One of the world’s most respected, best-known thinkers on corporate culture works out of an unassuming open-plan office over a hair salon in tony Lafayette, California, two traffic jams east of San Francisco.
The location suits him, and his mission. Just close enough to keep the pulse of disruption in Silicon Valley, just far enough away to grow skeptical that “change the world” mantras are actually creating great companies—and may actually be doing the opposite. Ask Patrick Lencioni to name a great company, he’ll bring up Southwest. Great leadership? Ford under Alan Mulally.
“Google has heated toilet seats, an infinity pool, organic gardens, free bicycles and a spa, and that’s great, but as soon as things go bad there it is going to be a bloodbath,” he says. “Companies, especially in technology, that love the accoutrements of culture, that’s not really culture. That’s to me excess. And I have to say I think it’s rooted in narcissism.”
His aversion to business BS runs deep. The son of a salesman, he joined Bain Consulting in the 1980s on a quest to discover why his father—and so many millions like him— suffered under unending crisis and chaos at work. Finding few answers in the actual practice of Big Consulting, he set off on his own.
Meeting with hundreds of clients over the next few years, he realized that it isn’t strategic miscues, or failures of technology or risk management that cause disasters. Those are symptoms. The causes are rooted the usual grab bag of fundamental human flaws—fear, greed, mistrust, etc.—and how they play out among top leaders.
To help businesses cope, he wrote a series of deceptively simple bestsellers, all of which you’re likely familiar with, including The Five Temptations of a CEO; Death by Meeting; The Advantage and, most famously, The Five Dysfunctions of a Team. By design, each can be read in a sitting and do not require an advanced degree to comprehend.
Now, as business and technology grow faster and more complex, he’s become increasingly convinced that it isn’t game-changing AI or the tally of PhDs that will determine an organization’s fate, but rather their ability to build cohesive teams and improve what he calls “organizational health.” That, he says, will prove to be the decisive edge among companies in the future.
With corporate culture dominating the headlines, Chief Executive decided it was the right time to sit down with Lencioni and get his take on business, from leadership meltdowns and tech titans to Millennials and the MeToo movement. Here’s an edited version of the conversation.
We talked a bit about that new book Bad Blood [by Wall Street Journal reporter John Carreyrou] and what happened at Theranos. What’s your take on the idea of the hero CEO and what it’s done to American business?
People always ask me “Who’s the best CEO in the world?” And I say, “Well, do you want a famous one, or do you want a great one?” Most of the great CEOs, nobody knows who they are, primarily because they don’t want to be known, that wasn’t their goal. Their goal was to create a great organization to serve their customers and their employees well and change people’s lives. So I think that the problem is that the media creates this.
Greed is no longer cool. But fame…. Like this young woman [CEO Elizabeth Holmes] at Theranos, she’s still determined to turn this into something, she’s still trolling the Valley, looking for deals and the next thing. I don’t know if it’s sunk in with her exactly what happened.
I worked in the database industry back in the 1990s, and there were two companies, one of which was Oracle, and Larry Ellison, who was early on in that world, and it was a miserable place to work, it just was. I went to work for a guy named Mark Hoffman who most people never heard of at a company called Sybase, and it was just a completely different place.
Sybase continued to grow and do well, and one day they started to say, “We should be like Oracle.” They got a new CEO who was much more of a personality and they lost the very thing that distinguished them. I think that’s very natural for people to seek that out because they think that’s what makes for great leadership, but it’s quite the opposite.
What’s your take on the rash of high profile CEO disasters that we’ve seen recently from places like Texas Instruments to Uber?
These are downstream symptoms. The core problem is a lack of what we call organizational health. They’re not sound organizations.
Sometimes you can have a sound organization and a person just goes off the rails. But usually, if you look back, they were nurturing this kind of culture. And then they finally get caught and people say, “Whoa, gee, what happened?” And it’s like oh no, this is just a matter of time.
At the heart of a great organization is a humble leader, somebody who’s doing it because they feel a great weight and responsibility in being the leader.
There are two schools of thought about becoming a CEO. One is that it’s the reward for a lifetime of hard work, you’ve arrived. The other is that it’s a huge responsibility and you are now more on the hook for your performance than you’ve ever been. I look at it like athletes who get drafted. Is it, finally, I’ve arrived and now I get to enjoy a great life, or, oh no, now if I don’t play well, I’m gonna blow it? The best athletes are the ones who have that second attitude. The best CEOs are the ones who go, “Now I feel more not negative pressure, but the pressure to do the right thing, to work really hard and to steward this opportunity.”
When you see it as a reward, you just cannot embrace the things you’re supposed to do. That’s kind of where it all starts. Whether it’s treating women wrong, abusing your power or abdicating responsibility for what you’re doing, it’s usually rooted in the idea that, “I’m entitled to this job, so I should get to do what I want,” versus, “I’m responsible for this job so I have to do what’s necessary.”
When you go in to work with a company, how do you know when the organizational health is good and how do you know when it’s bad? What are the tells of both?
If I could have one piece of data about a company to understand if it’s healthy and successful, I’d want to go watch the leaders in a meeting. If the meeting is boring and there’s no tension, and there’s not emotional engagement with one another, I know that there are really bad things going on. I don’t mean emotional tension like people going after each other’s throats. What I mean is if people are engaged and feel like there’s something at stake, and that they have to push each other.
What do people who run companies need to do right now to really make culture better? What do they need to understand about culture?
I’ve had my consulting firm for 20 years and I worked with CEOs for five years before that. I have never seen a charismatic famous CEO whose people really wanted to follow [him or her]. They were hitching their wagon to something hoping it would work, but when those companies turn down, it’s ugly.
I remember going to Walmart years ago. I was in their cafeteria and I thought I was in a junior high school. And all their executives and all their employees were going to this really crappy cafeteria, and I thought, where’s the really nice part? No, this is it. The stores are actually nicer than their headquarters were—which may have changed since then. But I’m always suspect of places that are self-referential and treat the leaders like they’re important. I just love to go places where you’re surprised by the level of humility and reality that exists.
I can’t even begin to imagine how much has been spent on foosball tables in the last 25 years to create a culture.
The great thing about Millennials is they sniff out the bullshit. If you have a foosball table and your managers treat people like crap, and they bring in dinner just because they’re trying to manipulate you to live your life there, eventually, they sniff that out.
Younger people today are like, “Listen, if you’re going to treat me terribly, don’t try to win me over by letting me bring my dog to work or play foosball or build a slide from the second floor to the first floor.” If you want to do that, fine, but make it a company that runs well, a company that’s truly collaborative where you ask people their opinions and consider them, and you get people involved and respect them. That doesn’t mean everybody gets to vote on everything, this is not a touchy-feely soft thing.
There are these CEOs who I would say are cynical and power hungry, but they know how to dress things up to look like it’s collaborative. But underneath it the culture is just poison. You’ve got to focus on the fundamentals of making an organization healthy, and if you don’t do that, don’t insult people by trying to buy their affection with toys.
What are those fundamentals?
There are really four things. Most leaders in the Valley think that to make a company big you have to be the smartest kid on the block. Well, the funny thing is with the ubiquity of computing and information today, everyone’s smart. I honestly believe in 20 years of being a consultant, I’ve never worked with a company and walked away from the first meeting and said, “These people are just too dumb.” Everybody knows enough in the world today to run a business. It’s not about what you know, it’s can you tap into the intelligence, the experience and the talent of the people there?
To do that there are four things you have to do. First of all, if the leaders at the top are political, dysfunctional and not a cohesive team, you’re through. If the leaders are fighting against each other, you’ll never come close to maximizing your potential. It’s the worst thing.
Second, they have to be intellectually aligned. There are six fundamental questions that if those leaders are not completely aligned around, I mean no daylight between them, then you’re going have problems.
Third, you have to constantly, persistently, and repetitively communicate the answers to those questions. Alan Mulally was incredible at this when he turned Ford around. Gary Kelly at Southwest is great at this. At all the best companies we know, the leaders constantly reinforce the key messages, they don’t get bored and move on to something else. They’re like, “This is what we’re about and I’m going to tell it to you again and again and again.”
Nobody ever leaves an organization because they think, “Well, the CEO just communicated to me way too much.” The best leaders know that you can’t over communicate what matters.
The last thing is they have to put just enough structure in place around those answers to reinforce the culture without bureaucratizing it. Most companies over bureaucratize.
Do we overcomplicate business?
Oh gosh, absolutely.
There are three reasons people reject simple solutions. One, I call sophistication bias. I want something that’s really sophisticated and sexy. It’s like, “I lost weight, how did I do it? I ate less and I exercised more.” Nobody’s finding that interesting.
The next bias is what we call the adrenaline bias. That’s, “I want something to work right now.” It’s like, “Freeze off my fat.” No solution that flips a switch and changes right away works. Organizational health does not take that long, but it’s a discipline that you have to do for a while to see it work.
The third one is quantification bias. When I worked at Bain [Consulting] people would say, “Isolate all the variables and tell me exactly what the ROI of doing this one thing is.” It doesn’t work that way.
When we work with companies they ask, “What will organizational health do for us?” Our answer is: Everything. It will permeate everything you do and you’ll never be able to isolate the variable. It’s going to permeate how you have meetings, how you make decisions, where you put your capital, how you talk to one another, how you deal with failures. And they’re like, “Well, if it’s not sexy, and I can’t do it right away, and I don’t know exactly what the ROI is, it must not work.”
We live in an age of quantification, big data, machine learning. What are some of the downsides to applying all that inside of organizations?
What’s meant to be measured, measure it and measure it well, and quantify whatever is truly accurate to quantify. But you can quantify the wrong things, and the human element will always be there.
I don’t care how smart a system you have, intuition and judgment will always be critical. The problem is we have a lot of bad forensic analysis that goes into companies, like why did that company succeed? What they’re doing is looking at it and going: “Find something I can quantify and I’ll it attribute to that.”
I worked with a big technology company once that almost went out of business, it got sold off for a fraction of its worth. And the truth is the CEO had no trust with his team because he would never admit he was wrong, ever. He was famous and brilliant so nobody ever challenged him. They were scared of him.
Well, eventually, they failed, and what did all the business magazines or newspapers write? “They made some strategic errors,” and “They had some product issues, some bugs in their product, that’s why they failed.” No, no, no, no, no. Those are downstream symptoms. Those were inevitable symptoms of a team that could not process a decision honestly. The human element is always what’s underlying, and yet we are so enamored with, “Give me something I can measure.” That’s just not how things work.
The other thing that’s happened in the last 10 years is the rise of always-on personal technology. What is that doing to teams and to culture?
It’s not allowing us to make the best decisions because we’re not really tapping into our best thinking. I don’t have to be a PhD in brain chemistry to understand this.
People want to think that Alan Mulally turned Ford around because he looked at the carburetors and made a better decision, or sold off this brand. But what he did is he went in there and changed the behavior of people. During meetings, people would look at their phones. He would just stop the meeting and look at them and say, “What are you doing? We’re making decisions here.”
Nobody wants to believe that Alan Mulally turned Ford around by doing what a fifth grade teacher does at my son’s school. But the fact of the matter is adults are just older kids, and it’s like you better listen and be fully engaged here because if you don’t want to be, there’s other things you can do.
What’s your best piece of advice for a leader today?
I don’t mean to be sounding one note, but make your organization as healthy as it can be and you will become resilient.
We had a company in the travel-related business. It was high-end travel. By their own admission, they were really dysfunctional and it was getting painful. The CEO brought us in. They were in silos, nobody was cooperative. They didn’t like each other, they didn’t want be together, they didn’t have a clear strategy. All this stuff.
They started to work on it and make progress. The industry turned down because there was all this disintermediation. They almost went out of business, and they said, “Let’s just focus on this, on being who we are, on sticking to our values, keeping the people who fit our values and acting on those.” Other people went out of business, but their customers came and said, “We can’t do this without you, you guys are so functional.” And now they’re doing better.
So it’s kind of like if my wife and I are doing well in our marriage, we have four boys, and things are going really well, that’s when we should say, “Hey, let’s go away and really understand why we’re doing well and recommit to that,” because when the inevitable crisis occurs, we’re going to weather that storm. If you wait for the storm to hit, sometimes you just don’t have the same perspective.
So I think that the best advice I can give to people is: Just focus on making your organization great.
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