Many business magazines (including Inc.) publish lists of the most profitable, most successful, or fastest-growing companies. Naturally, readers will be tempted to conclude that the people running these organizations must be "smarter" than those whose companies didn't make the list. But in many cases--in fact, in most cases--that's not true.

Don't get me wrong: The leaders of great companies are generally smart, but they aren't necessarily smarter than those of the companies they compete against. The truth is that intelligence, knowledge, and domain expertise are vastly overrated as the driving forces behind competitive advantage and sustainable success. What is severely underrated is the critical importance of organizational health, which comes down to management, strategy, operations, and culture all fitting together and making sense.

We live in a time when information is ubiquitous and easily accessible. In a sense, knowledge is a given. I have yet to meet members of a leadership team who I thought lacked the intelligence or the domain expertise required to be successful. I've met many, however, who failed to foster organizational health. Their companies were riddled with politics, various forms of dysfunction, and general confusion about their direction and mission. As a result, they couldn't leverage much of that vaunted intelligence.

Why don't more companies recognize the importance of organizational health versus intelligence? Because academics and analysts have for years attributed business success to knowledge, expertise, and brilliant ideas. Following some hasty forensic analysis on list-topping companies, they routinely conclude that the winners' successes result from their ability to outsmart the competition. They try to convince us that Whole Foods has succeeded in groceries because of its expertise in organic food, or that Southwest Airlines has triumphed thanks to its brilliance in fuel hedging and ticket pricing, or that Starbucks's prowess is mostly about real estate and marketing.

But those intelligence-based assets are the dividends of those companies' investments in organizational health. Leaders of these companies will tell you over and over that they cherish their cultures more than they do any single strategy or form of intellectual property.

How do you foster that kind of health in your company? First, focus on the members of your top team. Make sure they are absolutely clear about the identity and direction of the company, and that they act in ways that indicate they are aligned.

Next, be brutally intolerant of cultural or behavioral violations, especially among your most senior teams. Too often, companies focus on systems and structures that facilitate cultural change at the mid-management level, overlooking problems closer to the top. Be quick to address behaviors such as passive-aggressiveness during meetings or back-channel second-guessing.

Finally, reinforce this through hiring. Although most executives pay lip service to the idea of hiring for cultural fit, few have the courage or discipline to make it the primary criteria for bringing someone into the company. Instead, they continue to place too much emphasis on education, experience, and knowledge, reinforcing the mistaken belief that intelligence trumps behavior.

If any of this sounds soft, consider the very tangible benefits of organizational health: lower hiring costs, higher employee retention, better word-of-mouth marketing, and greater customer loyalty. Perhaps the ability to understand and act on all that may be the ultimate sign of corporate intelligence.

Patrick Lencioni is president of the Table Group and the author of 10 best-selling books on organizational health, including The Advantage and The Five Dysfunctions of a Team.

 

From the October 2014 issue of Inc. magazine
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.