-in-class on the smart side, the majority of companies are still not able to tap into it. They are weighed down by silos, politics, confusion, low morale, high turn-over of the best people and a general lack of engagement. They are unhealthy.
Becoming healthy is not complicated. But it is hard. We often shy away from it because it involves people and their emotions. It requires behaviour and personal discipline from us It takes time and is not easily measured. And it may not sound as impressive as a new capability. So we end up spending 95% of our time on the smart side. And we remain unhealthy.
Leaders who choose to do something about this are generously rewarded. When they master the behaviours which create an open and productive dialogue based on trust, they can get real personal commitment to the plans from every direct report. They then see these managers holding each other accountability entirely on their own, because they are focused on achieving one common goal that they have defined together.
Any shortages in capabilities or resources become immediately obvious and are fixed. These healthy organizations actually end up smarter than their competitors. Their strategies are executed fast, issues are identified and the iterate faster than competition through strategies and execution, quickly getting to a superior strategy proven in the market place.
Organizational Health Building Blocks
4 building blocks are required to drive Organizational Health. Below is an overview. Details can be found in Patrick Lencioni’s books, particulary “The Advantage” which summarizes it all.
Bulding a Cohesive Team:
Without a cohesive leadership team, a company cannot develop a winning strategy. Aligning on priorities and truly committing to them is hard work. It requires trust to be able to challenge each other in search for the truth. Everything therefore must start with building a cohesive team, and in particular building trust.
Trust: Vulnerability-based trust in a team is when team members can admit mistakes, ask for help and be honest without fear of losing their team members’ support. It is the foundation that is necessary before a team can enter into serious discussions – or conflict.
Conflict: Conflict is good. It is necessary in order to challenge our thinking and seeing the issues from all angles. We need the diverse views and expertise of every team member without them holding anything back for political reasons. Conflict based on trust is not mean or personal. It is the unfiltered debate which gets to the best plans. It is required before decisions can be made and before the members can commit.
Commitment: A commitment without having had a chance to share concerns, disagreements and fears will not last. It will start fading as soon as the team members reach their own office after the meeting. But if they have had a chance to weigh in, they can buy in. Even if the boss has to make the final call. This is a necessary step before accountability.
Accountability: This is not about the boss holding each team member accountable. This is about peer-to-peer accountability. Where each team member will point it out when another team member does not deliver. Peer pressure is powerful and healthy. And it is required before the entire team can truly focus on results.
Results: Even with all of the above, the team has to make a decision to work – and only work – against the agreed common goal. Personal goals and department needs are left at the door. In this team, they are all responsible to delivering one common goal.
Once a team has established trust and the skills to have an unfiltered debate can they attack the 6 questions they need to answer in order to create clarity. The answers to these 6 questions are what drives all decisions in the company.
Why do we exist? Beyond making money, why are we asking our thousands of employees to come to work every morning? How will our products or services make a difference?
How do we behave? What are the 2-4 behaviours or values that we will demand of every employee in every situation, starting with ourselves? What will we be absolutely intolerant of?
What do we do? This is simple but important. What products or services do we offer? Where do we make them available? Do we design, produce or sell them?
What are our strategic anchors? What are the drivers of our success in the market place which we want to optimize and maximize? What guidelines can we give our employees so they can make their own decisions on a daily basis, in a way which strengthens our company and moves us closer to our goals?
What is most important right now? In addition to running the day-to-day business, what will we do over the next 3-12 months which will put is in a permanently stronger position than where we are today?
Who does what? All team members are responsible for achieving the team goal, regardless of functional expertise. Nevertheless, we need to share the work and commit to our part.
Maybe there was a time when we could announce a decision once, and everybody would follow it. But today, we cannot. Managers are used to being bombarded with all kinds of information which no one follows up on. So if we want the organization to know that we are serious, we need to pick a few priorities, and talk about them every time we get a chance.
Finally, we need to make sure that our strategy is visible even when we are not around. We do that by building them into a few key processes such as recruiting, on-boarding, performance management, reward systems and recognition.