The Impact of Dysfunctional Teams on Organisational Performance
The impact of dysfunctional teams on an organisation can be significant and detrimental to its overall performance and success. Patrick Lencioni, in his book "The Five Dysfunctions of a Team," defines a dysfunctional team as a group of individuals who “struggle to work together cohesively and effectively” (Lencioni, 2002). These issues often include a lack of trust, fear of conflict, lack of commitment, avoidance of accountability, and an inattention to results.
According to a study by Stanford University professor Behnam Tabrizi in Harvard Business Review across 95 cross-functional teams in 25 leading organisations up to 75% of teams are dysfunctional (Tabrezi, 2015).
What is a dysfunctional team (in the workplace)?
A team becomes dysfunctional when patterns of interaction make it difficult to collaborate, make decisions, and execute consistently. It’s less about one “difficult person” and more about the system: norms, incentives, role clarity, conflict habits, and leadership signals.
What are the consequences of a dysfunctional team?
Dysfunctional teams can lead to various negative consequences, including:
Decreased Productivity:
Dysfunctional teams often struggle to work efficiently and cohesively, leading to delays in project completion and reduced productivity. This can hinder the organization's ability to meet deadlines and achieve its goals.
Poor Decision Making:
In dysfunctional teams, conflicts and lack of effective communication can impede the decision-making process. As a result, decisions may be biased, ill-informed, or delayed, which can have negative implications for the organization's strategic direction and success.
Low Employee Morale:
Dysfunctional teams create a toxic work environment characterized by tension, mistrust, and negativity. This can lead to low employee morale, decreased job satisfaction, and higher turnover rates as team members may become disengaged and demotivated.
Communication Breakdown:
In dysfunctional teams, communication breakdowns are common, leading to misunderstandings, misinformation, and a lack of clarity in roles and responsibilities. This can hinder collaboration and effective teamwork.
Increased Conflict:
Dysfunctional teams experience higher levels of interpersonal conflict, which can be disruptive to team dynamics and hinder the achievement of common goals. Unresolved conflicts can escalate and create a hostile or even toxic work environment.
Lack of Innovation:
Dysfunctional teams often stifle creativity and innovation. When team members are not working collaboratively and open to diverse ideas, the organization may miss out on valuable insights and creative solutions to problems.
Missed Opportunities:
Dysfunctional teams may fail to recognise and capitalize on opportunities for growth and improvement. This can hinder the organization's ability to adapt to changes in the market and stay competitive.
Reputation Damage:
The presence of dysfunctional teams can harm an organisation's reputation both internally and externally. Negative team dynamics can become widely known, leading to decreased trust and credibility among stakeholders.
High Employee Turnover:
Dysfunctional teams can contribute to higher employee turnover rates as team members may seek more positive and supportive work environments elsewhere.
Financial Losses:
The combined effects of decreased productivity, poor decision making, and low employee morale can lead to financial losses for the organisation.
Next step
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What is the leader’s role in team dysfunction?
In Lencioni’s model, dysfunction isn’t primarily a “team personality problem” - it’s a leadership-conditioned environment. The first dysfunction (absence of trust) is driven by a fear of vulnerability, and that fear is often rational: people are watching what happens when someone admits a mistake or challenges the room.
Your job as leader is to set the conditions for trust, conflict, commitment, accountability, and results. Practically, that means you “go first” on the behaviours you want repeated. Lencioni is explicit that leaders set the stage for vulnerability-based trust by being genuinely vulnerable (e.g., sharing failure stories, publicly admiring others’ strengths, letting others teach them).
Where leaders unintentionally create dysfunction:
They model invulnerability: the team stays polite, guarded, and politically “safe,” which reinforces the absence of trust (fear of vulnerability).
They reward artificial harmony: disagreement becomes dangerous, so the team avoids the productive conflict needed for good decisions (Lencioni describes “artificial harmony” as stifling productive ideological conflict).
They allow ambiguity to linger: unclear decisions and mixed messages erode commitment and make accountability feel personal rather than contractual.
They tolerate “learning risk” being punished: people stop surfacing problems early. Edmondson’s research on psychological safety focuses on how leaders can help teams manage interpersonal risk so learning and speaking up actually happens (Edmondson, 1999).
Zooming out, this is also culture work. Schein’s position is blunt: “the only thing of real importance that leaders do is to create and manage culture (Schein & Schein, 2017) .” In dysfunctional teams, the culture being created is usually avoidance, blame, and caution - unless the leader interrupts it.
What are early warning signs leaders miss?
Leaders often wait for visible conflict. The earlier signals are more subtle:
Meetings multiply, but decisions don’t stick
The same issues recur in slightly different forms
People “agree” in the room but don’t follow through
Escalations increase because ownership is unclear
Your employee survey scores for your team/organisation drift or crash
Turnover increases, people quietly leave
Silence increases (sometimes even quiet quitting): fewer challenges, fewer questions, fewer risks taken
Work gets routed around the team (“I’ll just handle it myself”)
Conclusion: The Impact of Dysfunctional Teams On Organisational Performance
Dysfunctional teams can have far-reaching consequences for an organisation, affecting its productivity, decision-making processes, employee morale, communication, innovation, and overall performance. If up to 75% of teams are dysfunctional then the impact for organisations and individuals can be colossal. Recognising and addressing team dysfunctions through effective leadership, conflict resolution, and team coaching strategies is essential for promoting a healthy and successful work environment.
Next step
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FAQs: The Impact of Dysfunctional Teams on Organisational Performance
Q. What does a “dysfunctional team” mean in practice?
It’s a team that struggles to work together cohesively and effectively, often showing Patrick Lencioni’s five dysfunctions: lack of trust, fear of conflict, lack of commitment, avoidance of accountability and inattention to results.
Q. How do dysfunctional teams impact organisational performance?
They drive decreased productivity, poor decision-making, low morale, communication breakdowns, increased conflict, reduced innovation, missed opportunities, reputation damage, higher turnover and ultimately financial losses.
Q. How common are dysfunctional teams?
Research cited in the article (Behnam Tabrizi’s HBR study across 95 teams in 25 organisations) indicates that up to 75% of teams are dysfunctional.
Q. What early warning signs should leaders watch for?
Persistent misunderstandings, recurring conflict, unclear roles and responsibilities, delays and rework, disengagement or attrition spikes, and decisions that stall or lack follow-through.
Q. What can leaders do to address dysfunction?
Build trust and psychological safety, set clear goals and roles, create healthy conflict and feedback norms, use accountability routines (e.g., 360s and team reviews), and invest in team coaching to reset behaviours and ways of working.
📚 References
Edmondson, A. (1999) ‘Psychological safety and learning behavior in work teams’, Administrative Science Quarterly, 44(2), pp. 350–383.
Lencioni, P.M., 2002. The five dysfunctions of a team: Team assessment. John Wiley & Sons.
Schein, E.H. and Schein, P.A. (2017) Organizational Culture and Leadership. 5th edn. Hoboken, NJ: John Wiley & Sons.
Tabrizi, B., 2015. 75% of cross-functional teams are dysfunctional. Harvard Business Review, 23, pp.2-4.
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