“The real problem is not what people do, but what they feel they must do.” — Václav Havel, Letters to Olga (1988)
The Year-End Review
Most leaders have sat in some version of this meeting. The quarter has closed, the numbers are in, and they are not what anyone wanted. The people around the table are not passengers – they are experienced, capable, and by any reasonable measure, the right people for the roles they hold. The conversation is civil, even constructive. But beneath the surface, something is not quite right – it begins to feel like team underperformance, with results that don’t fully reflect the capability of the team. The leader is choosing words carefully. The team is listening carefully. And nobody is saying the thing that is actually on their mind.
The instinct that follows is almost universal. If the results are not good enough, something about the team must need to change. Perhaps the skill set is wrong. Perhaps the leadership bench is lighter than it looked. Perhaps someone is not quite pulling their weight, or the wrong person is in the wrong seat. It is a reasonable instinct, particularly when the signs look like team underperformance. It is also, in the majority of cases I have observed, the wrong place to start.
The Reflex Towards the Team
There is nothing irrational about looking at the team when performance disappoints, particularly when the signs point towards team performance issues. Capability gaps are real. Poor hiring decisions happen. Some people do reach the limit of what they can contribute at a particular stage of a business. These things are true, and I have written about the patterns that sit behind team underperformance before.
But in a business that has been growing, staffed by people who have demonstrated genuine competence, the team-level diagnosis of team underperformance is usually reached far too quickly, and I’ve seen that play out often enough to be wary of it. The question that tends not to get asked in that review meeting is a simpler one: what are these people actually responding to? Because the gap between what capable people can do and what they are producing is rarely explained by the people themselves. It’s generally explained by the environment in which they’re operating, and is often where you begin to understand why capable teams underperform.
What Teams Actually Read
Teams are not primarily shaped by strategy documents, job descriptions, or formal communication from leadership. They are shaped by patterns – the ones that repeat week after week, meeting after meeting, until they become the real operating reality of the business.
Who actually makes decisions around here? Not who is supposed to, but who does in practice. What happens when someone acts on their own judgement and it does not go entirely to plan? What gets recognised, and what gets passed over? These are not questions anyone asks directly. They are answered continuously, through observation, and the answers are absorbed long before any formal review takes place.
Google’s Project Aristotle research, which examined what distinguished high-performing teams from others, pointed to psychological safety as the most significant structural condition – whether people felt it was safe to act, to question, and occasionally to get it wrong. That condition is not created by culture initiatives or team away-days. It is created, or undermined, by the behaviour of the leadership above the team, and by the clarity – or ambiguity – of the structure around them.
The gap between what leaders believe they are signalling and what teams actually receive is, in my experience, consistently wider than many leaders realise. And it matters more than most of the interventions that tend to follow a disappointing period.
The Cost of Unclear Authority
One of the most consistent drains on performance in growing SMEs is not a capability problem. It is a clarity problem. Specifically, the absence of clear decision authority in teams and well-defined decision rights.
This does not announce itself as a structural failure. It appears as hesitation. A capable person reaches a decision point and is not sure whether they own it or whether they need approval. The safe move, in that moment, is to slow down – to check, to escalate, to ask. None of those responses reflects a lack of capability. When the boundaries of decision ownership are not well defined, the most sensible thing a capable person can do is wait. And when that pattern repeats across a team, the cumulative effect looks, from the outside, like underperformance.
Being the default final decision point has a cost that tends to be felt before it is understood. Decisions queue as the leader’s time becomes more fully occupied. The team learns, over time, that the organisation moves at the speed of the person at the top, and adjusts its pace accordingly. Availability, consistency, and clarity do not present themselves as structural features in the way that an organogram does. But they shape how work is approached and how much ownership is genuinely taken, just as surely as any formal design.
The Rhythm the Leader Sets – or Doesn’t
Operating rhythm is one of those things that is easy to underestimate until it breaks down. When it is working – when meetings have consistent purpose, follow-through is reliable, and priorities hold their shape from one week to the next – the team can build momentum. Decisions made in one meeting become actions in the next. People carry their work forward with some confidence that the ground will not shift beneath them.
When it does not work, the effect is gradual, but it builds. A Monday directive that is not followed up by Thursday. A priority that dominated last week’s conversation and has barely been mentioned since. A reporting cycle that gradually becomes a performance – a ritual of updates that everyone knows will not change much.
Over time, this produces the disengagement that leaders notice and frequently misread. The execution gap – the space between what gets agreed and what actually happens – tends to widen not because the team stops caring, but because the structural rhythm that would give their effort traction is not reliably there. These are not character failures on anyone’s part. They follow from it.
Trust Withheld in the Name of Standards
There is a pattern I have seen often in founder-led businesses, and it is one of the harder ones to discuss because it comes from a genuinely good place. The leader has high standards. They care deeply about the quality of output. They have often built the business on the back of that care, and they are not wrong to maintain it.
But maintaining high standards through close involvement in output sends a signal the leader may not intend: that the team’s judgement is not fully trusted. The team does not respond by becoming worse. It responds by becoming more careful. Decisions that could and should be made independently get brought upward. People check in before acting rather than reporting back afterwards. Over time, the loop tightens, and what started as quality control starts to create dependency, often reinforcing a degree of founder dependency without it being intended.
This is not a criticism of high standards. It is an observation about what happens when standards are maintained through oversight rather than through clear authority and accountability. The structural limits of leadership attention are real. A leader’s capacity to be close to everything does not scale. And in a business that is growing, the team that waits for approval before acting is not the team the business needs. It is, however, often the team the structure has produced.
The Difference Between Team Underperformance and Under-Structured Organisations
There is a distinction that is easy to miss.
A team that appears to be experiencing team underperformance has a capability or motivation deficit, while a team that is under-structured has a design deficit. The people are capable; the conditions they’re operating in are not. Both can produce identical visible symptoms: missed targets, slow execution, decisions that do not land cleanly, momentum that does not build. The diagnosis, rather than the symptoms, determines what actually needs to change.
The question of what teams need to develop as a business grows is a real one, and it deserves proper attention at the right time. But it’s the wrong question if the team is already capable and the structure around them has not kept pace with the business. A team adapting rationally to ambiguous authority, inconsistent rhythm, and withheld trust is not failing. It is doing exactly what any sensible group of people would do in those conditions. The problem is the conditions.
The Question Worth Thinking About
Before the next conversation about what the team needs to do differently, it is worth pausing on a prior question: what is the team currently responding to?
Not as an accusation. Not as a framework for diagnosis. Simply as a question worth thinking about before the next intervention is decided. Most businesses at this stage of development have teams that are more capable than their results suggest, particularly when you look at leadership and team performance together rather than in isolation. The conditions that allow people to perform at the level they are actually capable of are not always visible from inside the system – and they are rarely the first thing that gets examined.
If the results are not reflecting the quality of the people you have, it may be worth asking what those people are responding to – and why.
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