The Forty-Five Minute Audit That Will Tell You Whether Your Business Is Actually Healthy

This is an audit I run, in my head, in the first week I ever spend at a new company. Forty-five minutes, give or take. I have run it as a consultant, as a hire, as an investor doing diligence, and as a friend asked to look at somebody else’s business at a barbecue. It works in all four contexts, and it has, in my experience, told me more about the actual health of a business than three months of reading reports.

The audit looks at five things. None of them are on the dashboard. All of them, individually, are diagnostic. Together, they tell you, with surprising accuracy, whether a business is actually healthy or just appears to be.

I am going to walk through all five. By the end of this piece, you will be able to run this on your own business in under an hour. If you do, I would be surprised if it does not change at least one decision you make in the next thirty days.

Audit point one: the bathroom test

The first thing I do, in any office, is go to the bathroom.

I am not making a joke. I am completely serious. The state of a company’s bathroom, especially the staff bathroom, is one of the most reliable indicators of organizational health I have ever found. The reason is simple. The bathroom is the part of the office that nobody is curating for outsiders. There are no posters. No mission statements. No carefully arranged plants. The bathroom is the part of the office where the company is not performing, and you can see, in about thirty seconds, what the company actually feels about the people who work in it.

If the bathroom is well-maintained, well-stocked, well-lit, and clean, you are probably in a company that, at the operational level, takes care of its people. If the bathroom is broken, dirty, missing supplies, or smells of recent disrepair, you are in a company where, somewhere up the chain, someone has decided that the experience of the people working there is not worth the cost of small fixes. Whatever they tell you in the all-hands, the bathroom tells you something different.

I have walked into the marbled lobbies of supposedly serious companies and found bathrooms that looked like they had not been touched in months. I have walked into modest offices in industrial neighborhoods and found bathrooms that were impeccable. The first kind of company is, almost always, in worse shape than its lobby suggests. The second kind is, almost always, in better shape than its address suggests.

Take this seriously. It is not metaphor. It is data.

Audit point two: how decisions get described

The second thing I listen for, in conversations during my first week, is how people describe past decisions.

I do not ask, “Why did the company make this decision?” That question gets a clean, rehearsed answer. I ask, instead, something more sideways, like: “Walk me through how this got decided. Who was in the room? What did the conversation look like?”

What I am listening for is whether decisions in this company are made by individuals or by committees, and whether the people in the meeting know who actually made the call.

In a healthy company, decisions have authors. Somebody named, recently, made a specific choice, with a specific rationale, that the team can articulate even if they disagreed with it. Even committee decisions have an author. Somebody owned the decision after the discussion, signed it, and put their name next to the outcome.

In an unhealthy company, decisions float. They appear to have made themselves. Everybody can describe what was decided, but nobody can tell you who actually decided it. The language is passive. “It was agreed that…” “We landed on…” “The team decided…” Decisions in unhealthy companies are orphans. Nobody owns them. Nobody is accountable for them. Nobody can be wrong about them, because no individual ever made a falsifiable choice.

The reason this matters operationally is that orphan decisions are unfixable. If something goes wrong with an authored decision, you can go back to the author, learn from the failure, and update. If something goes wrong with an orphan decision, the company has no learning loop, because there was no learner. The decision just happened, like weather, and the company will simply repeat the pattern next quarter.

Listen to how the people around you describe past calls. Within a few hours of conversation, you will know whether you are in a company that authors its decisions or a company that has them happen to it.

Audit point three: the gap between what is said and what is measured

The third thing I do is collect, in parallel, two lists.

List one is everything the company says it cares about. From the website. From the all-hands. From the values posted on the wall. From the founder’s recent LinkedIn posts. From the welcome deck for new hires.

List two is everything the company actually measures, weekly or monthly, on its dashboards. Not what it says it measures. What is on the actual screens that the executive team looks at every Monday morning.

I lay these two lists next to each other, and I look at the gap.

In a healthy company, the gap is small. The things the company says it cares about, like customer satisfaction, employee retention, ethical sourcing, long-term thinking, are also the things that show up on the executive dashboard. The metrics match the rhetoric. There is alignment between what the company is and what the company says it is.

In an unhealthy company, the gap is enormous. The company says it cares deeply about employee wellbeing, but the only people-related metric on the dashboard is headcount and salary cost. The company says it cares about customer experience, but the only customer metric on the dashboard is monthly active users. The company says it cares about quality, but the only quality metric anyone can find is a once-a-year survey that nobody reads.

This gap is not just a communication issue. It is the diagnostic for whether the company is, at the operational level, actually doing what it says it is doing. What gets measured gets managed. What does not get measured, does not, no matter how often it gets mentioned in speeches.

If you want to know what a company really cares about, do not read its website. Look at its dashboard. Then look at how often the executive team actually opens it. The truth of any company is, ruthlessly, in those two artifacts.

Audit point four: who has lunch with whom

The fourth thing I do, especially in companies with offices, is watch lunch.

This sounds soft. It is, in my experience, a brutally accurate diagnostic.

In a healthy company, you see real mixing. Senior people eat with junior people. Departments cross over. The CEO is occasionally in the cafeteria, sitting with people three or four levels below them, having a conversation that is clearly not a performance for someone’s benefit. The lunchtime social geography of the company is loose, varied, and unscripted.

In an unhealthy company, you see lunch as a class system. Senior people eat together, in their own room, with their own caterer, behind their own door. Junior people eat together, in their own area, eating their own food. The geography of lunch maps, almost perfectly, to the org chart. People who are at the same level eat with people who are at the same level. People who are at different levels do not, except when explicitly required by some scheduled event.

The reason this matters is that information in a company travels through informal social channels much more efficiently than through formal ones. A company where senior and junior people do not eat together is a company where senior people do not actually know what is happening on the floor. They will tell you they have an open door policy. The open door policy is irrelevant. People with real information do not, in practice, walk through open doors. They mention it casually over lunch to somebody they like and trust. If lunch is segregated by hierarchy, the information is not flowing, and the senior team is, structurally, in the dark.

You can change a culture in many ways. One of the cheapest is to demolish the lunch hierarchy. Make the senior dining room a normal dining room. Have leaders eat with their teams, frequently, unscripted. Within a quarter, the information topology of the company starts to look different, and the decision-making starts to improve.

Audit point five: how the company speaks about its competitors

The last thing I listen for, sometimes the most telling of all, is how the company talks about its competitors.

In a healthy company, competitors are described with respect, with curiosity, sometimes with a kind of professional admiration. The leadership team can articulate, specifically, what each competitor is actually good at, and what the company has chosen to do differently. Competitor analysis is detailed and current. People can name specific moves competitors have made in the last quarter and explain how the company is responding.

In an unhealthy company, competitors are dismissed, mocked, or, most dangerous of all, ignored. The leadership team describes the market as if the company exists in a vacuum. When competitors come up, somebody, usually senior, makes a small comment that is somewhere between contempt and indifference. Detailed knowledge of competitor activity is missing. Nobody can describe what the third-largest player in the market did last month, even though that player has been growing twenty percent quarter on quarter.

A company that does not respect its competitors is a company that does not understand its own market. It is also, almost without exception, a company that is about to lose to one of those competitors, because the competitor is paying close attention to the company, and the company is not returning the favor. This asymmetry is fatal. It just plays out slowly enough that the executive team does not feel it until it is too late.

When you are inside a company, listen, in the first month, for the tone with which competitors are described. That tone is your single best predictor of whether the company will still be relevant in five years.

What you do with the audit

If you run this audit on your own company and you find that, on most or all five dimensions, things look healthy, congratulations. You are working at one of a relatively small number of companies that are actually well-run, and you should not take it for granted, because the next company you join will probably be worse.

If you run this audit and you find problems on three, four, or all five dimensions, you have learned something important about where you are. You have a choice to make. You can try to fix the things you can influence, knowing that fixing structural cultural issues from below is exhausting and often unsuccessful. You can stay and protect yourself, doing your own work well and not getting too emotionally invested in the larger institution. Or you can start, quietly, looking for your next move.

There is no right answer. But there is a wrong response, which is to keep believing the dashboard.

The real state of a company is not on the dashboard. It is in the bathroom, in how decisions get described, in the gap between values and metrics, in who eats with whom, and in how it talks about the competition.

Forty-five minutes. Five inputs. One reasonably accurate read on whether the place you are in is, actually, the place you think you are in.

Run it on your company this week.

You will not enjoy what you find. You will, however, be operating with much better information by Sunday.