The authors describe the history and underlying ideas of a project to observe health-care organizations. Staff in medical and psychiatric institutions are faced with major anxieties in their work with ill people and these may be dealt with in various more or less defensive ways. It is argued that institutional observation can be a tool to detect and understand the dynamics, defensive techniques and culture of a health-care organization, and that for those working in such institutions it can be a useful learning instrument. Two observations, of a mental health hostel and a medical ward, are described in some detail.